Monday Economic Report – January 20, 2015

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

Financial markets around the world continued to react to the softening global economic environment. In particular, foreign exchange markets were rocked by news that Switzerland would no longer support its cap on the franc, where that currency has been seen as a safe haven, particularly against the euro. Almost immediately, the Swiss franc appreciated sharply against the euro and other currencies. For its part, the euro has continued to depreciate against the U.S. dollar, with one euro selling for $1.1581 on Friday. This was down $1.3927 on March 17, the high point of 2014, representing an appreciation of more than 17 percent for the U.S. dollar against the euro. These developments could hurt the ability of manufacturers in the United States to grow exports. (continue reading…)

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U.S. Scores WTO Victory Against Discriminatory Argentine Import Restrictions; Manufacturers Look for Quick Redress

The World Trade Organization (WTO) Appellate Body issued a decision on January 15 finding Argentina’s import restrictions on U.S. and other imported goods breached the international trade rules that Argentina had adopted in joining the WTO.

Since 2012, Argentina had, through its Declaración Jurada Anticipada de Importación or “DJAI,” and other measures, imposed limits on imports and other trade restrictive measures that have limited the ability of U.S. manufacturers to export and participate successfully in the Argentine market. These measures are estimated to affect billions of dollars of U.S. exports each year. (continue reading…)

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Manufacturing Production Rose 0.3 Percent in December, with 4.9 Percent Growth Year-over-Year

The Federal Reserve Board said that manufacturing production increased 0.3 percent in December, a slower pace than 1.3 percent growth rate observed in November. As such, it was a softer-than-desired end to the year in terms of output. On the positive side, it was the fourth straight monthly expansion for manufacturing production, and the sector has experienced a healthy 4.9 percent increase in output in 2014. That is more than double the year-over-year pace observed in December 2013 of 2.3 percent, for instance, illustrating the significant gains in production and in the outlook made over the past year. Manufacturers continue to be mostly upbeat about 2015, even as they are keenly aware of possible downward risks, especially in global markets. (continue reading…)

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Lower Gasoline Costs Send Consumer Prices Lower for the Second Month

The consumer price index fell for the second straight month in December, down 0.4 percent, according to the Bureau of Labor Statistics. This was widely anticipated, particularly given the sharp decline in gasoline prices, which fell 9.4 percent for the month. Indeed, the index for gasoline fell 22.4 percent in the second half of 2014. This mirrored data from the Energy Information Administration, which reported that the average price of regular conventional gasoline this week is $2.07 per gallon, down from $3.64 a gallon during the week of June 23, 2014. This has helped to bring headline inflation down significantly, with consumer prices up just 0.7 percent year-over-year, off from 2.1 percent six months ago. (continue reading…)

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Philly Fed: Manufacturing Activity Slowed in January, but Outlook Remains Strong

Manufacturers in the Philadelphia Federal Reserve Bank district reported somewhat slower growth in January. The composite index of general business conditions fell from 24.3 in December to 6.3 in January, starting 2015 off on a slightly weaker note. Yet, it was the eleventh straight monthly expansion, and the composite index averaged a sky-high 25.1 in the second half of 2014. Some moderation in growth might have been expected at some point. (continue reading…)

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New York Manufacturers Expanded Again in January After Contracting in December

The Empire State Manufacturing Survey found that activity expanded again in January after contracting slightly in December. The New York Federal Reserve Bank’s composite index rose from -1.2 in December to 10.0 in January. (Note that historical data were revised this month to incorporate new seasonal adjustments.)

This was good news and a positive way to begin 2015, with increased sales (up from 0.4 to 6.1), shipments (up from 2.6 to 9.6) and employment (up from 8.3 to 13.7). Indeed, one-third of those responding to the survey said that there were increased new orders in January, up from 26.0 percent in December. Still, the average employee workweek 8.4) (up from -11.5 to -continue to narrow, despite some progress for the month. The workweek should begin to improve, however, with increased activity. (continue reading…)

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Producer Prices for Final Demand Goods Declined in December for the Sixth Straight Month

The Bureau of Labor Statistics said that producer prices for final demand goods and services decreased 0.3 percent in December. Looking just at goods, producer prices for final demand items have now fallen for six consecutive months, down 3.0 percent over that time frame. A large part of that decline, of course, stemmed from sharply lower petroleum prices. Producer prices for energy goods were off 6.6 percent in December, with a 14.8 percent decline since June. This has generally helped to push inflationary pressures lower.  (continue reading…)

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NAM in the NEWS: Why Manufacturing Still Counts

Today, Wall Street Journal reporter Bob Hagerty published a series of articles highlighting the growing strength of the manufacturing sector. Although in recent years, the U.S. economy has seen a rise in service work, manufacturing continues to be a driver of growth, especially for the middle class. With the growing American energy renaissance, manufacturing jobs remain a source of good paying jobs averaging $36.37 in wages and benefits. (continue reading…)

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House Advances Legislation that Includes More Relief for Derivatives End Users

The House today passed legislation (H.R. 37) to amend several provisions of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Included in the package is a NAM-supported bill to prevent manufacturers from facing unintended derivatives clearing requirements simply because they structure using a centralized treasury unit (CTU).

While the Dodd-Frank Act provided an exemption from clearing requirements for end-users that use derivatives to hedge business risk, some manufacturers are still concerned they may be subject to these rules — and the resulting regulatory burden — anyway. The reason stems from the fact that even though these are nonfinancial companies, their use of a CTU to manage derivatives transactions can disqualify them from claiming the end-user clearing exception because the CTU may be considered a “financial entity.” (continue reading…)

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Retail Sales Numbers Were Unexpectedly Soft in December

The Census Bureau said that retail sales decreased 0.9 percent in December, which was much weaker than expected. Gasoline station sales were down 6.5 percent, falling for the sixth time in the past seven months and declining 25.4 percent since July. Of course, gasoline station sales reflect lower prices. The Energy Information Administration reported that the average price of regular conventional gasoline this week is $2.07 per gallon, down from $3.64 a gallon during the week of July 23, 2014.

In addition to gasoline, another area of softness was motor vehicle sales, which declined 0.7 percent in December. Still, American purchases of new automobiles remained a bright spot overall, with year-over-year growth of 8.6 percent. (continue reading…)

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