Data Indicates Supply Chain Issues Are Harming U.S., Canadian Growth

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Meanwhile, here are the major headlines from the last week:

• New orders for U.S. manufactured durable goods fell 0.4 percent in September to $261.3 billion. It was the first drop in new orders in five months. Excluding defense, new orders were down two percent while orders for transportation equipment were off 2.3 percent. The values of shipments, inventories, and unfilled orders all increased, however. Read the full report here.
• The Canadian economy expanded just 0.4 percent in August. The reading was lower than analysts had anticipated. It also indicated that the country could be facing little or no growth in September. As Reuters explained, supply chain issues have impacted auto exports and retail sales declined and continue to restrict growth.
• The U.S. economy grew at an annual rate of two percent in the third quarter of 2021, following an increase of 6.7 percent in the second quarter. The deceleration was led by a slowdown in consumer spending and a resurgence in COVID-19 cases that resulted in new restrictions and delays in reopening businesses in some parts of the country. Read the U.S. Commerce Department’s full report here. Regarding the outlook for future growth, the Federal Reserve Bank of Chicago announced its National Activity Index has fallen into negative territory, declining to -0.13 in September from +0.05 in August.
• In the United States, personal income fell one percent in September while disposable personal income was down 1.3 percent and personal consumption expenditures rose 0.6 percent. Read the full report here.
• Supply chain disruptions are weighing on U.S. manufacturers. According to the Federal Reserve Bank of Dallas, factory activity in Texas continued to increase in October. The bank’s production index, a key measure of conditions, fell six points to +18.3, but “was still well above average and indicative of solid output growth,” the bank said. Shipments and capacity utilization readings were down slightly, but the index for new orders rose. One worrisome point: as the bank noted, “Supply-chain disruptions continued to plague many manufacturers, and the unfilled orders index and delivery time indexes pushed up to 20.9 and 25.9, respectively. Read the full report here. The Federal Reserve Bank of Richmond said manufacturing activity in the Central Atlantic region strengthened in October. The bank’s composite index rose from -3 in September to +12 in October due to improved readings for shipments, new orders, and employment. As in Texas, backlogs of orders and lead times indexes continued to grow. Firms also reported inventories of both finished goods and raw materials are “too low.” Read the full report here. According to the Federal Reserve Bank of Kansas City, meanwhile, manufacturing in the Midwest continues to expand. The bank’s composite index was +22 in September, moderately lower than the +29 reading in August. Growth was driven by a faster increase in durable goods, in particular primary metals, computer and electronic products, and transportation equipment. Read the full report here.
• The U.S. Department of Labor announced that 281,000 individuals filed for federal unemployment benefits during the week that ended October 23. That number was down 10,000 from the previous week and was at its lowest level since March 14, 2020 when it was 256,000. The four-week moving average of continuing claims also fell and also is at its lowest level since March 14, 2020. In other employment-related news, compensation costs for private industry workers increased 4.1 percent from October 2020 to October 2021 while the cost of benefits increased 2.6 percent.
• In other economic news: the number of new homes sold in the United States rose 14 percent from August 2021 to September 2021, but fell 17.6 percent between September 2020 and September 2021; the Conference Board’s index of consumer confidence rose to 113.8 in October, up from 109.8 in September; and the University of Michigan’s reading for consumer sentiment  fell to 71.7 last month, down from 72.8 in September.