Today the NAM, several member companies and a number of other organizations sent President Obama a letter expressing our strong support for the continuation of the administration’s effort to reduce the federal government’s energy consumption. The federal government is the largest single user of energy in this country and many federal buildings are in need of upgrades and improvements.

In 2011 the President issued a Presidential Memorandum directing agencies to use $2 billion of private sector financing and expertise to upgrade federal buildings. Under this directive federal managers could utilize energy savings performance contracts (ESPC) and utility energy service contracts (UESC) to purchase energy efficiency upgrades by using gains from energy savings. ESPC and UESC pose no risk to the federal agency because the results are guaranteed and the contractors assume the risks.

To use a military term , the federal government is a “target rich” environment for these upgrades. A number of energy audits have been completed by federal agencies and to date more than $9 billion in addressable energy efficiency measures have been identified, and no doubt there are still more that will be identified in the coming years. We would like the President to again challenge the Executive Branch to identify and contract for $1 billion each year for the next five years in energy saving projects using performance-based contracting. The letter also request that the Executive Branch identify and develop a “best practices” program so that individual agencies can share their successes and their challenges.

We think this makes a lot of sense. This effort will keep the momentum going in the agencies, it will allow the federal government to improve and modernize infrastructure, and it will enhance energy security. All this and it will be done by using energy savings and not with appropriated tax payer dollars.

Manufactures have been leaders in energy efficiency both in the manufacturing of equipment and the utilization of equipment. We understand that a kilowatt saved is a dollar saved. Lowering our energy consumption not only allow us to better utilize our financial resources and but in many instances it helps us to be more productive using less energy. These savings impact the bottom line and help manufacturers to be more competitive in the global economy. Being energy efficient is simply smart!

Chip Yost is assistant vice president of energy and resources policy, National Association of Manufacturers.

The Bureau of Labor Statistics reported that producer prices for finished goods jumped 0.5 percent in May. As such, raw material costs bounced back somewhat from the 0.6 percent and 0.7 percent losses, respectively, in February and March. This shifted the year-over-year rate up from 0.6 percent last month to 1.7 percent now. Despite the uptick, pricing pressures overall still remain modest.

The higher figure stemmed both from increases in both food and energy prices. The cost of finished energy goods rose 1.3 percent, partially offsetting the 3.4 percent and 2.5 percent declines in the prior two months. This increase is consistent with the rise in the price of West Texas intermediate crude rose from an average of $92.02 per barrel in April to $94.51 in May. Meanwhile, food prices were 0.6 percent higher after an up-and-down year so far where costs have been higher one month only to fall the next. The largest food price increases were for fruits, vegetables, dairy, eggs, and fish.

Outside of food and energy, producer prices were up only slightly. Core inflation – which excludes food and enrgy costs – rose 0.1 percent in May, with a year-over-year pace of 1.6 percent.  This number is important, as it indicates that inflationary pressures remain below the Federal Reserve Board’s stated target of 2 percent or less. With the next Federal Open Market Committee (FOMC) scheduled for June 18 and 19, this data will become more relevant. The expectation is that the FOMC will continue to pursue its “highly accommodative” policies, even as it might taper the level of asset purchases that it conducts each month from its current $85 billion to something less than that. (continue reading…)

The Bureau of Labor Statistics reported that manufacturing job openings declined from 271,000 in March to 245,000 in April. The latest Job Openings and Labor Turnover Survey (JOLTS) data find that the number of job openings has stayed below 300,000 since June 2012, and April’s figure was the lowest value of 2013. The decline in labor postings perhaps reflects the recent weaknesses in the manufacturing sector, with sales being soft and various sentiment surveys observing very slow growth in activity overall.

With that said, net hiring in the month returned to positive territory. Manufacturers hired 224,000 workers in April, an improvement from the 201,000 new employees added in March. Despite the gain, the pace of hiring remains subpar, having generally stayed below its recent peak of 324,000 in March 2012. Meanwhile, total separations – which include layoffs, quits, and retirements – rose from 203,000 to 218,000. As a result, net hiring (or hiring minus separations) shifted from a decline of 2,000 workers in the sector in March to an increase of 6,000 employees in April. Even with a positive figure, it is clear that the pace of hiring remains quite slow, with manufacturers skittish about adding new workers. (continue reading…)

The latest NAM/IndustryWeek Survey of Manufacturers found that rising health insurance costs topped the list of concerns this quarter. The issue was cited by 82.2 percent of respondents, higher than the 74.0 percent level observed in the first quarter survey.

A series of special questions on the Affordable Care Acts drilled further on this topic. Specifically, 99.0 percent of manufacturers surveyed said that they provide health insurance coverage to their workforce, with 38.0 percent of those self-insuring. The average health insurance premium increased 8.6 percent this year, with a whopping 13.9 percent predicted for next year. More than anything, the 2014 numbers suggest just how much uncertainty is out there regarding insurance rates, with the perception out there that they will go up significantly. Just 43.8 percent of manufacturers said that they were prepared to implement the ACA when it goes into effect starting later this year.

Looking at the current economic outlook, 72.3 percent of manufacturers said that they are either somewhat or very positive about their company’s outlook, up from 51.8 percent six months ago and 70.1 percent three months ago. With the exception of the December survey, optimism levels have been roughly 70 percent since September. In essence, this survey confirms the good-but-not-great nature of the current manufacturing economy, much as we have seen in the most recent Institute for Supply Management and employment numbers. Sales are expected to rise 2.7 percent over the course of the next 12 months. While this was higher than the 2.3 percent observed last time, it was still lower than the 4.3 percent observed one year ago. (continue reading…)

Here is the summary from this week’s Monday Economic Report:

On many levels, last week’s economic indicators confirmed weaknesses in the manufacturing sector. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) dropped below 50—the threshold for growth—for the first time since November. New orders and production levels contracted, with hiring stalled. Some respondents cited softness in export sales, while others noted weaker domestic demand stemming from government spending cuts, higher payroll taxes and other uncertainties.

On the trade front, manufactured goods exports have grown very slowly in 2013, up less than 1 percent in the first four months relative to the same time frame in 2012. In April, goods imports outpaced exports, widening the deficit from $37.1 billion to $40.3 billion. Europe’s recession, in particular, has decreased sales overseas for our products, with sluggish growth elsewhere in many of our key markets.

These struggles have lessened businesses’ ability to bring on new workers. Manufacturing employment fell by 8,000 workers in May, the third consecutive monthly decrease. The sector has added 41,000 net new employees over the course of the past 12 months, just 1.9 percent of all nonfarm workers created in the economy. That pace is disappointing and a sign that we need the manufacturing economy to flourish again. While manufacturers were making outsized gains to output and employment as recently as a year ago, that pace has stagnated since then. As NAM President and CEO Jay Timmons noted in February in Detroit, a flourishing sector would yield an average of 20,000 new manufacturing workers each month. (continue reading…)

The Society for Human Resource Management (SHRM) said that manufacturing hiring will remain weak in June, but it expects service sector employment to pick up. The Leading Indicators of National Employment (LINE) survey is one of the few that look at hiring trends for the current month, and it mostly observes net hiring changes relative to what they were one year ago.

Specifically, 50.8 percent of manufacturers planned to increase employment in June, compared to 13.5 percent expecting to reduce employment. The good news is that this suggests net hiring of 37.3 percent, but it also indicates that the pace has eased from what was seen 12 months ago. In June 2012, just 5.2 percent planned employment decreases, with 49.0 percent hiring in that month. The net hiring rate was therefore 43.8 percent. Therefore, the year-over-year difference in net hiring is a drop of 6.5 percentage points.

In comparison, the net percentage of service sector firms planning increases this month was 42.9 percent, with 49.8 percent of service sector businesses expecting to increase employment in June. At the same time, 6.9 percent anticipating the need to let workers go. These figures are a significant shift from one year ago, when just 31.0 percent were planning to hire. Overall, the net percentage rose 20.5 percentage points from last year.

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

Here is the summary for this week’s Monday Economic Report:

The Bureau of Economic Analysis confirmed that the U.S. economy grew modestly in the first quarter of 2013, revising real GDP growth from the earlier estimate of 2.5 percent to 2.4 percent. Two factors that have had the greatest impact were the American consumer and a rebounding housing market. Business spending, while decelerating somewhat from the fourth quarter of 2012, also made a sizable contribution to growth. In fact, to illustrate the importance of consumer spending and gross private domestic investment to growth in the first quarter, they added 3.6 percentage points to real GDP, with government spending and net exports subtracting from that number. Moving forward, I expect real GDP to grow by 1.8 percent in the current quarter, with 2.3 percent growth overall for 2013.

Two surveys released last week both indicate a sharp rebound in consumer sentiment in May, with both rising to levels not seen in more than five years. The Conference Board and University of Michigan reports both observed improved perceptions about the current and future economic environment, and yet, Americans feel there are persistent challenges. These headwinds include elevated unemployment rates, higher payroll taxes and slow growth in the domestic and global economy. Softness in the economy contributed to flat personal income growth in April, with personal spending declining. In the manufacturing sector, wages and salaries have increased over the course of the past year, even as they were slightly lower in April. (continue reading…)

NAM President and CEO Jay Timmons talked about how to get manufacturing – and our economy – back on track for strong and sustainable growth at the 2013 Mackinac Policy Conference today in Michigan, where more than 1,500 of Michigan’s top business and government leaders are convening this week.

“Michigan gets it,” Timmons noted in today’s Detroit News editorial.  “With states competing to attract manufacturing facilities, Michigan is a great example of what can be done by improving the business climate.  With the right policies to help manufacturers grow and compete, the future of manufacturing is bright.”

Timmons’ panel at the conference, entitled “America’s Backbone: Bringing Manufacturing Back to the U.S.,” discussed policies that could help accelerate the manufacturing rebound.  His column this week in The Detroiter Magazine discussed the need to implement an aggressive agenda to make manufacturing in the U.S. more competitive.

Timmons also discussed the policies that will drive competitiveness and growth for manufacturing today on WJR’s Frank Beckmann Show. WJR is Michigan’s largest news talk radio station and broadcasts across the Midwest.

Here is the summary from this week’s Monday Economic Report:

Manufacturing activity worldwide has slowed noticeably. Flash Purchasing Managers’ Index (PMI) data for China and the Eurozone both reflect contracting levels for new orders, exports and employment. Europe’s problems continue to deepen. Even with some slight easing of declining sales, May’s manufacturing PMI data mark the 22nd consecutive month of declining activity for the continent. Beyond falling activity levels, manufacturers have also reported the need to reduce the selling price for their goods. The news that China had once again slipped into negative territory was a little surprising, suggesting its economic growth has slowed again. Over the course of the next few weeks, international PMI data will come in, allowing us to see the widespread softness in the manufacturing sector. The most recent JPMorgan Global Manufacturing PMI suggested that growth worldwide was modest at best.

The Markit Flash U.S. Manufacturing PMI declined slightly from 52.0 in April to 51.9 in May, falling from 56.1 in January. One of the largest factors in May’s decline was the decrease in new export orders. Output and hiring also slowed, and domestic new orders have decreased since the beginning of the year. At the same time, the Chicago Federal Reserve Bank’s National Activity Index (NAI) declined in April, largely on weaknesses in industrial production in the early months of 2013. (continue reading…)

The latest Markit purchasing managers’ index (PMI) data reflect slower manufacturing activity worldwide in May, continuing a trend that we saw in April. Last month, the Chinese economy slowed surprisingly, with the HSBC China Manufacturing PMI falling from 51.6 in March to 50.4 in April. Now, we see that the Flash measure has fallen further to 49.6 in May, its first contraction since October. A decline in new orders, with the sales index down from 51.7 to 49.5, was largely responsible for the decrease in the larger index. Exports, employment, and inventories were also lower. With that said, overall manufacturing output was only off slightly (down from 51.1 to 51.0), with very modest growth.

While the Chinese decline was unexpected, the European data have been in contracting levels since August 2011, and it is not expected to emerge from its recession any time soon. Nonetheless, the Markit Flash Eurozone Manufacturing PMI did improve somewhat from 46.7 in April to 47.8 in May, even as it remains in contraction for the 22^nd consecutive month. The pace of new orders (including exports) and output slowed in the month, helping to ease the rate of decline. The bottom line, though, is the fact that production and employment in the manufacturing sector are falling. The survey also indicates that selling prices among manufacturers are also decreasing, with deflation occurring each month so far in 2013.

In contrast to China and Europe, manufacturing activity in the United States is growing, but very slowly. The Markit Flash U.S. Manufacturing PMI edged marginally lower from 52.0 in April to 51.9 in May, decelerating for the fourth straight month. This easing appears to have erased the stronger growth that we saw in the U.S. at the beginning of the year, when the PMI was 56.1. (continue reading…)