As is often the case, it's as if the workforce is working smarter and is getting laid off for it.

In manufacturing, the revised productivity changes in the second quarter of 2007 were:

• 1.8 percent in manufacturing,
• 4.7 percent in durable goods manufacturing, and
• -1.4 percent in nondurable goods manufacturing," according to the BLS.

With the overextension of credit to less-than-credit-worthy home buyers, it may seem as if all the manufacturers of home furnishings and appliances are in for a rough ride. Yet appliance manufacturing was still among the top 10 manufacturing groups in August," according to the Institute for Supply Management.

A look at the past shipments of some appliances, however, points to a significant decline.

For example, Appliance Design showed a 7.7 percent decline in major appliances between May of 2006 and May of 2007. Since we're more than two-thirds through 2007, it may be encouraging to note that the forecast for shipments of gas ranges and ovens in 2008 is an increase of 2.4 percent to 3.478 million units.

As some of these statistics mix shipments for both residential and commercial, it's more accurate to break them apart. For example, when looking at water heaters going to commercial establishments, there was a 5.5 percent increase between May of 2006 and May 2007. In contrast, for water heaters going into residences, the May year-over-year figure was a 7.8 percent decline between 2006 and 2007.

Nonetheless, all the negative news about the money lent to questionably credit-worthy borrowers has consumers on edge. The Conference Board's Consumer Confidence Index, which had surged in July, gave back all of the gain in August. The index now stands at 105.0 (1985=100), down from 111.9 in July. The "present situation index" decreased to 130.3 from 138.3 in July. The "expectations index" declined to 88.2 from 94.4. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.

Further, consumers once again turned cautious in their short-term outlook. "Those expecting business conditions to worsen in the next six months rose to 10.6 percent from 8.2 percent, while those anticipating business conditions to improve was virtually unchanged at 15.0 percent," adds the Conference Board report.

Combining the manufacturing plant expansions of the past and present with the appliance data and consumer expectations, it seems likely we could see a shift in manufacturing from medium-priced leisure items to lower-priced necessities such as food, apparel, and transportation. This doesn't mean a gangbusters economy, though. According to MarketWatch's "forecaster of the month," High Frequency Economics U.S. economist Ian Shepherdson:

[The] overall economy is going to stay weak in the second half of the year. Consumers are constrained by gasoline prices, the drop in housing market activity, and the volatile stock markets. At the same time, businesses are going to be held back by higher interest rates.

MarketWatch reports:

While some economists point to the strong global economy as a positive factor in the outlook, Shepherdson said he is not convinced. "Global growth is strong, but the U.S. is essentially a closed economy and strength in the global economy doesn't translate very readily or very substantially into strength in the U.S. Exports are doing OK, but they are not accelerating and I don't think they will," he said.

Meanwhile, consumer spending "will only rise by 2 percent or so in the third and fourth quarter, and given that this consists of 70 percent of GDP "makes it a struggle for everything else to hold it together," Sheperdson told MarketWatch.

Indeed, retail sales were up 2.9 percent in August compared with last year. "It was a respectable, if lackluster, performance given economic jitters from a slumping housing market and spiking fuel prices," according to The New York Times.

Resources

Statement of Philip L. Rones, Deputy Commissioner, Bureau of Labor Statistics
Bureau of Labor Statistics, Sept. 7, 2007

August 2007 Manufacturing ISM Report On Business
Institute for Supply Management, Sept. 4, 2007

Official Says Deal Is Near on Housing Scandal
by Terry Pristin
The New York Times, Sept. 11, 2007

August 2007 Shipments
Appliance Design

Gloom Strikes Back
by Greg Robb
MarketWatch, Aug. 11, 2007

Retail Sales Rise, but Data May Mask Troubles
by Michael Barbaro
The New York Times, Sept. 7, 2007