Economy

New NAM Video Explains Impact of Ozone Regulations

I have continued to underscore the importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover. With that in mind, and after careful consideration, I have requested that Administrator Jackson withdraw the draft Ozone National Ambient Air Quality Standards at this time.” –President Obama, September 02, 2011

With the unemployment rate hovering above 9% and in the early stages of his reelection campaign, in September 2011, President Obama told the Environmental Protection Agency (EPA) to stop its work on a new ozone regulation – a regulation that by the administration’s own estimate would have cost industry and consumers as much as $90 billion per year. Now, just two and a half years later, the administration is once again considering a new ozone regulation, and again the costs to manufacturers and the economy could reach never-before-seen levels.

While we are still months away from the release of a proposed ozone rule, the rulemaking process is very much underway – EPA has developed its draft documents, its science advisors have met and environmental advocacy groups are in court seeking to expedite the whole process. Meanwhile, manufacturers are becoming uncomfortably reacquainted with the concept of the administration levying a regulation that makes expansion in many, if not most, parts of the country difficult at best and in some cases impossible.

With so much at stake for manufacturers, the NAM is committed to being involved at every stage of the ozone review and rulemaking process to ensure the administration gets it right. We will work with elected and appointed officials at all levels of government and educate the general public about the regulation, the steady and consistent air quality improvements that have been made over the last 30 years and the improvements that will continue to take place based on laws already on the books. But we will also work to ensure the public understands the consequences of the administration going too far by proposing unattainable standards and how with the right policies we can have both a clean environment and a strong manufacturing economy.

Below is a video the NAM developed that provides some background information on EPA’s review of a new ozone regulation and what’s at stake for manufacturers and the economy.

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Democrats Ask for Action on Keystone XL while White House Offers No Clear Deadline

Senate Energy and Natural Resources Committee Chairwoman Mary Landrieu (D-LA), joined by ten Democratic senators, sent a letter to President Obama on April 10 pleading with the Administration to commit to a timeline for a final decision on Keystone XL. At well over five years since the application was first received, the Administration has been criticized for repeatedly delaying the process. The 11 senators agreed with critics, calling the process “exhaustive in its time, breadth, and scope. It has already taken much longer than anyone can reasonably justify.”

Sen. Landrieu and her colleagues asked the President to require Secretary of State John Kerry to make a decision on Keystone XL. The project is currently subject to 90-days of public and inter-agency comment, which is set to expire in early May. The 11 senators asked the President set a deadline for the State Department to make its determination within 15 days of the end of the comment period, and for the President to commit to making a decision no later than May 31, 2014.

Given the final environmental impact statement came to effectively the same conclusion as all previous reviews of the project, these Senators urge the President to action. Yet the Administration refuses to commit to any firm timeline to make a decision on permit that is long overdue. The NAM has repeatedly called for approval of Keystone XL, a strong component of an “all of the above” energy strategy. Today we can add these 11 senators to the overwhelming majority of Americans who believe Keystone XL should be approved.

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Monday Economic Report – April 14, 2014

Here is a summary of this week’s Monday Economic Report:

In the minutes of its March Federal Open Market Committee (FOMC) meeting, the Federal Reserve Board highlighted the negative impact of weather events on first-quarter growth. Winter storms hampered business investment, construction, consumer spending and manufacturing production. Nonetheless, the Federal Reserve still anticipates real GDP growth of between 2.8 and 3.0 percent in 2014, faster than last year’s 1.9 percent expansion. While this reflects a slight downgrade in the outlook for the year from the last forecast, it continues to suggest that the economy will regain its momentum moving forward. The Federal Reserve also predicts growth of 3.0 to 3.2 percent in 2015. The International Monetary Fund’s World Economic Outlook, which was released last week, mirrors these figures in its own forecasts for the United States.

The highlight of the FOMC minutes was the background discussion among participants regarding future monetary policy actions. The Federal Reserve largely feels that the U.S. labor market has a lot of “slack” in it, which is not reflected by the 6.7 percent unemployment rate. Despite improvements in the unemployment rate, weaknesses continue, with the participation rate near 30-year lows and high rates of both underemployment and part-time employment. While some FOMC members feel there has been sufficient economic progress to warrant less stimulative monetary policy measures, the majority view the current labor market as sufficiently weak enough to continue the Federal Reserve’s highly accommodative actions for the foreseeable future. The Federal Reserve will continue to reduce its long-term asset purchases, but short-term interest rates will likely not rise until next year at the earliest. Inflationary pressures remain modest, providing the Federal Reserve with some wiggle room to do its stimulative measures.

The most recent Job Openings and Labor Turnover Survey (JOLTS) data suggest the labor market for manufacturers remains soft. The number of manufacturing job openings declined for the third month in a row in February. Postings have been lower since peaking in November, and the December to February time frame mirrored the weather-related weaknesses seen in other data. Net hiring was also lower in those three months, with 2,000 more separations than hires in February. Still, the manufacturing sector has added an average of 12,125 workers each month since August, mirroring the uptick in demand and production that we have seen since that point. We are hopeful that hiring begins to accelerate again in the coming months.

Looking at the sentiment surveys last week, businesses and consumers were more upbeat. The California Manufacturing Survey from Chapman University reported rising expectations for new orders and production for the second quarter, but with employment growth remaining soft. Both durable and nondurable goods activity were anticipated to expand modestly in the current quarter. Likewise, small business owners in the National Federation of Independent Business’ (NFIB) survey were more optimistic about future sales, and those saying the next three months were a good time to expand edged marginally higher. Still, earnings remained weak, and the percentage suggesting they would bring on more workers moved lower. The University of Michigan and Thomson Reuters also noted improved consumer sentiment, a welcome gain after three months of dampened enthusiasm.

This week will be a busy one on the economic front, specifically with new reports on housing starts and industrial production. We hope to move beyond the weather-related weaknesses from earlier this year, and March’s manufacturing output numbers are expected to show a continued rebound. Similarly, housing starts moved slightly higher in February, but permits surpassed the 1 million mark for the first time since November; yet, rising interest rates, financial challenges for potential buyers and low inventory remain concerns. Other highlights this week include new data on consumer prices, leading indicators, manufacturing surveys from the New York and Philadelphia Federal Reserve Banks and state employment.

Chad Moutray is the chief economist, National Association of Manufacturers. Note that General Electric Chief Economist Marco Annunziata will prepare the Monday Economic Report for April 21.

participation rate - apr2014

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Global Manufacturing Economic Update – April 11, 2014

Here is the summary for this month’s Global Manufacturing Economic Update:

In its latest World Economic Outlook, the International Monetary Fund (IMF) now predicts global GDP growth of 3.6 percent in 2014 and 3.9 percent in 2015. The forecast for this year was essentially unchanged from the outlook in October, and it suggests that the global economy continues to recover. Global growth in 2013 was 3.0 percent. The IMF projects U.S. growth of 2.8 percent this year and 3.0 percent next year, up from 1.9 percent last year. Europe is another area where the IMF sees progress this year—albeit quite modestly—with real GDP growth of 1.2 percent in 2014 and 1.5 percent in 2015, with the continent emerging from its deep two-year recession. Despite the slightly better data overall, the IMF worries about low inflation in advanced economies, structural challenges in emerging markets and geopolitical risks.

The IMF also notes that China’s economy continues to decelerate, with real GDP growth of 7.5 percent in 2014 and 7.3 percent in 2015. This is consistent with recent data, which show activity in the manufacturing sector slowing down. The HSBC China Manufacturing Purchasing Managers’ Index (PMI) has contracted for three straight months with falling levels of new orders and output. On the positive side, export sales appeared to pick up a bit in March. Next week, we will get new data for industrial production, fixed-asset investment and retail sales. Each has eased significantly in recent reports. Still, even with these slower rates, the outlook for China remains strong overall, and China has already begun to put stimulative measures in place to boost the economy further. As noted in the past report, the Bank of China has also supported a depreciation of the yuan in the past few months, but it asserts that its actions have been mainly to fend off speculators.

Weaknesses in China and Russia have also weighed heavily on manufacturing activity figures for emerging markets. The HSBC Emerging Markets Manufacturing PMI fell below 50 for the first time since July as demand and production stagnated. Nonetheless, outside of China and Russia, the picture for emerging markets was somewhat more positive. Several countries continued to experience modest growth rates, albeit with a slower pace than the month before in some cases. Two notable strengths among emerging markets hail from Eastern Europe. The Czech Republic and Poland continue to see strong growth in their manufacturing sectors despite some deceleration in March. For instance, the production index in the Czech Republic has now exceeded 60 for two straight months, a sign that output is experiencing healthy gains of late.

In all of Europe, manufacturers report slow-but-steady progress. The Markit Eurozone Manufacturing PMI has now expanded for nine consecutive months, an encouraging sign after the deep two-year recession. France, which had lagged behind many of its peers on the continent, had its manufacturing PMI figure exceed 50 for the first time since July 2011. However, overall economic growth remains modest. The unemployment rate continues to be elevated, even as it fell below 12 percent for the first time in 13 months. Weak income growth has caused many to worry about possible deflationary concerns. Annual inflation rates in the Eurozone have fallen from 1.7 percent in March 2013 to 0.5 percent in March 2014, and producer prices declined in February. Aware of these trends, the European Central Bank (ECB) held interest rates steady and said it was prepared to pursue quantitative easing, if necessary, to stimulate the economy further.

Meanwhile, the U.S. trade deficit widened in February due to a decrease in goods exports and an increase in service-sector imports. Manufactured goods exports in the first two months of 2014 were 0.6 percent lower than during the same time period last year, which was disappointing. Nonetheless, we continue to be optimistic that better economic growth rates abroad will lead to improvements on the export front. Fortunately, four of our top five markets for U.S.-manufactured goods notched year-to-date increases in the first two months relative to last year, including Mexico, China, Japan and Germany.

Efforts to move forward U.S.–European and Asian–Pacific negotiations continue, and the World Trade Organization (WTO) is heading to the next stage of implementing the recently completed Trade Facilitation Agreement. On the legislative side, Export-Import (Ex-Im) Bank reauthorization efforts continue, while manufacturers keep pressing for congressional action on key trade legislation, such as Trade Promotion Authority (TPA) and the Miscellaneous Tariff Bill (MTB).

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

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Manufacturers applaud introduction of the Safe and Accurate Food Labeling Act

On Wednesday, Reps. Mike Pompeo (R-KS) and G.K. Butterfield (D-NC) introduced bipartisan legislation (H.R. 4432) that would create a federal standard for the labeling of foods and beverages made with genetically modified ingredients (GMOs). The bill, known as the Safe and Accurate Food Labeling Act of 2014, is a commonsense measure that would establish uniformity in food and beverage labeling and ensure the labeling of products addresses health and consumer safety concerns. Currently, no such standard exists and, as states consider their own labeling standards, a myriad of conflicting state standards could dramatically increase costs for both producers and consumers. The National Association of Manufacturers (NAM) supports the legislation and praises Reps. Pompeo and Butterfield—and original cosponsors Reps. Marsha Blackburn (R-TN), Jim Matheson (D-UT) and Ed Whitfield (R-KY)—for their leadership in advancing federal policies that will ensure a safe and affordable food supply.

The U.S. Food and Drug Administration (FDA) is the nation’s foremost food safety agency. The Safe and Accurate Food Labeling Act would provide the agency with the authority it needs to establish voluntary standards for GMO products and to require mandatory labeling of GMO products if they are found to be unsafe or materially different from foods produced without GMOs. The Safe and Accurate Food Labeling Act of 2014 will ensure that federal policies on food labeling protect consumers and allow them to make the best food and beverage choices for their families. H.R. 4432 would accomplish the following:

  • Ensure food safety: Requires FDA to determine the safety of a GMO and whether the GMO is materially different from traditional food before it can be introduced into commerce.
  • Establish labeling standards: Provides FDA authority to issue regulations for the voluntary labeling of food and beverage products containing GMO ingredients.
  • Require mandatory labeling based on health and safety: Directs FDA specify labeling requirements for GMO foods to protect health and safety or to prevent the label of a GMO food from being false or misleading, based on any material difference between the GMO and the comparable traditional food.
  • Provide consistency in labeling: Requires FDA to issue regulations defining the term “natural” so that food and beverage companies and consumers have a consistent legal framework that will guide food labels and inform consumer choice.
  • Eliminate confusion: Preempts state labeling standards to avoid the confusion and uncertainty of a 50-state patchwork of GMO safety and labeling laws and affirms the FDA as the nation’s authority for the use and labeling of genetically modified food ingredients.

Food and beverage manufacturing accounts for 1.65 million jobs in the United States and is critically important to the success of the federal government’s domestic and global feeding programs, including SNAP, school nutrition, WIC and direct U.S. foreign food aid. The food and beverage industry does more to combat hunger and malnutrition in the U.S. than anyone else. In the past 3 years, the food sector has contributed $3 billion in food and cash to fight hunger and malnutrition.

GMO technology has fostered a revolution in American agriculture that has benefitted consumers in the U.S. and around the world. GMOs enable America’s food producers to more efficiently use resources and allow farmers to withstand crippling droughts and ward off disease or pestilence while reducing their use of pesticides and chemicals. Click here to contact Congress to urge support for the Safe and Accurate Food Labeling Act of 2014.

For more information about GMOs and the need for a federal labeling standard, visit www.CFSAF.org.

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NAM Member Testifies on Benefits of LNG Exports

LNG exports will create jobs and create a positive ripple effect throughout the manufacturing supply chain. That was the message today from Chart Industries Vice President and Secretary Matt Klaben at a House Ways and Means hearing focused on the trade implications of U.S. energy policy and the export of liquefied natural gas (LNG).

Klaben addressed the importance of free trade and open markets over market-distorting barriers to trade. He also highlighted Chart’s story of job creation and the type of advanced manufacturing that would take place across the country if these terminals are approved. Below are excerpts from Mr. Klaben’s testimony:

For manufacturers, natural gas is a critical component of an “all-of-the-above” energy strategy that embraces all forms of domestic energy production, including oil, gas, coal, nuclear, energy efficiency, alternative fuels and renewable energy sources…

Chart’s participation in the LNG value chain has put us in a position to create many good-paying jobs in communities across the U.S. In recent years, we have invested tens of millions of dollars to expand our facilities in various American communities to be prepared for these opportunities…

If Chart is selected to supply equipment for just one average-sized export terminal, it would support hundreds of jobs at Chart facilities, and further hundreds of jobs with Chart suppliers in other communities around the U.S…

Chart and its suppliers are not alone—we represent just a small part of the LNG value chain and the total work needed. Each LNG export terminal costs roughly $10 billion to construct. Each project would create thousands (and in some cases tens of thousands) of jobs and generate billions of dollars in economic benefits. Manufacturers across the country would create jobs making compressors, heat exchangers, storage tanks, pipes, valves and other components of these state-of-the-art infrastructure projects.

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Federal Reserve Participants Focused on Slack in the Economy at their March FOMC Meeting

The Federal Reserve Board released the minutes of its March 18-19 Federal Open Market Committee (FOMC) meeting. While we already had the statement from this meeting, the minutes allow us to know the inner deliberations of the Committee. The participants debated, for instance, the degree to which there was “slack” in the labor market, with some feeling that the reduced unemployment rate masked continuing weaknesses (e.g., low participation rate, high rates of underemployment and part-time employment) while others felt that some of these weaknesses mirrored larger demographic trends.

FOMC members also spent some time focusing on the impact of global events on the U.S. economy.  The recent deceleration in real GDP growth in China “had already put some downward pressure on world commodity prices, and a couple of participants observed that a larger-than-expected slowdown in economic growth in China could have adverse implications for global economic growth.” The participants also discussed the events of the Ukraine and the negative impact of possible geopolitical events.

One of the more controversial – in some circles – aspect of the March FOMC meeting was the dropping of the 6.5 percent target in its forward guidance. That target had been part of their guidance since the December 2012 FOMC meeting. There were discussions about replacing the 6.5 percent target with another number. (Narayana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis, dissented from the final statement and later suggested that he felt the target should have been 5.5 percent.) In the end, the majority of participants voted to approve the switch from a “quantitative” to a “qualitative” target, which would be data dependent but still provide the FOMC with flexibility to act when it needed to.

The FOMC also voted to continue tapering its long-term and mortgage-backed security purchases from $65 billion each month to $55 billion each month. The minutes go on to say the following: “Members again judged that, if the economy continued to develop as anticipated, the Committee would likely reduce the pace of asset purchases in further measured steps at future meetings.”

In general, FOMC members wanted the public to know that it would maintain a highly accommodative stance on monetary policy for the foreseeable future. While tapering of long-term assets will continue at future meetings, short-term interest rates will stay near zero throughout 2014, and it is likely that they will not start to increase the federal funds rate until sometime in 2015.

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

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California’s Manufacturing Sector Expected to Improve in the Second Quarter

Manufacturing activity in California is expected to improve in the second quarter, according to the A. Gary Anderson Center for Economic Research at Chapman University. The composite purchasing managers’ index (PMI) increased from 56.2 in the first quarter (January) to 58.5 in the second quarter (April). Indeed, manufacturers largely anticipate increased paces for production (up from 60.5 to 64.4) and new orders (up from 55.8 to 60.9). Roughly half of the respondents in the survey said that they thought sales and output would be higher in the second quarter.

Employment growth remained soft (down from 55.6 to 53.3). Looking at the specific responses, 24.1 percent felt that their employment levels would increase in the second quarter, with 11.4 percent saying that it would be lower. However, the bulk of responses (64.5 percent) said that their hiring levels would be unchanged for the quarter. One positive, of course, was that net hiring was positive, albeit only modestly so.

The PMI for nondurable goods (up from 56.7 to 58.2) advanced more than the one for durable goods industries (up from 58.1 to 58.3), which increased only marginally. Each was lower than it was one year ago, however, when durable and nondurable goods firms had index values of 60.3 and 60.9, respectively.

Overall, these data show that manufacturers in California see demand and production picking up this quarter. That is a good thing, but it is also worth noting that the pace of growth remains below the pace observed in mid-2013. Moreover, manufacturers in Orange County were less positive this quarter than in the last (down from 64.1 to 58.5) on slower new order and employment growth.

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

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Manufacturers Testify Before House Ex-Im Panel

Yesterday, manufacturers like Boeing and FirmGreen participated in a panel hosted by House Financial Services Committee Ranking Member Maxine Waters (D-CA) to highlight the critical importance of reauthorizing the U.S. Export-Import (Ex-Im) Bank. Ex-Im Bank faces a tough reauthorization fight in Congress this year.

Manufacturers, especially small and medium-sized manufacturers, cannot afford a lapse in the financing support that helps them stay competitive in the global marketplace. Most of the Bank’s financing deals help small businesses, Ex-Im Chairman and President Fred Hochberg told the panel. Hochberg spoke with the NAM’s Member Focus magazine last year about efforts to help businesses of all sizes.

Unfortunately, manufacturers are already facing the consequences of the uncertainty surrounding Ex-Im’s reauthorization. FirmGreen CEO Steve Wilburn told lawmakers that his company lost a $57 million contract to a South Korean competitor because reauthorization legislation faces an uncertain future in Congress. “I just want you to understand the impact on people in my company, me personally and the people in the Midwest that I can’t give those jobs to,” he said. “To me, it’s unconscionable that we allow this debate to rage on a partisan basis.”

Ted Austell, Boeing’s vice president of executive, legislative and regulatory affairs, said that Ex-Im supports the company’s 160,000 employees, 15,000 suppliers and vendors, and hundreds of thousands of workers connected to the aerospace sector. “In a word, it’s jobs,” he said.

House Democratic Whip Steny Hoyer (MD) addressed the panel yesterday afternoon, and he indicated that he will make Ex-Im a legislative priority. The NAM appreciated Rep. Hoyer’s outstanding leadership during the last reauthorization of Ex-Im, and we are very pleased that he continues to make this issue a priority. It is a critical tool that allows our small, medium and larger manufacturers to compete globally. Rep. Hoyer announced at a press conference earlier today that he is including Ex-Im Bank reauthorization in his manufacturing initiative.

This evening, Rep. Denny Heck (D-WA) and other members of the New Democrat Coalition will take to the House floor to discuss the Ex-Im Bank’s positive impact on American jobs during a “special order.” You can follow along with the New Dems on Twitter here.

The NAM will continue to advocate for Ex-Im Bank’s reauthorization on Capitol Hill and with the Administration. In March, we spearheaded a letter that was joined by more than a dozen other business leaders to urge the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee to take immediate action on legislation. We’re also engaging our members to add their voices and influence. Click here to learn more about what manufacturers can do today.

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Manufacturing Job Postings and Hiring Data Were Weaker in February

The Bureau of Labor Statistics said that manufacturing job openings declined for the third month in a row in February. After peaking at 298,000 in November, the number of job postings in the sector has continued to move lower, with 250,000 openings recorded in February. Weather has negatively impacted overall economic activity over much of this period, and it is possible that winter conditions hampered employment growth, as well. Nonetheless, this is a trend that will hopefully reverse with coming data, and it reverses what had been upward movement from May to November of last year (up from 203,000 to 298,000).

Net hiring has followed a similar pattern and was also lower in February for the third straight month. Manufacturers added 234,000 workers in February, down from 244,000 in January. At the same time, the number of separations – including layoffs, quits, and retirements – fell from 242,000 to 236,000 for the month. As such, net hiring (or hires minus separations) shifted from a net gain of 2,000 in January to a net loss of 2,000 in February. This was well below the net hiring rate of 41,000 observed in November, illustrating the current softness in the labor market.

In contrast, employment numbers in the larger economy improved in February. Total job openings increased from 3,874,000 in January to 4,173,000 in February. This was the fastest pace for job postings since January 2008. Likewise, net hiring in the month in the nonfarm business sector rose from a rather weak 97,000 in January to 203,000 in February. While manufacturers hired fewer workers in the month, there were notable increases for retail trade, leisure and hospitality, and government.

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

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