From a high level, we monitor the manufacturing sector for what it can tell us about broader economic activity. In periods where real economic activity is accelerating, we would expect to see accelerating growth in new orders, shipments, and inventories. In the January manufacturing report from the U.S. Census Bureau, new orders, shipments, and inventories decelerated on a y/y basis to -1.95%, -1.62%, and -0.53%, respectively. The levels of each category have effectively flatlined since the middle of 2022.
Source: Macrobond.
As we move through 2024, comparing against the slowdown in 2023 could start to have a positive impact on y/y growth rates beginning in the next few months. By the midpoint of this year, the potential rate of change acceleration in these measures could have a positive impact on broader economic output measures like GDP. If we do not see an acceleration against the easier comparison set, it will give us a better indication of where we are likely heading in terms of the broader economic cycle. This 2023/2024 easing base effect dynamic will be worth watching across other economic indicators as well which we will review in later posts.
The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance. The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.
Investment Strategist
Boyd Watterson Asset Management, LLC