Economic Trends for Manufacturers

Marcel Proust once observed, “The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.” In his recent remarks at Jackson Hole, Federal Reserve Chair Jerome Powell has apparently grown a new pair of eyes, stimulated by recent news that (1) the U.S. actually added 818,000 fewer jobs between March 2023 and March 2024 than previously projected, and (2) the annual inflation rate slowed to 2.9% in July, the lowest rate since 2021, approaching the long-held target of 2%. The initial cuts are expected to come in mid-September 2024, reducing the benchmark rate to 5.00–5.25% from 5.25–5.50%, the level it’s been since July 2023. In the precarious act of piloting the airplane we call the U.S. economy, the question has been raised whether the Fed waited too long for a soft landing. At 46.8%, manufacturing’s most recent Purchasing Managers Index remains firmly in the zone of contraction. In line with this, manufacturing production saw a monthly decline in July of 0.3% after no growth in June. On the other hand, as 30-year mortgage rates start falling in anticipation of imminent Federal Reserve action, new home sales surged to the highest level in a year and a half.

Addendum (as of 9/3): American consumers are doing their part to keep the economy growing. The Conference Board’s Consumer Confidence Index rose in August to 103.3, with a Present Situation Index of 134.1 (up from 133.1 in July) and an Expectations Index of 82.5 (up from 81.1 in July). Moreover, the Commerce Department revised its Q2 GDP real growth rate upward, from 2.8% to an annualized rate of 3%. The increase is attributed to an increase in American consumer spending of 2.9%, which was revised upward from the initial assessment of 2.3%. On top of this, corporate profits grew 1.7% in Q2 and are up 8% YoY.

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