Yesterday, the NAM co-hosted an Economic Forum at the Boeing Company headquarters in Chicago. This forum was part an ongoing effort to hold discussions with senior-level executives and economists around the country to listen and discuss the current state of the economic and political landscape.
The Economic Forum in Chicago was hosted by Greg Smith, the Chief Financial Officer of Boeing, who highlighted the importance of manufacturing and exports for Boeing. Business at Boeing continues to grow and the company currently has a record order backlog.
Boeing is the largest commercial airplane manufacturer by plane output. Yet, aerospace is becoming increasingly more competitive globally and the largest challenges in the short-term stem from shrinking spending levels on defense and the prospects of devastating across-the-board federal spending cuts – including cuts to civil government agencies which will affect manufacturers from every sector.
The issue of the automatic spending cuts came up at multiple points during the discussion today. William Strauss, a senior economist with the Federal Reserve Bank of Chicago, noted the slow pace of growth in the economy that we have experienced since the end of the Great Recession. He anticipates growth of around 2.5 percent this year. While this is better than in 2012, it is modest at best. He said repeatedly we are missing a significant opportunity to grow faster based on the “slack” in the economy created from the 2008-09 downturn – opportunities that could be realized through more agile and manufacturing-friendly policy implementation.
The other experts on the economic panel made up of Peter Hamilton, Chief Financial Officer, Brunswick; Hui Jiang, Business Analytics and Strategy Director, Navistar; and Chad Moutray, NAM Chief Economist tended to concur with this assessment. Moutray presented compelling data that showed rapid expansion in manufacturing in the first quarter of 2012, but a serious decline for the remainder of the year. Much of the cooling of manufacturing growth, Moutray said, was attributable to the uncertainty about the direction of economic and tax policies in Washington.
Many of the participants felt that uncertainties surrounding the fiscal debate have been a drag on economic growth, and the possibility that the automatic budget cuts could have dire consequences to growth moving forward. Peter Hamilton highlighted Brunswick’s capital spending and R&D investments, but he cautioned the need for a “credible plan to deal with our fiscal crisis before a full recovery could happen.”
Dorothy Coleman, NAM’s Vice President for Domestic Economic Policy, backed up these concerns by outlining the current tax and budget policy issues in Washington. She noted the debates over the budget cuts, the expiration of the FY 2013 continuing resolution, and the mid-May deadline for surpassing the debt ceiling. Beyond these points, she also highlighted the need for long-term fiscal budget solutions which also help to promote growth and improve the nation’s global competitiveness. This would suggest having serious conversations related to tax and entitlement reform.
While much of the conversation focused on the economic and policy challenges, there was also a fair amount of talk on the opportunities for manufacturers. Dr. Moutray spoke of the strengths in the economy last year which he expects to continue. Those strengths include an improving housing market, the possibility of improved exports in 2013, lower energy costs, and continued modest growth in consumer spending.
The participants also spoke of the significant opportunities that come from trade as nearly 95 percent of the world’s consumers live outside our borders. Reaching new markets for U.S. manufactured goods can lead to more jobs and growth here in the United States.
We thank Boeing for co-hosting yesterday’s conversation about the current state of manufacturing in the United States and the challenges the industry faces as we move forward in 2013 and beyond.
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