BANNOCKBURN, IL – “Global demand remains strong, but we are starting to see some early signs that demand might be slowing,” says Shawn DuBravac, Ph.D., chief economist, IPC, in the August Economic Outlook report. “Even with demand slowing, back orders remain high, and inventories remain low, which should keep manufacturers busy for the foreseeable future. Covid has become a sledgehammer to confidence.”

In the US, consumer spending on services is up 7.9% in 2021, 11.4% over the last year, moving above pre-pandemic levels, DuBravac says. Spending on goods such as computers, TVs, and cars has grown nearly 30% since the beginning of the pandemic, but in the last three months, spending on durable goods has dropped 6.5%. However, spending on services has risen 3.2% in the same three-month period.

Consumer sentiment in the US fell 13.5% in August compared to July.

July industrial production increased 0.9%. Overall production was up 6.6% year-over-year but down 0.9% over the last two years. Manufacturing production in the US grew 1.4% in July, with manufacturing output now 1.1% above pre-pandemic levels, says DuBravac.

Overall capacity utilization increased from 75.4% in June to 76.1% in July, according to the report, with manufacturing capacity utilization up to 76.6% in July from 75.5% in June.  

New orders for durable goods slipped 0.1% in July, and bookings for commercial aircraft were down 48.8%. Orders for computers and electronic products dipped 0.4% during the month but are up 9.5% compared to pre-pandemic levels.

In the US, says DuBravac, the inventories-to-sales ratio for retailers has fallen from 1.4 pre-pandemic to 1.08 today. Surging Covid cases in the US have stalled recovery, with the consumer sentiment index falling 13.4% in August.

In the second quarter, the US economy grew 6.6% on a seasonally adjusted annual basis, according to IPC, but the US economy remains below the pre-pandemic trend. The economy may cross that mark by the end of the year if it is able to maintain 6.5% growth for the rest of 2021, says DuBravac.

IPC’s chief economist now predicts GDP growth in the US for 2021 to be 6.2% and 4.4% in 2022. Canada is expected to experience economic growth of 6.2% this year and 4% next year. Mexico is forecast to see growth of 5.8% in 2021 and 3% in 2022; Euro area 4.7% and 4.3%, respectively; and China 8.5% and 5.6%, respectively.

In the EU, manufacturing output was down 0.2% in June. Output grew 11.4% compared to last year but was down 0.8% over the last two years. The EU electronics industry saw a drop of 4.3% in June, with the segment up 16.8% year-over-year and 28.1% over the last two years.

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