Kansas City Manufacturers Noted Continued, but Slower, Expansion in April

Manufacturers in the Kansas City Federal Reserve Bank’s region noted expansion for the fourth straight month in April, albeit more slowly than in March. The composite index of business activity declined from 10 to 7 for the month, with easing observed in other key variables, as well.

For instance, the index for production declined from 22 in March to 12 in April. Still, one should not over-interpret this decline, as March’s figure was a strong rebound from winter-related softness observed from December to February. The positive news was that 38 percent of survey respondents reported increased output in April, with 17 percent noting decreases. Likewise, new orders (down from 13 to 9) and shipments (down from 16 to 14) were still encouraging despite the decelerated figures in April. One downside in the report was exports, which stagnated.

On the employment front, the average workweek extended somewhat (up from 3 to 6) and hiring moved from being flat to small net increases (up from zero to 3). Yet, the sample comments make it clear that manufacturers in the District continue to struggle to recruit new talent. “We are challenged finding good people with the right skill sets,” one individual wrote.

Regarding the longer-term outlook, manufacturing leaders in the Kansas City Fed area continue to be mostly optimistic about the next six months. Nearly half of them anticipate increased orders, shipments, and production in the coming months, and over one-third plan to bring on new workers and to invest in more capital spending.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Manufacturers Welcome Ex-Im Proposal and Urge Congressional Action to Reauthorize this Vital Tool to Promote Small Business Exports and a Robust U.S. Trade Policy

The Ex-Im Bank is a critical tool for manufacturers who are competing in the global economy. Reauthorization of the bank’s funding is a top priority for manufacturers as it helps to boost our nation’s exports and supports U.S. job growth.

In his opening remarks at the Ex-Im Bank annual conference this morning, Chairman Fred Hochberg said the Administration submitted a draft reauthorization bill to the Speaker of the House and President of the Senate yesterday. The proposed bill would increase the Bank’s lending cap by $5 billion each fiscal year from FY15-FY18, with an exposure limit capped at $160 billion. The bill would also extend Ex-Im Bank’s authority through September 30, 2019.

The outline Ex-Im Bank Chairman and President Fred Hochberg has laid out today is an important step forward, and we urge members of the House and Senate to expedite legislation to reauthorize the bank before its authorization expires on September 30.

Last year alone, the Ex-Im Bank supported 3,400 small business transactions. Given the highly competitive global economy, reauthorization of the bank is a vital component to a robust U.S. trade policy that levels the playing field for America’s manufacturers whose international competitors already benefit from their own governments’ highly generous export financing.

Click here to read the NAM blog series Exporters for Ex-Im, which highlights the importance of the Ex-Im Bank to manufacturers. To learn more, click here or join the conversation on Twitter at #ExIm4jobs.

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Leaders Gather in North Carolina to Discuss Importance of Trade

Rep. Price addresses an NAM forum on the importance of trade.

Rep. Price (NC-04) addresses an NAM forum on the importance of trade.

At a forum today hosted by the National Association of Manufacturers and BASF Corporation, leaders from Washington, D.C. and across North Carolina gathered to discuss the importance of trade to growing North Carolina’s economy.  The forum took place at the North Carolina Biotechnology Center facility in Research Triangle Park and included a number of manufacturers and local leaders.

Special guest U.S. Rep. David Price (D-NC-04) spoke on the importance of trade to North Carolina, noting that “when constructed responsibly, trade agreements can boost U.S. exports and provide North Carolina’s businesses and manufacturers access to new and growing international markets.”

Nevin McDougall, senior vice president of North America for BASF Corporation’s Crop Protection Division focused on the importance of trade policy to manufacturing, noting that “trade policies are critical to manufacturing businesses like BASF as we seek to develop and deploy our business strategies around the world.”

NAM's Chris Moore discusses the importance of trade to manufacturers.

NAM’s Chris Moore discusses the importance of trade to manufacturers.

Chris Moore, senior director of international business policy at the NAM highlighted how trade currently plays a critical role in the state’s economy, “manufacturers in North Carolina and around the country are already boosting sales overseas, particularly to free trade agreement partner countries that purchase nearly 50 percent of all U.S.-manufactured goods exports and bring nearly $30 billion to North Carolina’s economy.” Moore also called for progress on pending trade deals and highlighted the importance of policies like Trade Promotion Authority (TPA), “manufacturers need new, robust trade agreements that eliminate barriers overseas and put our nation’s manufacturers on a more level playing field.” To watch the latest Manufacturing Minute from Moore on the importance of TPA, click here.

The forum was the second in a series of regional events hosted by the NAM to increase awareness on the importance of trade to the economy. To learn more or to tell Congress you support strong U.S. Trade policies, visit www.nam.org/trade.

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Durable Goods Sales Rebound for the Second Straight Month in March

The Census Bureau said that durable goods orders rose 2.6 percent in March, building on the 2.1 percent gain of February. As such, it suggests that the durable goods sector has begun to move past the winter storms and declining new orders in both December and January. While sales still remain 2.1 percent below their recent peak in November, year-over-year growth remains strong, up 9.1 percent.

The highly-volatile transportation sector often skews these results higher, including in March. Nondefense aircraft orders rose 8.6 percent for the month, boosting overall transportation orders by 4.0 percent. Motor vehicle sales increased a more modest 0.4 percent. Excluding transportation, new durable goods orders were up 2.0 percent in March, or 3.3 percent year-over-year.

This indicates decent sales growth in the broader durable goods sector, including increased new orders for computers and electronic products (up 5.7 percent), electrical equipment and appliances (up 3.5 percent), fabricated metal products (up 2.2 percent), primary metals (up 2.0 percent), and machinery (up 0.5 percent).

Meanwhile, durable goods shipments rose 1.0 percent and 1.1 percent, respectively, in February and March, recovering from decreases in the prior two months. Shipments have grown 4.6 percent over the past 12 months and were just 1.1 percent shy of the all-time high reached in November. Durable goods shipments were higher across-the-board in March, with the largest increases for defense aircraft (up 8.2 percent), nondefense aircraft (up 5.4 percent), computers and electronic products (up 1.6 percent), and machinery (up 1.3 percent).

Chad Moutray is the chief economist, National Association of Manufacturers.

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Exporters for Ex-Im: Texas Small Business Expanding to New Markets Thanks To Ex-Im

In the latest edition of NAM’s Member Focus, the featured success story of Polyguard Products reveals the importance of the Export-Import Bank’s services to small and medium-sized manufacturers.

In 2005, Polyguard—a Texas-based manufacturer of protective coatings for rehabilitation and weld joints on pipelines—was sitting on the sidelines of the global marketplace. Like many small businesses, the company knew there was substantial opportunity to grow their business, but was initially hesitant to take the risk of expanding export activity without export credit insurance to safeguard against potentially hefty unpaid invoices from abroad. Adding to the challenge was the fact that private insurers often refrain from providing credit to manufacturers with smaller volumes of exports. Without export financing or insurance, small and medium-sized manufacturers face an overwhelming disadvantage compared with their global counterparts.

That’s why Polyguard turned to Ex-Im’s credit insurance, which allows small companies the opportunity to compete in the global marketplace. Polyguard has increased sales by 338% since 2005, and has more than doubled its employee count. Polyguard exports to 34 countries and counting, and won the Presidential “E” Award for outstanding contributions to growing U.S. exports in 2010. The company’s President John Muncaster and his son Nate Muncaster, Director of Global Business Development, say the expansion wouldn’t have been possible without support from the Ex-Im Bank.

“If you want small and medium companies to succeed at exports—a very significant part of the American economy—it’s Ex-Im’s role to support and underwrite those guys,” said Nathan Muncaster.

And it’s not just the Bank’s role; a congressional mandate requires Ex-Im to direct 20 percent of its funds to small businesses. In 2012, the Bank authorized $6.1 billion, nearly 17% of total transactions, directly in support of small businesses. If Congress fails to re-authorize the Ex-Im Bank before its current charter expires in September, small and medium-sized manufacturers like Polyguard would be forced to settle for less than what they’re capable of achieving and the American economy will suffer.

“Exporters for Ex-Im” is a blog series focused on the importance of the Export-Import Bank to manufacturers. To learn more or to tell Congress you support reauthorization of the Export-Import Bank, visit http://www.nam.org/Issues/Trade/Ex-Im-Bank.aspx.  

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Growing Manufacturers’ Opportunities in the Asia Pacific: U.S. Push for Ambition and Market Access in TPP Must Continue

With President Obama’s Asia visit kicking off in Japan today, manufacturers are hopeful that the President and Japanese Prime Minister Shinzo Abe will make meaningful progress towards achieving ambitious and market-opening outcomes in the Trans-Pacific Partnership (TPP) negotiations, and that work will continue during the President’s visit to Malaysia to meet Prime Minister Najib Razak later this week. Manufacturers have long supported the negotiation of the TPP that TPP Leaders described in November 2011 that “will be a model for ambition for other free trade agreements in the future, forging close linkages among our economies, enhancing our competitiveness, benefitting our consumers and supporting the creation and retention of jobs, higher living standards, and the reduction of poverty in our countries.” Already, comprehensive, high-standard U.S. free trade agreements help propel nearly 50 percent of manufacturing goods exports around the world.  A TPP done right will boost the United States’ already record manufacturing exports, as well as other sales and other commercial opportunities, by linking America’s highly productive manufacturers to new consumers around the world.

As recognized by each of the TPP countries then and as manufacturers have long advocated, such an agreement must:

  • provide comprehensive market access that concretely levels the playing field;
  • ensure high standards on issues such as intellectual property, transparency and investment;
  • address new trade challenges such as cross-border data flows and longstanding issues such as competition from state-supported enterprises; and
  • incorporate strong enforcement mechanisms so that the agreement is more than words on a piece of paper.

When Japan joined the TPP talks in 2013, it committed to negotiate on the same ambitious basis that the existing TPP negotiating countries had already agreed. U.S. Trade Representative Ambassador Mike Froman said today in Japan, the talks are at a “crossroads” and now is the time for Japan “to choose a bold path.”  Manufacturers agree.  Similarly bold choices must also continue in the capitals of all TPP partners to achieve an ambitious and fully market-opening outcome. Manufacturers urge Japan, Malaysia and all other TPP countries to continue to focus on that ambition this week and in the weeks to come so that the momentum of the TPP talks can be regained and that the TPP  countries’ commitment to an “ambitious, high standard and comprehensive”  agreement that was renewed in December 2013 can be achieved.

A successful TPP agreement that truly opens markets and improves the competitiveness of manufacturers in the United States represents an unprecedented opportunity to boost commercial ties throughout the Pacific Rim and beyond. The NAM continues to urge the immediate and comprehensive elimination of tariffs and non-tariff barriers, strong protections consistent with U.S. practice on intellectual property and investment for all products, new provisions to permit the movement of data cross border and new disciplines to ensure fair commercial competition with state-owned enterprises. These provisions all must be backed up by state-of-the-art enforcement provisions from state-to-state to investor-state mechanisms. Ultimately a successful, growth-producing TPP agreement will be one that ensure that manufacturers in the United States will be put on a fair and competitive footing in each of the TPP markets.

President Obama, Prime Minister Abe and Prime Minister Najib Razak have a critical opportunity this week to inject new vitality into the TPP talks. Manufacturers hope they will seize this occasion to move the negotiations closer to a pro-growth and pro-competitive conclusion.

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Ex-Im Critics Ignore Reality; Re-Authorization is Really about Jobs and Competitiveness

Over the last days and weeks, critics of the Export Import Bank (Ex-Im) have talked about lots of issues and attempted to smear lots of mud. Yet, they continue to ignore the crux of the Ex-Im issue: American jobs and American manufacturing competitiveness.

While critics may enjoy debates inside isolated ivory towers, our nation’s manufacturers have no such luxury. Manufacturers big and small, in communities across the country, face a highly competitive global economy every single day. Every sale made can mean jobs that are saved or new jobs are created. When they lose out to foreign competitors for sales, our nation’s manufacturers are faced with tough choices as they struggle to make payroll and keep their business on track.

Critics of Ex-Im’s reauthorization seem to ignore a basic fact of the global economy when complaining about sales of airplanes to foreign airlines or sales of capital equipment to foreign mining projects. The fact is that other countries are building up their infrastructure and striving to meet growing domestic demand for energy, transportation, water, crops and telecommunications. These projects are moving forward regardless of what the U.S. Congress does or doesn’t do on Ex-Im Bank reauthorization. The issue that Ex-Im reauthorization presents is whether those foreign projects will use products made in the United States by American workers or whether those sales will go to our competitors in Asia, Europe or elsewhere.

Outside the United States, at least 59 foreign export credit agencies (ECA) are working intensively to give our foreign competitors a leg up in sales in fast-growing overseas markets. Those ECAs do not hesitate to support all types of projects, with far less rigor than Ex-Im already places on the sales for which it provides financing, insurance, loan guarantees and other services.

The United States has led efforts to impose important disciplines on ECAs, particularly those for member countries of the Organization for Economic Cooperation and Development (OECD). In 2011, the United States negotiated a new Aircraft Sector Understanding to bring official ECA financing rates more in line with commercial rates, taking away incentives for credit-worthy airlines to use ECA financing. That new agreement went into effect in 2013, and we’ve seen the commercial markets respond by picking up more financing for aircraft. But U.S. leverage has waned as critics seek to have the United States unilaterally disarm its own Ex-Im activities.

While the critics focus on a few large companies that use Ex-Im services (which not only support jobs in their own companies but also in thousands of small and medium-sized companies throughout their supply chains), they ignore the nearly 90 percent of Ex-Im transactions in FY2013 – some 3,413 transactions – that directly supported small businesses. As the NAM’s new Exporters for Ex-Im blog post series will highlight in the days and weeks to come, small and medium-sized businesses make up the lion’s share of Ex-Im’s activities. Ex-Im’s support of dynamic small business exporters like Wallquest has helped small businesses enter and expand export sales – thereby growing not only their manufacturing production, but the number of their employees.

At a time when the global economy is starting to show some growth, and we know our global competitors are seeking to win every sale, the question for lawmakers voting on Ex-Im reauthorization this year is actually quite simple: Do you want foreign purchasers to buy products manufactured in the United States with U.S. workers? If so, support Ex-Im reauthorization. Manufacturers do.

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China’s Manufacturing Sector Contracted for the 4th Straight Month; U.S. and Europe Strengthened

Chinese manufacturing activity contracted for the fourth straight month. Yet, the pace of the decline slowed, with the HSBC Flash Manufacturing Purchasing Managers’ Index (PMI) up from 48.0 in March to 48.3 in April. The data largely mirrored the recent deceleration seen in other economic indicators, including China’s real GDP falling from an annualized 7.7 percent in the fourth quarter of 2013 to 7.4 percent in the first quarter of 2014.

Despite the weaknesses, one could put a positive spin on the slightly better – but still contracting – levels of new orders (up from 46.9 to 47.7) and output (up from 47.3 to 48.0). On the other hand, employment (down from 49.3 to 48.6) and export sales (down from 51.4 to 49.3). Exports have now contracted in four of the past six months, which have no doubt negatively impacted overall manufacturing sentiment.

Meanwhile, the latest reports reflect renewed strengths in both Europe and the United States. While the Markit Flash U.S. Manufacturing PMI edged marginally lower (down from 55.5 to 55.4), production growth (up from 57.5 to 58.2) was at its highest level since March 2011. This was a sign that the sector has begun to move beyond the weather-related slowdowns observed earlier in the year. New orders (up from 58.1 to 58.9) and exports (up from 51.0 to 51.9) have also rebounded. Hiring eased a bit (down from 53.9 to 53.8), but still reflected modest growth.

At the same time, the Markit Flash Eurozone PMI increased from 53.0 to 53.3. This was the tenth consecutive monthly expansion on the continent for manufacturing activity. The higher figure in April was largely the result of the jump in output (up from 55.4 to 56.5), which was only barely below the three-year peak of 56.7 seen in January. Likewise, hiring also strengthened (up from 50.3 to 51.3), its highest point since September 2011.

Nonetheless, sales growth moderated slightly (down from 54.4 to 53.9), with exports unchanged (53.6). The good news was that both still reflected modest gains, and the recent gains in demand and production in Europe have helped to lift spirits, particularly given the severity of the two-year recession.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Growing Manufacturers’ Opportunities in the Asia Pacific: Seizing Huge Growth Potential

The President’s visit to Asia this week should highlight the value of strengthening trade and investment ties and identifying areas for increased commerce and cooperation throughout the Asia-Pacific region. We believe that increased American economic and commercial engagement in the Asia-Pacific is critical unlocking numerous growth opportunities for manufacturers in the United States.  The Asia-Pacific represents a huge market with an even greater growth potential that we hope the President’s trip can help catalyze.

Already, the Asia-Pacific region is a strong and growing purchaser of U.S. manufactured goods. Three of the top ten export destinations for U.S. manufactured goods are in Asia (China, Japan and South Korea). Total U.S. manufactured goods exports to Asia grew from $213.25 billion in 2009 to more than $331.56 billion in 2013. More specifically, transportation equipment exports from the United States to Asia nearly doubled from $30.21 billion in 2009 to just over $60 billion last year. Computer and electronic product exports also grew from roughly $55.61 billion in 2009 to $67.08 billion in 2013. Chemical exports to Asia also increased by $13.4 billion over the last five years.

Yet the potential for greater growth for manufacturers in the United States is substantial The Asia-Pacific region boasts nearly 60 percent of global GDP and is the fastest growing region in the global economy. The Asia-Pacific also makes up roughly half of the world’s population, making it a market ripe for more U.S. export growth.

To boost manufacturers’ export and sales opportunities in the region, more work is needed to eliminate tariff and non-tariff barriers, expand commercial relationships and ensure our trading partners play by the rules of the international trading system. The United States is seeking to negotiate a comprehensive, high standard and market-opening Trans-Pacific Partnership (TPP) agreement that would include our Asia-Pacific partners (Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam) along with several Western Hemisphere partners (Canada, Chile, Mexico and Peru). The United States is also negotiating a bilateral investment treaty (BIT) with China, and efforts are underway to expand relationships with the Association of Southeast Asian Nations (ASEAN). More broadly, the United States has cooperated with 20 of our Asia-Pacific trading partners through the Asia Pacific Economic Cooperation (APEC) forum to expand economic ties and develop stronger frameworks in numerous areas, from trade in environmental goods and transparency to creating a stronger enabling environment for infrastructure investment. At the same time, though, there are over 130 other trade agreements in the Asia-Pacific that exclude the United States and put manufacturers at a substantial disadvantage in other Asian markets.

To move successful trade negotiations forward and eliminate the competitive disadvantage that manufacturers in the United States face in many Asian markets, enactment of Trade Promotion Authority (TPA) is critical. Both the President and Congress need to work closely together to move a strong TPA bill. In January, the Bipartisan Congressional Trade Priorities Act was introduced to facilitate the negotiation and implementation of comprehensive and ambitious trade agreements and require intensive consultations throughout the negotiating process. Despite repeated calls by manufacturers and the broader business community, no further action has been taken on this or any other TPA legislation. To grow substantial new commercial opportunities in the Asia-Pacific, action on TPA is critical.

As Commerce Secretary Pritzker so aptly stated in a speech last week at Johns Hopkins School of Advanced International Studies: “We can act now to advance American values and interests in setting the rules for trade in a region representing 40 percent of the world’s economy, or we can let others with different values and interests take the lead.” Manufacturers agree that the time is now for the United States to lead in this region, where significant growth opportunities are awaiting U.S. exporters.

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Exporters for Ex-Im: Bank Key To Wallpaper Company’s Growth

As the world’s economy strengthens and competition for global consumers intensifies, ensuring U.S. companies have the ability to tap into that growing market is becoming increasingly more important. With 95 percent of consumers existing outside of our country’s borders, foreign companies are quickly seeking new ways to dominate the marketplace and undercut their U.S. counterparts.

Fortunately, U.S. manufacturers are up for the challenge and, given the slow turnaround of our own country’s economy in recent years, are increasingly relying on exports to faster-growing markets around the world in order to continue to grow and produce jobs. In 2012, manufactured goods exports reached a record $1.35 trillion. Today more than a quarter of everything we make in the U.S. is sold overseas and according to the White House, one in three U.S. manufacturing jobs depends on exports.

One of the main elements fostering this impressive growth is the support of the Export-Import Bank of the U.S. (Ex-Im Bank), which offers financing for American companies to export their goods and services, often when American creditors will not. This is essential to ensuring U.S. companies are properly equipped to compete with International businesses, many of whom are receiving aggressive government support ranging from development funding to export financing.

For the Pennsylvania-based manufacturer, Wallquest, this certainly rings true. A family-owned company since 1985, Wallquest is one of the larger wallpaper manufacturers in the U.S. Though still considered a relatively small manufacturer, the company’s dedication to creating a quality, innovative product while preserving traditional standards has helped secure their competitive advantage within the global home furnishings sector. Today, 90 percent of their American-made products are sold overseas.

Much of the company’s growth has occurred in the past few years as they were able to expand their customer base within international markets. In 2008, at the time the company began receiving financing from the Ex-Im Bank, they were 80 employees strong. In large part due to this financial support, the company was able to lower their cost of capital and open up a new, expanded market for foreign customers. Just four years later, in 2012 Wallquest reached 185 employees and today are looking to expand even further.

Jack Collins, vice president of Wallquest said, “Today we are selling wallpaper in 61 different countries. The Ex-Im Bank’s working capital programs played a key part in financing our company’s growth.” Beyond the company’s own growth, Collins also acknowledges the other domestic sectors of the economy that benefit, from the raw material suppliers to the professional services such as accountants and lawyers.

Wallquest is just one of over 3,400 small businesses that are prospering and helping to create U.S. jobs because of the support of the Ex-Im Bank. As Members of Congress consider the Bank’s reauthorization this September, it is critical that they recognize why companies like Wallquest deserve a level playing field to continue to grow our economy and contribute to America’s future.

“Exporters for Ex-Im” is a blog series focused on the importance of the Export-Import Bank to manufacturers. To learn more or to tell Congress you support reauthorization of the Export-Import Bank, visit http://www.nam.org/Issues/Trade/Ex-Im-Bank.aspx.  

 

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