North Carolina Manufacturer Testifies Before House Small Business Committee

Today the House Small Business Committee held a hearing titled “U.S. Trade Strategy: What’s Next for Small Business Exporters?” The first panel of the hearing included testimony from Deputy USTR Miriam Sapiro discussing the status of current trade negotiations and the overall strategy to help small businesses reach new markets.

Also testifying at the hearing was Thermcraft, Inc. President Thomas Crafton from Winston Salem, North Carolina. Mr. Crafton was there to share with the members of the committee some recommendations to help increase exports to create manufacturing jobs.

Thermcraft, Inc. President Thomas Crafton testifies before the House Small Business Committee

Thermcraft, Inc. President Thomas Crafton testifies before the House Small Business Committee.

Mr. Crafton discussed during his testimony the obstacles that Thermcraft still faces when exporting, such as obtaining consistent and reliable information and help from federal government representatives stationed overseas:

On the flipside, we have export issues that arise on a daily basis and continue to be an ongoing struggle. For example, it can be difficult to get consistent and reliable information and help from the local representatives stationed abroad. Commercial Officers seem to see only the big picture and often fail to address the details and help small businesses through the ongoing process of exporting. Regulatory changes are constant, and the burden lies on us to keep up with those changes and decide on classifications for specific products. There is a lack of a single source for info regarding export embargoes. They are listed across multiple websites that take countless hours to research, and it is difficult to know if all requirements have been addressed.

He also mentioned the importance of fee trade agreements and the need to continue to reach new markets for manufacturers as well as the opportunities the Russian market presents: (continue reading…)

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Senate Panel Highlights Manufacturers’ Sustainability Efforts

Manufacturers are leading the way in implementing successful sustainability programs, according to testimony from several witnesses at a Senate Environment and Public Works Committee Subcommittee hearing on “Growing Long-Term Value: Corporate Environmental Responsibility and Innovation.” Executives from four companies – Intel Corporation, Procter & Gamble (P&G), Eastman Chemical Company, and FedEx Corporation – testified before Subcommittee Chair Tom Udall (D-NM) and Ranking Member Lamar Alexander (R-TN) on the ways in which each company is fostering innovation, reducing waste and air emissions, and creating more sustainable products through voluntary initiatives.

All four witnesses noted that the programs have helped improve their company’s bottom line, even though many of the projects require up-front investment. For example,

  • Intel has invested $100 million in water conservation initiatives that have yielded over 40 billion gallons of water savings;
  • Procter & Gamble stated in its written testimony that its energy savings will be greater than the per-site energy consumption at 80% of its facilities worldwide;
  • Eastman has utilized a Department of Energy (DOE) program called Save Energy Now and has found $3 million in savings opportunities so far; and,
  • FedEx has significantly reduced its greenhouse gas emissions and improved the mileage of its FedEx vehicles. It recently purchased six solar energy facilities as well.

 

 

 

 

 

 

 

 

Dr. Len Sauers, Vice President of Global Sustainability at Procter & Gamble, testifies at the hearing.

Sen. Alexander expressed concern that some costly and overly-burdensome federal regulations, such as the Environmental Protection Agency’s (EPA) Boiler MACT proposal, can often hurt manufacturers’ sustainability efforts by diverting resources towards unnecessary equipment retrofits. Sen. Udall (D-NM) stressed the importance of public-private partnerships between the federal government and businesses in continuing to drive innovation and environmental responsibility. Manufacturers are encouraged by the Senate Subcommittee’s focus on sustainability and acknowledgement that many companies are making significant environmental improvements through voluntary initiatives.

More information on the hearing and the written testimony can be found here.

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Industrial Production Up 1.1 Percent in April

The Federal Reserve Board reported that industrial production rose 1.1 percent in April, its fastest pace since December 2010. After falling in March by 0.6 percent, this represents a healthy turnaround. The numbers were lifted by strong showings in the utilities and mining industries, which were up 4.5 percent and 1.6 percent. Overall capacity utilization for all industries has risen to 79.2 percent, its highest level since the spring of 2008.

Manufacturing production increased 0.6 percent, aided by a 1.3 percent rise in durable goods production. Nondurable goods manufacturers experienced a 0.2 percent decline in production in April. Manufacturers have produced 5.8 percent more on a year-over-year basis. Meanwhile, manufacturers’ capacity utilization increased to 77.9 percent, essentially on par with the February reading of 78 percent.

Motor vehicle sales were the largest bright spot in the manufacturing sector, with production up 3.9 percent in April. This continues a steady gain for the auto sector, which has seen a 27.1 percent increase in activity since April 2011. Other sectors with higher production in April include furniture and related products (up 2.4 percent), computer and electronic products (up 1.6 percent), miscellaneous durables (up 1.5 percent) and aerospace (up 1.1 percent).

The largest declines were seen in petroleum and coal products (down 2.6 percent) and wood products (down 1.4 percent). In each case, though, the year-over-year production numbers were higher for 16 of the 19 major manufacturing sectors. Those lagging in production over the past 12 months include the printing and support, paper and apparel and leather sectors. (continue reading…)

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Housing Starts Rise in April

The Census Bureau and the U.S. Department of Housing and Urban Development reported that housing starts rose from a revised 699,000 in March to 717,000 in April. As such, new residential construction has bounced back from its decline in March, putting it back on the pace seen in January and February which had 720,000 and 718,000 housing starts, respectively.  This continues a slow-but-steady upward ascent in housing figures as the market begins to improve. Housing starts in April 2011, for instance, stood at 552,000 annualized units.

Unlike past months when multi-family construction dominated, both single-family and multi-family units increased in April. There are currently 492,000 and 225,000 new residential construction projects under way, at annual rates. Single-family housing starts, though, are still below their levels of December and January. This suggests that there is still room for more improvement.

Fortunately, single-family housing permits have also been on the rise, and while overall permits declined, single-family unit permits rose from 466,000 to 475,000. Total housing permits fell from 769,000 to 715,000 units, mostly from a decrease in multi-family permits. Still, the March figure appears to be an outlier, possibly from seasonal factors due to warmer weather. The current housing permits number is equivalent to the level of February, and the longer-term trend is positive.

This observation was also seen in the National Association of Home Builders (NAHB) and Wells Fargo report which was released yesterday. The Housing Market Index (HMI) rose from 25 in April to 29 in May, its highest level since 2007. Like the housing starts figures, the decline in April appears to be due to seasonal factors, as the HMI stood at 28 in both March and February. Improvements were seen in all regions except the West, with expected sales and potential buyer traffic up.

NAHB Chief Economist David Crowe, while elated about progress in the housing market, also cautioned that structural challenges still haunt the sector. He said, “The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices.”

Indeed, it will take some time before we are able to see a full recovery in this all-important sector, with many regions continuing to suffer from excess inventory, high proportions of the population in upside-down mortgages, and high turn-down rates for would-be home buyers. With that said, both the housing starts and NAHB figures show that there are signs of life in the housing market, which is highly encouraging.

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Common-Sense Tax Simplification Legislation Passes House

Common-sense, bipartisan tax legislation can and does pass quickly in Congress! Today, the House passed, by voice vote, the Mobile Workforce State Income Tax Simplification Act (HR 1864), a bill that establishes an easy-to-understand rule on taxing out-of-state workers that helps both employees and employers. Currently, a maze of state income tax laws apply to employees who temporarily work in nonresident states and their employers who are responsible for withholding taxes for these traveling employees.

The House recognized the absurdity of this patchwork of different state income tax rules and passed HR 1864, which establishes a simple and fair test: a temporary worker needs to work in a nonresident state for more than 30 days before he has to pay income taxes to the state he’s visiting. 

The NAM letter sent 5/14 to all House offices voiced support for this bill and urged prompt passage of this legislation on behalf of many manufactures and their workers, who are getting trapped by onerous compliance burdens and different state income tax liabilities. The compliance burden is particularly problematic for small and medium size companies that do not have in-house tax departments to calculate the employee’s tax liability and the necessary employer’s tax withholding requirements.

The bill now advances to the Senate and manufacturers urge Senators to act quickly on this common-sense, bipartisan legislation. To learn more about the issue, click here.

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86.9 Percent of World Market Still Maintains Barriers Against U.S. Exports

On the memorable day that the U.S.– Colombia Trade Promotion Agreement has at long last gone into effect – eight years after its negotiation started, it is useful to recall how beneficial Free Trade Agreements (FTAs) are, and have been, for America’s manufacturers. Far from being the drag on the U.S. economy claimed by many detractors of our trade agreements, these agreements have been a boon for manufacturers in the U.S. and factory workers – as well as for farmers and service providers.

Accounting for just 12.5 percent of Gross Global Product outside the United States, America’s FTA partners (counting Korea, the agreement with which went into effect last year) have accounted for a remarkable 52 percent of the growth of U.S. manufactured goods exports so far this year.

Exports to them are growing faster than to non-FTA partners.  Through March, U.S. manufactured goods exports to FTA partners were 13 percent larger than for the same period of 2011.  Our manufactured goods exports to non-FTA partners during the same time grew 10 percent – meaning that exports to FTA partners grew one-third faster!

And, confounding trade critics, manufactured goods trade with FTA partners has been in surplus for several years – meaning we sell them more manufactured goods than they sell us.  According to the U.S. Department of Commerce’s International Trade Administration FTA report, counting Korea our manufactured goods surplus with FTA partners was $7.5 billion in 2010, $29 billion in 2011, and so far in 2012 was at an annual rate of $47 billion.  In the coming months, the new Colombian agreement will add even more to that figure.

Counting the newly-implemented Colombian agreement, the proportion of Gross Global Product outside the United States accounted for by our FTA partners rises from 12.5 percent to 13.1 percent – but that leaves 86.9 percent of World GDP outside the United States as markets without FTAs with us, markets with trade barriers limiting our exports.  It is high time to open those markets so more American workers can be employed producing high-quality U.S. products to be sold around the world. 

Frank Vargo is vice president for international economic affairs, National Association of Manufacturers.

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Business Community United on Pension Issues

A little while ago, a letter from 204 businesses and trade associations representing companies all across the country sent a letter to the Congress urging them to take immediate “action to stabilize funding interest rate rules for private-sector pension plans” to adjust for current economic conditions which are driving up pension funding obligations and in opposition to pension premium increases.

Pension plan funding obligations are inversely tied to interest rates so when interest rates are low – like they are today – then pension obligations are high.  Since the financial collapse the FED has adopted a policy of keeping interest rates low in an effort to stimulate the economy.

One negative side effect of this policy is the impact on a company’s pension obligations. The Senate a few months ago passed a provision that would fix the funding rules to all a more historically accurate measure for funding obligations using a 10 percent corridor around the 25 year average.

This provision was part of the highway transportation bill which is now in conference. We are hopeful that the Conferees will adopt this provision and make it permanent rather than time limited as provided for in the Senate bill.

This provision makes sense and if made permanent will go a long way toward helping provide businesses more certainty from which to plan for this commitment. Improved planning will mean more certainty which will in turn help make our companies better able to compete in today’s economy. We urge Congress to adopt this common sense solution.

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Manufacturing Activity Improves in New York

The New York Federal Reserve Bank’s Empire State Manufacturing Survey bounced back in May after a disappointing April. The composite index of general business conditions jumped from 6.6 in April to 17.1 in May, nearing the levels that it achieved earlier in the year. Equally important to perceptions about the larger economy, the various subcomponents were higher across-the-board, reflecting modest growth among manufacturers.

The largest increase occurred in the index for shipments, which rose from 6.4 to 24.1. The shift in the monthly shipment figures was the result of nearly 47 percent of respondents saying that their shipments were higher this month than last.

Other measures also increased, but less dramatically. The index for new orders, for instance, rose from 6.5 to 8.3. Inventories, the number of employees and the average workweek were all higher, as well.

Interestingly, though, manufacturers in the New York region were less optimistic about the next six months than in past surveys. The forward-looking general business conditions index fell from 43.1 to 29.3 for the month. This mirrored similar drops in new orders, shipments, employment and capital expenditures.

With that said, it is hard to get too worked up over this, especially since nearly half of respondents expect for new orders to be higher. In addition, these index levels still suggest a relatively brisk pace of growth moving forward. The drop, though, does suggest increased anxieties.

Those taking the survey were also asked about pricing pressures. They said that input prices grew by 3.6 percent on average over the past year, with a 3.5 percent gain expected this year. This reflects a degree of moderation, though, from the 8.1 percent increase that respondents cited in May 2011 at the height of a run-up in raw material and energy prices. As for selling prices, they are growing around 2 percent.

Chad Moutray is chief economist, National Association of Manufacturers.

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Retail Sales Up Just 0.1 Percent in April

The Census Bureau reported that retail sales rose 0.1 percent in April, following strong gains in the first three months of the year. At least some of this pullback could be due to the unseasonably warm winter, which resulting in construction occurring earlier in the year than normal. As evidence of this, retail sales of building materials dropped 1.8 percent in April, a reversal from the 2.7 percent gain in March.

Other sectors with declining sales included clothing and accessories (down 0.7 percent), gasoline stations (down 0.3 percent) and general merchandise (down 0.1 percent). Nonetheless, there were areas of strength, too. The strongest monthly sales growth occurred with nonstore retailers (up 1.1 percent), furniture and home furnishings (up 0.7 percent), sporting goods and hobbies (up 0.7 percent), motor vehicle and parts (up 0.5 percent) and food service and drinking places (up 0.4 percent).

Year-over-year growth in retail sales currently stands at 6.4 percent, a slower pace than in past months. Six months ago in October, the annual rate of growth for retail sales was 8 percent.

These numbers suggest modest growth in retail sales overall. The slower pace in April was mostly due to seasonal factors as well as lower gasoline prices. So, it is important not to read too much into the easing of retail sales figures. Americans continued to grow their spending in other categories, with nonstore retailers leading the way.

Chad Moutray is chief economist, National Association of Manufacturers.

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Senate Expected to Vote on Ex-Im Bank Today

Today the Senate is expected to consider H.R. 2072 to reauthorize the Ex-Im Bank along with several amendments. The NAM has sent a Key Vote letter to senators urging support for the Bank which is so critical to small and medium-sized manufacturers.

Below is an excerpt from the Key Vote letter:

The Ex-Im Bank levels the playing field for U.S. exporters by matching credit support other nations provide, ensuring that our nation’s manufacturers can compete based upon the price and performance features of their products. It also enables small and medium-sized manufacturers to capture new markets in emerging economies abroad. In FY2011, the Bank supported more than $41 billion in export sales from more than 3,600 companies, supporting approximately 290,000 export-related American jobs.

Manufacturers are urging all senators to support H.R. 2072 to reauthorize the Ex-Im Bank and to increase its lending authority.

 

 

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