From Manufacturing to Construction, U.S. Shows Signs of Recovery
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After an initial quarter of negative growth in the U.S., new economic data indicates a seasonal pickup began in spring.
From manufacturing activity to construction spending, and from personal income growth to purchasing power, the U.S. showed signs of rebounding strength, after posting a 0.7% GDP decline in the first quarter. That fall stunned economists, many of whom predicted more than 1% annualized growth in the period, as port closures on the west coast and cold weather stifled activity throughout the country.
Personal Income Rises
After an initial quarter of negative growth in the U.S., new economic data indicates a seasonal pickup began in spring.
From manufacturing activity to construction spending, and from personal income growth to purchasing power, the U.S. showed signs of rebounding strength, after posting a 0.7% GDP decline in the first quarter. That fall stunned economists, many of whom predicted more than 1% annualized growth in the period, as port closures on the west coast and cold weather stifled activity throughout the country.
Personal Income Rises
The Bureau of Economic Analysis announced that personal income rose by $59.4 billion, or 0.4%, in April, offering Americans greater purchasing power along with it. Inflation-adjusted personal consumption expenditures were nearly flat, falling less than 0.1% in April after rising in March.
On an unadjusted basis, PCE fell by $2.6 billion, indicating Americans are hesitating to spend more of the income that they are earning from strong job growth. The trend has stumped many economists, but clearly indicates that America’s total savings rate is rising, and Americans are growing more accustomed to saving rather than spending their discretionary income. While some analysts fret that this is a headwind for an economy dependent on consumer spending for growth, others say this is a sign of more stable consumption habits in the country.
Manufacturing, Construction Gain
While individual Americans are earning more in aggregate, manufacturers are more productive, according to one indicator. The Institute for Supply Management’s manufacturing PMI rose to 52.8 in May, up 1.3 points from April. Confirming the trend in personal income seen by the BEA, the ISM also saw employment rise; its employment index was up to 51.7 in May from 48.3 in April. Manufacturing saw expansion in May, the 29th consecutive month.
The ISM emphasized that economic activity was strengthening in large part thanks to the “improving flow of goods through the West Coast ports” after labor disputes there have been settled. There is also reason to believe manufacturers can see marginal profit expansion, as raw material prices fell for the seventh month in a row.
Similarly, the construction sector has seen strong gains, thanks in part to lower costs and seasonal favorability to building. According to the Census Bureau, construction spending rose in April by a seasonally adjusted annual rate of just over $1 trillion, 2.2% above the rate in March and 4.8% above the same period a year ago.
The Census Bureau said both private and public construction spending rose, with public spending rising at a faster rate (3.3%) than private spending (1.8%). However, private construction remains substantially a larger market, at $725.2 billion in April, versus $280.9 billion in the public market.
However, some markets are seeing a contraction in spending, according to the report. Private residential construction spending fell 2% year-over-year, and construction of power infrastructure is down 31% year-over-year. Spending on hotels, public buildings, and non-residential spending are up substantially year-over-year, offsetting those declines.
