Producer Prices Were Unchanged in August

The Bureau of Labor Statistics said that producer prices for final demand goods and services were unchanged in August, continuing the easing in inflationary pressures seen in July. More importantly, producer prices for final demand goods were down 0.3 percent in August, with costs for both food and energy lower for the month. Energy prices fell for the second straight month(down 1.5 percent), consistent with the drop in the price of West Texas intermediate (WTI) crude oil from $106.07 per barrel at the end of July to $98.23 at the end of August. (WTI closed at $92.92 per barrel yesterday, indicating that there will be a further deceleration in this measure in September.)

Meanwhile, food prices decreased 0.5 percent in August. After rising 5.4 percent from December to April, producer prices for final demand food products have eased by 0.8 percent. As such, the cost of food remained 4.5 percent higher in August than at the start of the year. This has largely stemmed from higher prices for meats, eggs, dairy and produce. The largest price declines in August were seen in eggs, fish, oilseeds, pasta products and pork.

Beyond food and energy, core prices for final demand goods were unchanged. Higher monthly costs for footwear, heavy motor trucks, mobile homes, paper industries machinery, pet food and toys were offset by lower prices in computers, household appliances, metal forming machinery, office equipment, passenger cars and women’s apparel.

On an annual basis, producer prices for final demand goods and services have increased 1.8 percent over the past 12 months. This represents a decline from the 2.0 percent observed in May but an acceleration from December’s 1.1 percent pace. Likewise, core inflation – which excludes food and energy costs – for final demand goods and services has increased 1.8 percent year-over-year in August, up from 1.6 percent in July.

Overall, this report suggests that pricing pressures have accelerated from earlier in the year, but inflationary growth has eased slightly over the past couple months. Core inflation remains below the Federal Reserve’s stated threshold of 2 percent. This indicates the inflation remains in-check, at least for now, and the recent deceleration should ease the pressure on the Federal Open Market Committee (FOMC) to expedite its plans to normalize rates. With the FOMC meeting concluding tomorrow, we will get a better sense of its intentions with its latest statement. Of course, the final decision to raise short-term rates will likely hinge on economic data in the months to come.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

House Lawmakers Invest in Manufacturers’ Innovation. Will the Senate Do the Same?

Last evening, the House passed the Revitalize American Manufacturing and Innovation Act (RAMI), a bill championed by Rep. Tom Reed (R-NY) and Rep. Joe Kennedy (D-MA) that has the potential to strengthen the technology leadership position that manufacturers have worked years to establish.

Manufacturers in the United States have always been the world’s leading innovators, as demonstrated by their investments and research and development and prolific patent portfolios. RAMI marks another important investment in a public-private innovation partnership that will help drive manufacturing and facilitate the longevity of our industry’s comeback. The legislation creates a network of innovation centers that brings together business, schools and the government in a joint effort to accelerate the transfer of advanced manufacturing technology and techniques into the commercial sector.

RAMI has been a top legislative priority for the NAM. Our policy teams have tirelessly advocated for the legislation in congressional meetings with key lawmakers. The NAM also designated legislative action on RAMI as a Key Vote. Now that the House has done its part and passed the bill, it is time for the Senate to follow suit.

There is reason to be optimistic. Sen. Sherrod Brown (D-OH) and Roy Blunt (R-MO), the bipartisan sponsors of a Senate version of RAMI, sat down with the NAM’s Member Focus magazine to discuss how their bill would contribute to the manufacturing comeback. “This legislation will particularly help small and medium-sized manufacturers by helping companies gain access to cutting-edge capabilities and equipment and by educating and training students and workers in advanced manufacturing skills,” Blunt told Member Focus.

As NAM President and CEO Jay Timmons wrote to lawmakers in July, “This legislation will accelerate the development of advanced manufacturing technologies and solidify the United States as the best place in the world to innovate.” The NAM will continue its push to advance RAMI until it becomes law.

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

Iowa Hosts 4th Stop on NAM’s Leadership Engagement Series

Iowa’s top manufacturing leaders joined the NAM today for a discussion on advancing federal policies that strengthen manufacturing growth and opportunity. The roundtable event in Iowa is part of NAM’s nationwide Leadership Engagement Series focused on uniting the manufacturing community and elevating top manufacturing priorities.

Panelists included CEOs from Vermeer Corporation, Vantec Inc, EFCO Corporation, Kent Corporation, Al-jon Manufactuing LLC and Pella Corporation.  Leaders agreed that manufacturing in America is making a comeback, employing over 12 million workers and contributing over $2 trillion to the U.S. economy annually. However, panelists expressed concern over Washington’s political agenda threatening to hurt manufacturers’ competitiveness—from costly energy regulations and taxes to the potential shut down the Export-Import Bank.

These unfavorable federal policies could have a huge impact on jobs and the economy in Iowa, as manufacturers account for 16.7 percent of the total output in the state, employing 14 percent of the workforce. As the midterm elections quickly approach, the manufacturing community must engage in the political process to make sure the manufacturing comeback continues in the future.

Follow NAM on Twitter (@ShopFloorNAM) for more information on NAM’s Leadership Engagement Series and visit the NAM’s Election Center for more information on how you can get involved. Next stop, New York City on September 24.

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

TRIA Needs to be Reauthorized Now

As Congress negotiates the final details of a bill to fund the government ahead of the September 30 deadline, lawmakers should be mindful of another fast-approaching date: December 31, the deadline to renew the Terrorism Risk Insurance Act (TRIA).  It first passed after the 9/11 attacks, when insurers and reinsurers stopped offering coverage for terrorist events, and has played an important role in ensuring the availability and affordability of commercial terrorism insurance for manufacturers. Recently the Senate voted to reauthorize TRIA with overwhelming bipartisan support, and last week the NAM joined over 400 businesses and industry groups in asking House members to do the same.

The NAM has outlined the benefits of TRIA in the past, but it essentially provides a high-level backstop for insurers and reinsurers who offer terrorism coverage and mechanism to recoup any federal outlays stemming from a catastrophic event. In another letter sent to Congress last week, the National Association of Insurance Commissioners noted that it is especially important for workers compensation (WC) because WC statutes require nearly all US employers to cover terrorism.

It is rare to see regulators and industry send letters in support of the same legislation and it indicates the importance of renewing TRIA. The clock is ticking and Congress needs to act.

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

NY Fed: Manufacturing Activity Expanded Strongly in September

The Empire State Manufacturing Survey from the New York Federal Reserve Bank reported a strong increase in activity in September, its fastest pace in nearly five years. The composite index of general business conditions rose from 14.7 in August to 27.5 in September, with almost 46 percent of those taking the survey saying that conditions had improved in the month. Other measures were mostly positive, as well, including faster paces for new orders (up from 14.1 to 16.9) and shipments (up from 24.6 to 27.1).

Yet, there were also some challenges, most notably in the labor market. Hiring eased in September, with the index for the number of employees dropping from 13.6 to 3.3. This decline stemmed from an increase in those respondents who said that their employment levels had decreased, up from 5.7 percent in August to 16.3 percent in September. Along those lines, the average employee workweek (down from 8.0 to 3.2) also narrowed.

Pricing pressures continued to be elevated, even as there was a marginal improvement for the month. The index for raw material prices declined slightly, down from 27.3 to 23.9, but that still represents a significant percentage of manufacturers in the Fed district seeing input costs rise. That is expected to continue over the next six months, with nearly 46 percent of respondents anticipating higher prices.

The other forward-looking measures continue to find a mostly optimistic outlook in the New York Fed region. There was a slight pullback in many of the measures assessing the next six months, but manufacturing leaders remain upbeat overall. In fact, 57.1 percent of those completing the survey predict sales increases, or about the same proportion as those anticipating higher shipments. Just over one-quarter expect to add more workers in the coming months, with 29.4 percent planning additional capital expenditures.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

Manufacturing Production Was Softer than Expected in August on Reduced Auto Output

Manufacturing production fell 0.4 percent in August, declining unexpectedly instead of extending the strong gains of July. Much of this decline stemmed from reduced motor vehicle production (down 7.6 percent in August), but this was likely the result of auto makers’ switching over to a new model year and summertime vacations. Despite the decrease for the month, motor vehicle production has risen 8.1 percent over the past 12 months, the largest increase of any of the major sectors. As such, this month’s figure should not be misinterpreted as a weakness, but instead, it is just a pause in an otherwise upward trend for motor vehicle demand and output.  Excluding autos, manufacturing production would have increased 0.1 percent.

Manufacturing production continues to reflect an accelerated pace from the winter months, with the year-over-year pace up from 1.6 percent in January to 4.0 percent in August. Still, this pace was down from 5.2 percent in July. Durable and nondurable goods output has increased 5.6 percent and 2.2 percent year-over-year, respectively. At the same time, manufacturing capacity utilization also eased, down from 77.6 percent in July to 77.2 percent in August.

Nondurable goods production was up 0.2 percent in August, but that was offset by a decline of 0.9 percent for durable goods manufacturers. Computer and electronic products (up 1.3 percent), food, beverage and tobacco products (up 0.4 percent), nonmetallic mineral products (up 0.4 percent), machinery (up 0.3 percent) and chemicals (up 0.3 percent) were examples of sectors with increased output in August.

In contrast, sectors with declining output included apparel and leather products (down 2.3 percent), fabricated metal products (down 1.3 percent), furniture and related products (down 1.0 percent), textile and product mills (down 0.9 percent) and printing and support (down 0.6 percent).

Meanwhile, overall industrial production decreased 0.1 percent, its first decline since the weather-related slowdowns of January. Mining (up 0.5 percent) and utilities (up 1.0 percent) output were both higher. Total capacity utilization edged lower, down from 79.1 percent to 78.8 percent.

In conclusion, manufacturers continue to be upbeat about activity in the second half of this year, but much like the jobs data out a couple weeks ago, the production figures suggest that there was softness in August. Instead of modest gains in output in August as expected, production in the sector declined 0.4 percent, mainly on slower activity in the auto sector. Nonetheless, the outlook remains mostly optimistic, and there were likely retooling issues related to the declines in motor vehicle production.

Still, manufacturers would like to see stronger economic activity moving forward, and for that reason, policymakers should focus on pro-growth initiatives that will allow them to expand and flourish.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

Monday Economic Report – September 15, 2014

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

The latest NAM/IndustryWeek Survey of Manufacturers found that businesses are generally upbeat about the coming months. Manufacturing respondents expect 4.4 percent growth in sales on average over the next 12 months, the fastest pace of expected growth in new orders since the first quarter of 2012, when the sector was expanding more robustly. Indeed, nearly half of those taking the survey anticipate sales growth of at least 5 percent. Capital investment and hiring trends have also moved in the right direction, with manufacturers planning to increase capital spending and employment by 2.5 percent and 1.9 percent, respectively. The hiring figure represents substantial progress from the lackluster pace of job growth in 2013, which averaged just 0.8 percent. Overall, 87.3 percent said that they were positive in their outlook, the highest reading in two and a half years.

Nonetheless, the more positive attitude needs to be balanced against other issues. First, enthusiasm for expanded new orders and production is often nuanced by anxieties that events might prevent the economy from gaining traction—much as it has time and again in this recovery. Certainly, many of them are disappointed with the slow economic growth in the first half of 2014, even if they remain hopeful about the second half.

Second, manufacturers—like many Americans—continue to be frustrated with Washington. The top business challenges remain rising health insurance costs and an unfavorable business climate, cited by 77.1 percent and 73.1 percent, respectively, in the survey. Along those lines, the NAM released a study showing the disproportionate burden placed on small businesses and manufacturers when complying with federal regulations. Total federal compliance costs in 2012 were estimated to be $2.028 trillion, with an average cost of $19,564 per employee for manufacturers, or twice the level of all businesses.

Beyond these issues, there was encouraging news on the consumer front. Retail sales rose 0.6 percent in August, rebounding from softer increases in the previous three months. Prior to this release, there were worries that a more cautious consumer might derail brighter prospects for growth. This data suggests that the public might be more willing to spend. Retail sales have risen 3.8 percent year-to-date, or 5.0 percent over the past 12 months. Moreover, the consumer also appears to be less hesitant about borrowing, with July consumer credit up 9.7 percent in July. This included a sizable pickup in revolving credit, which includes credit cards. Another positive was the increase in consumer sentiment from the University of Michigan and Thomson Reuters, ending a lull in that measure throughout 2014 and marking its highest point since July 2013.

This morning, we will get new data on industrial production. Production in the sector jumped one percent in July, and the expectation is for modest gains in manufacturing output in August. It is also anticipated that housing starts and permits will once again exceeding one million annualized units when August figures are released on Thursday. This would suggest that residential construction activity has begun to recover from softness earlier in the year. Beyond those figures, the biggest headlines will come from the Federal Open Market Committee meeting this week, which is not expected to make any major shifts in monetary policy. Quantitative easing should end in October, with the largest focus being uncertainty over when the Federal Reserve will start raising short-term rates. With that said, new consumer and producer price data should reflect the recent easing in inflationary pressures, particularly from lower energy costs.

Other data releases this week include the latest findings on manufacturing activity in the New York and Philadelphia Federal Reserve Banks’ districts and data on home builder confidence, leading indicators and state employment.

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

retail sales - sept2014

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

Exporters for Ex-Im: There’s More Than Meets the Eye with Large Corporate Ex-Im Bank Users

Behind every large corporate user of the U.S. Export-Import (Ex-Im) Bank—a guarantor of affordable export financing—are hundreds, even thousands, of small business suppliers whose futures are inextricably connected to the bank’s fate.

Click Bond, Inc., in Carson City, Nevada, is a case in point. The company is a developer and manufacturer of fastening hardware and adhesive bonding processes for the aerospace, surface transportation, maritime, and offshore energy markets. Click Bond is the classic “invisible exporter,” a company that supplies parts to large U.S.-based manufacturers, which in turn export a majority of their products with the help of Ex-Im’s financing backing.

The aerospace industry is Click Bond’s oldest and biggest market—the company’s fasteners can be found on the 787 Dreamliner, F-35 Lightning II fighter jet, and even NASA’s Mars Curiosity Rover. Its largest strategic civil aviation customer is Boeing, which depends on Ex-Im to back competitive loans proffered to foreign purchasers of its airplanes.

Boeing is a frequent target of anti-corporate rhetoric from critics who would like to see the bank’s charter expire, but Click Bond Director of Strategic Partnerships Paul McNeill says those critics fail to recognize Ex-Im’s downstream impact on small and mid-size manufacturers that do not contract directly with Ex-Im Bank.

“A significant majority of components found on Boeing aircraft are manufactured by other companies—companies in Boeing’s supply chain,” McNeill says. “When someone sees a Boeing airplane in the sky, that’s not just the work of Boeing. It represents the contributions of thousands of small businesses.”

Without Ex-Im, Boeing would be at a disadvantage to its European rival Airbus, and its suppliers’ competitiveness would also suffer, according to McNeill. “When Boeing thrives, its U.S. suppliers become more competitive by investing in innovation and in processes that improve performance and lower costs. We can’t do that if Boeing isn’t selling airplanes. Boeing is an enormous economic engine that fuels competitiveness at multiple levels in the U.S. manufacturing base.”

Click Bond says that Ex-Im’s closure would jeopardize the jobs of its 400-plus employees, 80 percent of whom directly or indirectly support Boeing’s commercial airplane exports. “It would be a significant blow to our competitiveness,” McNeill states.

“Exporters for Ex-Im” is a blog series focused on the importance of the Export-Import Bank to manufacturers. To learn more or to tell Congress you support reauthorization of the Export-Import Bank, visit

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

Global Manufacturing Economic Update – September 12, 2014

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

Net exports have been a drag on the U.S. economy so far through the first half of this year, with manufacturers continuing to experience sluggish sales growth in international markets. With that said, the U.S. trade deficit narrowed a bit in July to its lowest level in six months, with growth in goods exports outpacing growth in goods imports. Petroleum trade accounted for a significant portion of the change in each, and in general, energy has helped to narrow the deficit from that of a couple years ago. Another positive note was the fact that each of the top-five trading partners for U.S.-manufactured goods experienced increases in manufactured goods exports year-to-date relative to the same time frame last year using non-seasonally adjusted data.

Along those lines, manufacturers worldwide saw modest growth, with a slight improvement from the month before. The J.P. Morgan Global Manufacturing Purchasing Managers’ Index (PMI) rose marginally, up from 52.4 in July to 52.6 in August. The good news is that this marks the 21st straight month of expanding activity globally; yet, it is also clear that the pace of growth has not changed much this year. Still, manufacturing activity in August expanded in 9 of the top 10 markets for U.S.-manufactured goods, an improvement from just five markets in May.

Nonetheless, the data also show signs of softness, most notably in Europe and in China. Real GDP in the Eurozone fell 0.2 percent in the second quarter, with recent industrial production and retail sales data trending lower, as well. The Markit Eurozone Manufacturing PMI declined from 51.8 to 50.7, its lowest level since July 2013, when Europe was just emerging from its deep recession. Still, the economic health of various European nations varies widely, ranging from deteriorating activity in France to relatively robust growth in Ireland. For its part, the European Central Bank has once again lowered interest rates in the hope of spurring more economic activity and additional lending. With these actions and slow growth in Europe, the euro has depreciated against the dollar, down from a recent high of $1.3924 for one euro on May 6 to yesterday’s close of $1.2921 on September 11.

Meanwhile, Chinese manufacturers have reported expanding levels of activity for three straight months (June to August), which by itself is progress after starting the year with five months of contraction. However, the HSBC China Manufacturing PMI declined from 51.7 to 50.2, or just barely above neutral, with decelerating levels of new orders, output and exports. Moreover, while real GDP in China picked up slightly from a year-over-year pace of 7.4 percent in the first quarter to 7.5 percent in the second quarter, we expect to continue to see an easing in growth rates moving forward. We have also seen decelerating rates of growth—albeit still healthy ones by our standards—for industrial production, fixed asset investments and retail sales. Slower growth in China has also helped to pull down overall manufacturing activity in the emerging markets.

U.S. trade talks continue this month with both Asia-Pacific nations and Europe, while the World Trade Organization seeks to move forward both trade facilitation and environmental goods discussions. Domestically, a range of trade and international financing legislation awaits action, including the reauthorization of the Export-Import Bank of the United States, whose charter expires on September 30.

Chad Moutray is the chief economist, National Association of Manufacturers. us trade deficit - sept2014


VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

University of Michigan: Consumer Confidence Has Risen Somewhat in September

The University of Michigan and Thomson Reuters said that preliminary data on consumer confidence reflects a slight increase in September. The Consumer Sentiment Index increased from 82.5 in August to 84.6 in September, its highest level since July 2013. These figures suggest that the lull in confidence that we have seen so far this year might finally be starting to dissipate. Prior to the September reading, for instance, the University of Michigan index has averaged just 81.9, and it was little changed since recovering from the budget showdown last fall. In contrast, the Conference Board’s confidence measure has reached pre-recessionary highs in its most recent report.

The subcomponents in the University of Michigan data continue to reflect some anxieties on the part of the consumer. For instance, the index for the current economic environment slipped a bit this month, down from 99.8 to 98.5, even as it represents an improvement from earlier in the year. Americans remain concerned about labor market and income growth, and this is likely responsible for the decline in the present figure. Geopolitical events might also play into this. Still, the future-oriented index rose strongly, up from 71.3 to 75.6, its highest level in over one year, suggesting more optimism moving forward.

We will get final data on September consumer sentiment from the University of Michigan on September 26. The Conference Board will also release its survey data on consumer confidence on September 30.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

A Manufacturing Blog

  • Categories

  • Connect With Manufacturers

  • Blogroll