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U.S. Minerals Critical to Innovation

Did you know that copper is a critical component in wind turbines and the wiring of solar panels? Or that platinum—used in more than 20 percent of all manufactured goods—is found in personal computers, flat-screen TVs and lifesaving medical devices?

With more than $6.2 trillion worth of minerals in the U.S., further development of these critical resources could help meet manufacturer needs and bolster the economy. Stable access to domestic minerals is imperative for continuing U.S. technological advancement and innovation, and keeping manufacturers globally competitive.

The establishment of stable domestic mineral supply chains not only means that American resources are supporting American jobs, but also that manufacturers will enjoy reduced delivery time and costs and have better insight into their production timelines.

Click here to watch a video on the minerals mining industry’s commitment to innovation.

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3D Printing is in the House (Small Business Committee)

Today’s House Small Business Committee’s hearing, “The Rise of 3D Printing: Opportunities of Entrepreneurs,” sounds like the latest sci-fi movie out of Hollywood that spells out a technology-filled future – but those watching the amazing advances in 3D printing know that the future is now.

3D printing stands to benefit all manufacturers by providing another key tool in the toolbox that improves production and delivers products to market faster than ever before. The possibilities are endless and today’s hearing made that clearer than ever.

Stratasys’ Executive Vice President of Corporate Affairs, Jonathan Cobb, testified before Chairman Sam Graves (R-MO) and other members of the Committee today to educate members on how 3D printing has changed manufacturing in the U.S. what it can deliver for our future. He shared stories of how they helped businesses save hundreds of thousands of dollars in development costs, provided 21st Century design education to students across the nation through STEM (science, technology, engineering and math) initiatives.

Mr. Cobb told the Committee, “We take pride in stories like this. To us, they demonstrate that we are not just in the business of producing 3D machines, we are also helping empower entrepreneurs by bringing manufacturing into their homes and workplaces.”

It’s something we should all take pride in – 3D printing will be a big part of the comeback of manufacturing in the U.S. – and we can’t wait to see what they come up with next.

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House to Hold Hearing on Viability of Carbon Capture and Storage Systems

Tomorrow March 12th the House Committee on Science, Space and Technology will hold a hearing entitled “Science of Capture and Storage: Understanding EPA’s Carbon Rules”. The hearing will explore the EPA’s conclusion that carbon capture and storage (CCS) systems are “adequately demonstrated” for use in limiting carbon dioxide emissions in commercial power plants. These CCS systems have been at the forefront of the EPA’s proposed power plant rules that will place a huge burden on the nation’s energy supply that threatens our manufacturing competitiveness.

EPA Administrator McCarthy recently stated that power plant rulemaking has drawn an “unprecedented” number of comments, and with good reason. While the EPA claims that the nascent technology is sufficiently developed, all the evidence seems to point to the contrary.

The hearing will feature a panel of speakers from the environment, technology and utility fields. Among them is Robert Hilton, Vice President for Government Affairs at Alstom Power Inc., which is a leader in CCS technologies. Hilton will testify that, while CCS has been proven at smaller pilot projects, there is not a single power plant in the world that has demonstrated CCS on the commercial scale necessary to meet the EPA standards. This is exactly what the NAM and other industry leaders have been saying all along – the EPA’s performance standards are unattainable and will effectively shut out vital fossil fuels as viable energy sources.

The NAM has advocated heavily for an all-of-the-above approach to energy policies. As the testimony in this hearing will highlight, the Administration has pushed its own agenda above the protests of manufacturers of the technology who know it simply isn’t viable. While it might be wishful thinking that another hearing will make the EPA change their course, it’s certainly better to light a candle than curse the darkness.

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Supreme Court Hears Securities Class Action Case

Playing the stock market is a better gamble if you can sue when you lose. That’s what some sophisticated investors have been doing with some success as a result of the 1988 Supreme Court decision in Basic v. Levinson.  Although there’s no statute that says you can sue when your stock bet loses money, you can always look around after the fact and try to find evidence that the company didn’t publicize something that might have had an effect on the price.  If you can show fraud by the company, you can sue under an implied right-of-action under the securities laws.

Showing that you were defrauded requires that you prove that you relied on some statement that the company made when deciding whether to buy or sell your stock.  Lucky for you, that requirement was eliminated when the Supreme Court ruled that a court may presume that you relied on information generally available to stock market participants. Under the “efficient capital markets” theory accepted by the Court, it is assumed that stock prices accurately reflect their true price in open and well developed markets with many trades.

If you relied on the efficient market in buying stock, a court will assume the price accurately reflects material information about the stock, and if there was price distortion from erroneous or misleading information, you can sue for your losses.

The Court assumed that investors invest on the assumption that the trading price of the stock accurately reflects the true value of the stock. The problem with that is that many sophisticated investors buy stock because they think it will outperform the valuation that the market assigns. Many investors buy or sell a security precisely because they believe the market price is wrong – buying when they assess the market has undervalued the stock and selling when the stock is overvalued in their estimation.

That’s the argument the NAM made to the Supreme Court in an amicus brief in Halliburton v. Erica P. John Fund, a case being argued March 5. The Court is reconsidering its presumption-of-reliance ruling, and we hope it will require that reliance be proven. You can’t have it both ways, relying on your own view of the market price, but also relying on the efficient market theory to sue if you guessed wrong.  That’s an unfair and expensive outcome that adds yet another cost to doing business, reducing competitiveness and hampering job creation.

Quentin Riegel is Vice President and Deputy General Counsel for the National Association of Manufacturers. 

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Timmons Addresses Waterways Council

Today, NAM President and CEO Jay Timmons addressed stakeholders and small businesses at the Waterways Council’s Washington Seminar. The seminar focused on issues that impact inland waterways, including legislation, policy priorities and the Army Corps of Engineers’ Civil Works Programs.

Chief among these policy priorities is reauthorization of the Water Resources Development Act (WRDA). Manufacturers rely on the nation’s waterways for competitiveness, which is why WRDA reauthorization is top priority for the NAM.

Jay at WaterwaysTimmons highlighted this issue today, noting that “manufacturers rely on waterways to receive the inputs they need to make their products and then to ship their products to market. Infrastructure, whether waterways, roads, rail or airways, is a competitiveness issue, and one on which our members want us to be engaged.”

Manufacturers from a broad range of sectors and industries rely on our nation’s waterways and ports to bring their products to market. The NAM recently highlighted many of these manufactures in our WRDA blog series, Its All Connected.

The NAM is hopeful that WRDA conferees can soon come to an agreement on a package that will help manufacturers grow, create jobs and compete.

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STEP Awards Honor Women in Manufacturing

Our members often tell us there is a significant skills gap in manufacturing. Day after day, thousands of jobs go unfilled, reducing productivity and holding the American economy back. Yet, only 24% of the manufacturing workforce is women. To be sure, this represents a larger share than has historically been the case, but manufacturers know there is an opportunity for growth. We can take an important step toward filling the skills gap in manufacturing by tapping into the potential of women.

In 2012, the Manufacturing Institute began to address this challenge by launching the Science, Technology, Engineering and Production (STEP) Ahead initiative to honor and promote the role of women in the manufacturing industry.  STEP Ahead celebrates the accomplishments of women in manufacturing at all levels –from the production line to the C-suite – by honoring leaders in the field at the annual STEP awards.

Yesterday we celebrated those in the next class of leaders. 160 women from all across the country were in our nation’s Capital to be honored for their hard work and determination. These women have often succeeded without peers to guide them, but press ahead knowing they are inspiring the next generation of women in manufacturing. The NAM celebrates and congratulates these women for their contribution to our nation’s economy.

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Real GDP Rose 3.2 Percent in the Fourth Quarter on Strong Consumer Spending and Exports Data

Real GDP rose a relatively strong 3.2 percent in the fourth quarter, ending the year on a decent note. This follows a 4.1 percent jump in the third quarter, which was buoyed by significant levels of inventory replenishment. For the year, real GDP increased a much more modest 1.9 percent, below the 2.8 percent rise seen in 2012.

Consumer spending and international trade data were the strongest elements in U.S. economic growth in the fourth quarter. Americans spent 4.9 percent more at the annual rate on consumer goods, with durable and nondurable goods growth up 5.9 percent and 4.4 percent, respectively. Personal consumption expenditures as a whole contributed 2.26 percentage points to the 3.2 percent real GDP growth figure. Consumer goods accounted for 1.12 percent of that contribution, with services adding another 1.14 percentage points.

Net exports were also up sharply. Goods exports jumped an annualized 15.1 percent in the fourth quarter, more than outstripping the 0.8 percent growth rate for goods imports. As such, net exports contributed 1.48 percentage points to real GDP, its strongest performance in the past three years.

These data also included some disappointments. Fixed investments added just 0.14 percentage points to real GDP in the fourth quarter, its slowest pace since the first quarter. Business spending on nonresidential structures, information processing equipment, and industrial equipment were all lower. Residential spending was also weak. On the positive side, there was increased spending on transportation equipment and intellectual property rights. Inventory replenishment was also higher, albeit adding less to real GDP than in the third quarter as expected (down from a 1.67 percent contribution to 0.42 percent).

The main drag on economic growth in the fourth quarter was federal government spending, subtracting 0.98 percentage points from real GDP. Note that this was the quarter that included the partial government shutdown, which might explain part of this figure. Both defense and nondefense spending were negative. In contrast, state and local government spending provided a slight positive contribution to growth for the third straight quarter, reflecting increasing strength in their financial positions.

Overall, these data suggest that the U.S. economy ended 2013 on a relative positive note, with modest growth and strength in consumer spending and exports. Yet, it is worth noting that this data also reflected some weaknesses, including lackluster business spending growth, reduced housing expenditures, and declines in federal government spending. For the year as a whole, 2013 was a disappointment, with just 1.9 percent growth in real GDP.

Nonetheless, manufacturers remain cautiously optimistic about growth in 2014, and the strong figures for demand and production in the second half of 2013 helps to provide some momentum moving into the new year. I expect real GDP to average at least 3.0 percent in 2014, and if this is the case, it would be the first year since 2005 for it to do so. Of course, for that to happen, we need to see continued growth in consumer and business spending, with strong exports numbers. Much of that will hinge on growth continuing in the overall economy, both domestically and globally. Policymakers should consider pro-growth measures to ensure that such growth can be achieved, building on recent gains.

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

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Monday Economic Report – January 21, 2014

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

Manufacturing production rose 2.6 percent in 2013, slowing from the 3.5 percent and 3.2 percent growth rate experienced in 2011 and 2012, respectively. Yet, the lower 2013 figure stemmed largely from weaknesses in the first half of the year, with manufacturing output rising an annualized 4.2 percent in the second half. As such, the sector ended the year on a strong note, with a pickup in demand and cautious optimism for 2014. Indeed, a number of other reports reached the same conclusion. Surveys from the New York and Philadelphia Federal Reserve Banks and from the Manufacturers Alliance for Productivity and Innovation (MAPI) both observed expanding levels of activity in their latest releases. Respondents to these surveys tended to be mostly upbeat about new orders, shipments, exports and hiring over the coming months—which is definitely good news.

Over the past couple years, the rebound in the housing sector has been one of the bright spots in the U.S. economy. Housing starts were lower in December, but it seems the November data were a bit of an outlier. Absent that soaring figure, new residential construction was generally higher to end 2013, particularly for single-family units. New single-family starts increased 7.6 percent year-over-year. Housing permits also eased slightly in December but increased 4.6 percent from the year before. The reduction in housing activity could have been due to severe winter storms, with somewhat higher borrowing costs as another possible contributing factor. The average 30-year mortgage rose from 4.29 percent in the week of November 27 to 4.48 percent in the week of December 26, according to Freddie Mac. Nonetheless, this still historically low rate helps to explain the generally upbeat assessment of home builders.

Meanwhile, the pace of retail sales slowed in December, with reduced auto sales dragging the overall figure lower. Still, motor vehicle sales increased 5.9 percent in 2013, making it one of the stronger components of consumer spending growth. Excluding autos, retail sales would have risen by 0.7 percent last month, suggesting broader strength than the headline figure implies. On a year-over-year basis, total retail spending increased 4.1 percent, a modest pace that marks the slowest since 2009.

The two measures of sentiment moved in opposite directions. Preliminary data from the University of Michigan and Thomson Reuters on consumer confidence was surprisingly lower for the month, down from 82.5 in December to 80.4 in January. The December data has noted a recovery in perceptions about the economy after falling in the wake of the government shutdown, and the expectation had been for January’s data to extend those gains. With a reduction in sentiment instead, this suggests that the public remains somewhat anxious about economic conditions. At the same time, the National Federation of Independent Business (NFIB) noted an increase in optimism for the second straight month. Underneath the main reading, however, the data were mixed, with more small business owners calling it a “good time to expand” but with sales and earnings remaining subpar.

In terms of news events, outgoing Federal Reserve Chairman Ben Bernanke delivered a speech at the Brookings Institution that provided his take on the lessons learned from the financial crisis. This “exit interview”—as it has been widely dubbed—was mostly a valedictory address defending the Fed’s monetary actions to help stimulate growth in the economy. Coincidently, Bernanke gave it on the same day that the Bureau of Labor Statistics reported that core consumer inflation had risen by just 1.7 percent over the past year. A similar conclusion on producer prices had been released the day before, and in each case, the data suggested that pricing pressures were increasing within an acceptable range, at least for now, according to the Fed’s stated targets.

There will only be a handful of economic data releases this week. From the manufacturing perspective, the highlights will come on Thursday. Markit will provide “flash” estimates for its purchasing managers’ index (PMI) reports for the United States, the Eurozone, and China. In addition, the Kansas City Fed will discuss the latest results of its regional manufacturing survey. In each instance, the expectation will be for manufacturers to note continued growth, building on recent gains. Other data releases include updates on the leading economic index and existing home sales.  

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

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Manufacturing Production Increased 2.6 Percent in 2013

The Federal Reserve Board said that manufacturing production increased 0.4 percent in December, extending the 0.6 percent gains experienced in both October and November. This was the fifth consecutive monthly gain in manufacturing output, with the sector recovering from weaknesses seen in the spring months. Year-to-date growth in the manufacturing sector has definitely improved from the 1.2 percent pace experienced in July to 2.6 percent in December.

Manufacturing capacity utilization has also increased over the past few months, up from 75.7 percent in July to 76.9 percent in November to 77.2 percent in December. This was the highest level since March 2008 for the manufacturing sector.

Nondurable goods production outpaced durable goods output growth in December, up 0.9 percent versus 0.1 percent, respectively. With that said, on a year-over-year basis, durable goods output was up more strongly, up 4.1 percent since December 2012. Nondurable goods production rose a more modest 1.3 percent in 2013.

The strongest manufacturing output growth in December occurred in the following manufacturing sectors: printing and support (up 1.9 percent), motor vehicles and parts (up 1.6 percent), electrical equipment and appliances (up 1.4 percent), primary metals (up 1.4 percent), food, beverage and tobacco products (up 1.2 percent), apparel and leather (up 1.1 percent), petroleum and coal products (up 0.9 percent), and chemicals (up 0.8 percent).

With this being the last data point of 2013, we get a good glimpse of what sectors experienced the greatest output gains for the year. Certainly, much has been made of the rebound in the automotive sector, which had production growth of 7.2 percent for the year. Yet, the largest year-over-year increase occurred in the furniture and related products sector, up 9.4 percent. Other sectors with large gains in output in 2013 included fabricated metal products (up 4.5 percent), computer and electronic products (up 4.3 percent), aerospace and miscellaneous transportation (up 3.8 percent), wood products (up 3.8 percent), plastics and rubber products (up 3.7 percent), petroleum and coal products (up 3.1 percent), and electrical equipment and appliances (up 3.0 percent), among others.

Overall industrial production also grew strongly, up 0.3 percent in December. This extended the 1.0 percent gain experienced in November. In addition to manufacturing, industrial production data were boosted by a strong increase in mining output, up 0.8 percent for the month and 6.6 percent year-over-year. Meanwhile, while utility production rose 7.6 percent in 2013, it provided a drag of 1.4 percent in the December report.

In conclusion, manufacturing activity continues to expand, a trend that we have seen since the beginning of the third quarter. Manufacturers are generally upbeat about production growth in 2014, and these data suggest that output growth was up strongly as we ended 2013. Many observers feel that this might be the year that the economy finally starts to gain some traction, with real GDP and industrial production growth of 3 percent or more.

Yet, we have begun past years with a similar feeling of cautious optimism only to have such sentiment derailed. To keep the momentum going, policymakers should enact pro-growth measures that will keep allow manufacturers to expand and flourish, building on recent progress.

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

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Manufacturers Added 9,000 Workers in December, But Jobs Numbers Were Weak Overall

Manufacturers added 9,000 net new workers in December, according to the Bureau of Labor Statistics. This was below the much-stronger hiring gains observed in October and November (17,000 and 31,000, respectively), but the average over the past five months suggests that employment has begun to pick up more recently, albeit at a pace that remains modest at best. From August to December, manufacturers hired an additional 16,000 net new employees on average each month. In contrast, the average over the prior five months (March to July) was a net decline of 8,000 per month.

Looking at the entire year, manufacturers added 77,000 net new workers over the course of 2013. This was the slowest pace of hiring growth since 2009. Manufacturing sector employment rose by 109,000 in 2010, with 207,000 and 154,000 more workers added in 2011 and 2012, respectively. As such, manufacturers have added 557,000 more jobs since December 2009.

In December, both durable and nondurable goods firms added workers on net, up 6,000 and 3,000, respectively, from November. The largest monthly gains were in the following sectors: food manufacturing (up 5,300), fabricated metal products (up 5,000), transportation equipment (up 3,800), primary metals (up 3,500), petroleum and coal products (up 1,600), and plastics and rubber products (up 1,600).

Some notable sectors with declining employment for the month included computer and electronic products (down 2,400), printing and related support activities (down 2,200), chemicals (down 1,800), nonmetallic mineral products (down 1,500), and furniture and related products (down 1,200).

On the hours and compensation front, the data were mixed for manufacturers. There was some slight easing in the number of average number of hours worked per week (down from 41.5 to 41.3) and in average weekly earnings (down from $1,078.17 to $1,075.04) for durable goods firms. At the same time, similar data were a bit higher for nondurable goods manufacturers, with average weekly hours (up from 40.2 to 40.3) and average weekly earnings (up from $891.64 to $895.87) higher. Note that the longer-term trend for manufacturers on the labor front has been a positive one for both of these indicators.

Meanwhile, much of the attention in this month’s jobs numbers has been on the weak nonfarm payroll growth. The overall economy added just 74,000 nonfarm payroll workers in December – a figure that was well below the consensus estimate of around 200,000. There is some suspicion that colder weather might have had an impact on this data. The average monthly gain in nonfarm payrolls for 2013 was 182,167. This was nearly identical to the averages seen in 2011 and 2012, which were 175,000 and 183,000, respectively. Nonetheless, the average from August to November had jumped to 214,000, providing some optimism for stronger numbers in December, which did not materialize.

The other shocking development in this report was the drop in the unemployment rate from 7.0 percent in November to 6.7 percent in December. This was the lowest rate since November 2008. Yet, it corresponds with another drop in the participation rate, down from 63.0 percent to 62.8 percent, its lowest level since February 1978. Those individuals who were “marginally attached to the labor force” rose by 331,000, including 155,000 additional “discouraged workers.”

In conclusion, the December employment data show that we continue to have persistent weaknesses in the labor market despite recent progress. Weather might have been a factor, but overall, the jobs market data were disappointing. For manufacturers, the positive news was that the sector has added 16,000 additional workers over the course of the past five months, and yet, this news is somewhat tempered by the reality that 2013 was the weakest year of hiring growth in the sector since 2009.

With that said, we remain cautiously optimistic about modest gains in employment for 2014. To ensure that the gains in employment that we have seen in the second half of 2013 continue in the new year, policymakers should adopt pro-growth measures that will allow the sector to expand and flourish, allowing them to hire more workers.

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

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