Haver Analytics
Haver Analytics

Economy in Brief: June 2024

    • Price index held down by declines in goods prices.
    • Real spending increases modestly.
    • Income gain improves.
    • 47.4 in June vs. 35.4 in May; 5.4 pts. above the year-to-date average of 42.0.
    • All the five subindexes increase in June but three remain below 50.
    • New Orders (45.6, the 9th contraction in 10 mths.), Employment (44.1, the 7th straight contraction), Order Backlogs (40.5, the highest reading since Nov.), Production (54.6, the first expansion since Dec.), and Supplier Deliveries (50.7, the first above 50 since Jan.).
    • Prices paid index falls 11.9 pts. to 56.5, a one-year low.
  • In the graph that accompanies this article, I have chosen to plot industrial production as a level instead of as a growth rate- the latter treatment would be more common. The reason for it, as you can see, is that industrial production has been without a positive trend for some time. The prevailing trend over a longer period (back to 2021 or further depending on how you construct a trend) is clearly negative although the short-term trend shows a very clear revival in progress from early this year.

    These complications make growth rates less useful to calculate because production has contrary long-term and short-term trends, and its path is peppered with a good deal of volatility which increases the chance that any growth rate you calculate is not very meaningful.

    Having said that, I also included table that calculates growth rates! Seeing the chart and plotting industrial production as a level together allows us to understand what's going on with the growth rates a little bit better.

    Industrial production declines over 12 months and over six months but then makes a very strong recovery over three months for both total IP and for manufacturing. Total industrial production is rising at a 19.3% compounded annual rate over three months while manufacturing output rises at a 28.5% annual rate over three months. However, both show that output falls by 0.4% over 12 months, and for the year before that both headline industrial production and manufacturing rose on 12-month growth rates of 2.2% and 5.3%, respectively.

    Looking at manufacturing sectors for consumer goods, intermediate goods, and investment goods, we have all three sectors showing output advancing in May, falling in April, and advancing in March. The recent months have been volatile. Looking at growth rates over 12 months, six months and three months, all the sectors have slightly different growth characteristics. Consumer goods output declines over 12 months and six months but grows strongly over three months. Intermediate goods output rises over 12 months, falls over six months, and then rises strongly over three months. Investment goods output declines over 12 months, grows at nearly a 4% pace over six months, and then explodes at a nearly 50% annual rate over three months. The output of investment goods is the only sector that shows persistent acceleration.

    Moving out of manufacturing to mining and electric utilities & gas, we find that mining shows declines over 12 months and six months, with a nearly 10% annual rate increase logged over three months. Electricity & gas show that persistent acceleration from minus 0.2% growth over 12 months, to nearly identical ‘zero growth rate’ over six months and to a nearly 10% annual rate of growth over three months.

    Despite the turbulence and the inconsistency across different timelines and in comparing timelines across different sectors, the one constant here is that over three months Japan's output is doing quite well no matter what sector you look at. Despite that, it's still true that, for the most part, industry shows increases in March, versus declines in April, topped by increases in May. It isn't exactly like Japan is now on this steady recovering platform; it's just that the data line up this way and because of that it doesn't give us any confidence that even with the strong trend over three months that it's going to have staying power.

    Still, in the quarter-to-date the annual rate increase of overall industrial production manufacturing and all the sectors is impressively and consistently large.

    However, as the chart at the top reminds us Japan has been in a period of relatively difficult growth. If we look at the level of output now calculating the percent change in output from where it was in January 2020, we are looking at a period slightly in excessive of four-years. And yet overall and manufacturing output both are lower, the output of intermediate goods is lower, consumer goods output is flat, and only investment goods output is up by 3.1% over that four-year span. Mining output is down, and the output of electric and gas utilities is lower on balance as well.

  • Growing concern about the economic ramifications from France’s upcoming election have been weighing on risk appetite in European financial markets in recent weeks (see chart 1). But the outlook for the broader world economy has also been arguably taking a turn for the worse. Evidence is certainly mounting that global growth momentum is slowing (see charts 2 and 3), that financial conditions are tightening (charts 4 and 6), and that central banks may now be more hesitant to loosen monetary policy in the period immediately ahead (chart 5).

    • Aircraft orders surge as motor vehicle orders moderate.
    • Excluding transportation, orders ease.
    • Shipments slip but inventories & backlogs edge higher.
    • May PHSI at a record low; two straight m/m declines after rises in Mar. and Feb.
    • Home sales fall m/m in the Midwest and South but rebound in the Northeast and West.
    • Home sales decline y/y in the four regions, w/ the deepest fall in the South (-10.4%).
    • Largest goods trade deficit since May ’22.
    • Export decline reverses April increase.
    • Imports fall moderately following April surge.
    • Real GDP growth in Q1 was revised up to 1.4% from 1.3%.
    • PCE growth revised down markedly to 1.5%, the weakest reading in three quarters.
    • Both GDP and PCE inflation revised up 0.1%-point.