Dispatch from the Front: The Week of May 21

President Obama wraps up the NATO Summit in Chicago today. He then heads to Joplin, Mo., to deliver the commencement speech for Joplin High School. On Wednesday, he speaks at the Air Force Academy’s commencement ceremony before heading to California for fundraising events. On Thursday, the President will talk about the economy in Newton, Iowa.

The Senate convenes this afternoon to consider the Food and Drug Administration Safety and Innovation Act (S. 3187). The Senate has also set aside an hour to debate a judicial nomination.

The House is out this week.

Senate Hearings: TUESDAY—The Energy and Natural Resources Committee holds a hearing on “Catalyzing American Ingenuity: The Role of Government in Energy Innovation.” The Banking Committee considers derivatives reform. The Armed Services Committee begins a weeklong markup of the defense authorization bill. WEDNESDAY—The Banking Committee holds a hearing on “Reviewing the U.S.-China Strategic and Economic Dialogue.”

Executive Branch: Defense Secretary Leon Panetta and Secretary of State Hillary Clinton are in Chicago for the G-8 Summit. Homeland Security Secretary Janet Napolitano is traveling in Israel and Jordan. Commerce Secretary John Bryson is traveling in France and Germany this week.

Economic Reports: From The New York Times: “Data to be reported this week will include: Existing home sales for April (Tuesday); new home sales for April (Wednesday); durable goods orders for April and weekly unemployment claims (Thursday); and the Thomson Reuters/University of Michigan consumer sentiment index for May (Friday).”

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Monday Economic Report – May 21, 2012

Below is my Monday Economic Report for the Week of May 21.

Most reports on manufacturing activity last week echoed a familiar theme. The sector remains a bright spot in the U.S. economy. Higher production and new orders helped to lift the Conference Board’s measures of the current and forward-looking indices. While the overall Leading Economic Index (LEI) fell by 0.1 percent, this was primarily due to lower housing permits and other factors. Industrial production rose 1.1 percent in April—its fastest pace since December 2010—with motor vehicle activity up significantly. On a year-over-year basis, manufacturing production has risen 6 percent. Mining and utility industries also experienced strong gains for the month, and overall capacity utilization now stands at its highest point since spring 2008. This is encouraging news.

Other data reflected similar sentiments. The Federal Reserve Bank of New York observed manufacturing activity in its region bouncing back in May after a disappointing April, especially among shipments. The housing market appears to be back on track to have a slow but steady improvement in this still-depressed sector. Seasonal variations can explain at least part of the previous month’s decline, with the latest data consistent with the positive numbers seen earlier in the year. These same seasonal adjustments—brought about because of the warmer-than-normal winter—also affected retail sales figures. Building materials sales dropped 1.8 percent, reversing March’s 2.7 percent gain. Overall, though, retail sales continue to grow modestly, with Americans continuing to spend.

Not all of the news last week was good, however. The Philadelphia Federal Reserve Bank’s survey on manufacturing activity reflected a surprisingly downbeat assessment. Several key indicators showed contractions, including new orders and employment, and respondents were less positive about future production. It remains to be seen if the Philly survey represents an outlier or not; its next survey will be closely watched (much as it was after a similarly disappointing report last August). In other news, it’s looking increasingly likely that Greece might exit the euro, which could have profound consequences on the global economy and increase everyone’s anxiety levels.

This week, the Federal Reserve Banks of Kansas City and Richmond will release manufacturing sentiment surveys for their regions. Hopefully, their assessments reflect higher production and new orders, similar to the industrial production and Empire State survey out last week. In addition, new data on durable goods orders will hopefully also show increased activity.

Chad Moutray is chief economist, National Association of Manufacturers.

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Chevron Seeks Additional Evidence of Corruption in Ecuador Suit

Earlier this week the Wall Street Journal’s Mary Anastasia O’Grady penned an editorial about the current state Chevron’s fight against the corrupt judgment brought against it by an Ecuadorian court in February of last year. Chevron has been waging a battle to prove that the judgment in the case is the result of corruption and the evidence continues to mount.

On May 4th Chevron asked the U.S. federal court in Miami for records of several bank accounts with Banco Pichincha in Ecuador. It’s believed that these Bank records will show that one of the court-appointed independent experts, a geological engineer, was bribed by the plaintiff’s lawyers:

One of Chevron’s allegations is that geological engineer Richard Cabrera, the court-appointed “independent” expert who would assess the rain forest damage, was working secretly for the plaintiffs lawyers. It cites outtakes from the ADC film “Crude” that show the two sides meeting together before his appointment and documents secured through discovery in U.S. courts to support that allegation. Chevron also claims that documents prepared by the plaintiff’s lawyers became part of the Ecuadorean court’s judgment, which it says casts doubt on the court’s neutrality.

Chevron has continued to go to court in the U.S., now more than 20 times to show that fraud was committed in the case and in nine instances U.S. courts have been critical of the Ecuadorean Court proceedings. From the WSJ:

In one instance, addressing Chevron’s claim that the plaintiffs’ representatives “ghostwrote” Mr. Cabrera’s report, the U.S. District Court for the Western District of North Carolina observed that “While this court is unfamiliar with the practices of the Ecuadorian judicial system, the court must believe that the concept of fraud is universal, and that what has blatantly occurred in this matter would in fact be considered fraud by any court. If such conduct does not amount to fraud in a particular country, then that country has larger problems than an oil spill.”

Chevron is continuing to move forward with their RICO suit in the NY Southern District Court against Amazon Defense Coalition, one of the nongovernmental organizations advocating for the plaintiffs in the suit. And it’s becoming more and more clear that this judgment was arrived at with fraud and corruption.

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Congratulations to the Winners of the President’s “E” Awards for Exports

Last week the President’s “E” Awards and “E Start” Awards for Exports were presented to Exporters at a White House ceremony. The awards are presented to person and firms that contribute significantly in the effort to increase U.S. exports as well as recognizing noteworthy export promotion efforts.

Several manufacturers won the President’s “E” Award for Exports including Bio-Microbics, Inc. and Gold Eagle Co. Also, several received the President’s “E Star” Award for Exports which included Zippo Manufacturing Company, French Oil Mill Machinery Co., Kingsbury, Inc. and Rust-Oleum Corporation. We congratulate all of these manufacturers on their efforts to export and to promote exports.

Growing exports is essential to job creation and manufacturing in the U.S. With 95 percent of the world’s consumers living outside of our borders its imperative we continue to undertake efforts to export more U.S. manufactured goods.

The reauthorization of the Export-Import Bank is a good first step as the Bank helps thousands of small and medium-sized manufacturers reach new markets. But we need to do more. We need more trade agreements as well as Congress needs to pass PNTR for Russia. Manufacturers are looking to Washington to help level the playing field for them to compete globally.

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Disappointing Philly Fed, Leading Indicators Data

The two economic indicators released today were disappointing, showing continued weakness even as other data points show some improvements in manufacturing and the overall economy.

The Philadelphia Federal Reserve announced a surprisingly downbeat assessment in the May version of its Business Outlook Survey. The composite index fell from 8.5 in April to -5.8 in May. Several components reflect contracting activity, including new orders, inventories, prices received, employment and hours worked. Shipments data were the lone holdout, with a slight uptick in the growth rate.

This increased level of pessimism carried through to the forward-looking indicators as well. Manufacturers in the Philly region expect the growth rate to ease somewhat. The expectations composite index of general business activity plummeted to 15 in May from 33.8 in April. While new orders and shipments expectations remain strong, it is with a little less gusto. Still, only 15 percent of respondents expect new orders to decline in the next six months. (continue reading…)

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Alcoa Groundbreaking of New Aluminum Lithium Facility

Today Alcoa celebrated the groundbreaking of construction for its new $90 million aluminum lithium facility in Lafayette, IN. Alcoa is the world’s leading producer of primary and fabricated aluminum.

The new state-of-the-art facility will be an 115,000 square foot expansion capable of producing more than 20,000 metric tons of aluminum lithium. The new facility will create approximately 75 high-value jobs, with an additional 150 jobs created during the construction.

Alcoa’s decision to invest in a new facility is a perfect example of how manufacturers are leading innovation here in the United States. Manufacturers are driving our economic recovery and it’s great to see manufacturers continue to expand and create new jobs.

What manufacturers need now is more pro-growth policies from Washington that will allow companies to invest in new facilities such as this and employ more workers.  We need more stories like today’s groundbreaking of Alcoa’s new facility. Such projects will ensure that the U.S. remains competitive in the global manufacturing economy.

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Treasury Secretary Geithner to Visit NAM Member Marlin Steel

Today Treasury Secretary Tim Geithner will tour NAM member company Marlin Steel Wire in Baltimore and meet with NAM Board Member and President Drew Greenblatt. The Secretary Geithner is expected to discuss President’s “to do list” for Congress which includes his proposed new hire tax credit.

Before touring Marlin Steel Secretary Geithner addressed the Greater Baltimore Committee where he talked about the need for spending cuts and other measures to help the economy.

Manufacturing continues to receive a lot of attention and deservedly so as the sector has been the engine behind our economic recovery creating 481,000 jobs since January 2010. But manufacturers are looking to policy makers like Secretary Geithner to help implement policies which will enable them to continue to grow. Our blueprint to keep manufacturing competitive, A Manufacturing Renaissance: Four Goals for Economic Growth, lays out key policies that Congress and the Administration can enact to keep manufacturing in the United States strong.

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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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