Manufacturing Leaders Deliver Recommendations to Obama Administration

Today, manufacturing thought-leaders, including many NAM-member company CEOs, delivered the Advanced Manufacturing Partnership 2.0 report to the Obama Administration. The report includes recommendations that recognize the importance of advanced technology to manufacturing products and processes as well as the necessity of a skilled workforce to sustain the manufacturing comeback. (continue reading…)

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Leadership Road Show Heads to North Carolina

As the election grows nearer and nearer, the issues facing manufacturers – and the American economy – continue to grow in importance. This week, NAM President and CEO Jay Timmons traveled to Charlotte, North Carolina to discuss with local manufacturing leaders the question of what’s at stake in the upcoming midterm elections, and to consider the role of the Tar Heel State in our nation’s ongoing manufacturing comeback. (continue reading…)

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ACC Map Shows New Ozone Regulations Threaten Manufacturing Growth

Last week the American Chemistry Council (ACC) released a new interactive map and analysis showing that over one hundred billion dollars of investments in new manufacturing plants and other expansions could be at risk because of new ozone regulations. (continue reading…)

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Dallas Fed: Manufacturing Outlook Picked Up Somewhat in October

The Dallas Federal Reserve Bank said that manufacturers continued to expand in October, with the pace of growth in production easing ever-so-slightly. The composite index of general business conditions edged slightly lower, down from 10.8 in September to 10.5 in October. It has averaged 10.3 over the past seven months, which was progress from the 0.3 index reading in February. (continue reading…)

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Congress Needs to Renew TRIA ASAP

With so little getting done in Washington these days, manufacturers are encouraged that leaders in the House of Representatives believe they will vote on reauthorizing the Terrorism Risk Insurance Act (TRIA) when Congress returns after the election. First passed in the wake of the 9/11 attacks, TRIA provides a federal backstop for the insurance market in the event of a catastrophic terrorism attack, with a mechanism to recoup any federal outlays from policyholders overtime. (continue reading…)

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Monday Economic Report – October 27, 2014

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

What a difference a week makes. After a volatile week in financial markets amid worldwide economic worries, things calmed down last week. While the Dow Jones Industrial Average remains 2.7 percent below its all-time high on September 19, it gained 425 points last week, or 2.6percent. Attitudes shifted to a more positive stance on decent earnings reports and on news that firms remain mostly upbeat in their outlook. (continue reading…)

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Somewhat Better Manufacturing Data in China and Europe for October, But Weaknesses Persist

The HSBC Flash China PMI rose to its highest level in three months, up from 50.2 in September to 50.4 in October. It was the fifth consecutive monthly expansion in manufacturing activity in China, an improvement from the contracting activity levels experienced in the first five months of 2014. Yet, despite the better headline figure, many of the underlying data points reflect some easing in growth rates for the month, including new orders (down from 51.5 to 51.4), exports (down from 54.5 to 52.8) and output (down from 51.3 to 50.7). Hiring continued to decline but at a slower rate (up from 47.5 to 48.6).

As such, Chinese manufacturers are expanding but not by as much as we might prefer. This finding is consistent with the deceleration in other Chinese data, including real GDP, which slowed from 7.5 percent year-over-year growth in the second quarter to 7.3 percent in the third quarter. Fixed real investment (down from 16.5 percent year-over-year in August to 16.1 percent in September) and retail sales (down from 11.9 percent year-over-year to 11.6 percent) also declined. On the positive side, industrial production picked up, increasing from the year-over-year rate of 6.9 percent in August to 8.0 percent in September; yet, that remained lower than July’s 9.0 percent pace.

Meanwhile, the Markit Flash Eurozone Manufacturing PMI increased from 50.3 to 50.7. That is good news, as the September figure had been the lowest level since July 2013, when Europe first emerged from its recession. October’s reading was higher largely due to a pickup in output (up from 51.0 to 51.9) and employment (up from 50.1 to 50.6). Still, new orders (unchanged at 49.3) contracted for the second straight month, with exports (down from 51.6 to 50.5) easing. The Eurozone continues to face challenges in manufacturing, especially in terms of falling sales. The results also vary by country, with Germany (up from 49.9 to 51.8) improving somewhat, while French manufacturers  (down 48.4 to 47.6) continue to report weakness.

Closer to home, the Markit Flash U.S. Manufacturing PMI dropped slightly, down from 57.5 to 56.2. The pace of activity was down across-the-board, including new orders (down from 59.8 to 57.1), output (down from 59.6 to 58.0), hiring (down from 56.4 to 56.2) and exports (down from 54.1 to 51.9). While the index for new orders was at its lowest level since January’s 53.9 reading, it is hard to get too worked up over October’s decline for these indicators. After all, demand, production and employment continue to grow at decent rates, and manufacturers are reporting higher activity levels than earlier in the year.

Still, we would like to see better results to begin the fourth quarter, particularly for exports. Given the softness in worldwide markets, however, this weakness should not be a surprise.

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

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GlobalFoundries Taking Steps to Drive Future Innovation

GlobalFoundries is bringing computer chip design in-house, opening the doors for new business and growth. Acquiring the business from IBM’s Vermont and New York locations is a boon for GlobalFoundries innovation – gaining customers and, importantly, the institutional expertise of 5,000 researchers and engineers. This partnership between IBM and GlobalFoundries will not only preserve these manufacturing jobs, but will leverage IBM’s commitment to R&D and GlobalFoundries’ ability to develop and enable technologies

Driving the next generation of innovation and game-changing products is a critical to maintaining manufacturers’ in the U.S. mantle of leadership. Manufacturing today is sleek, advanced, and technological. The ability to stay ahead of the competition and innovating at every turn will define the future of manufacturing and it’s great to see GlobalFoundries, like many others, is taking pro-active steps to ensure future growth. Manufacturing is making a comeback and we can’t wait to see what’s around the corner.

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Tax Extenders are a Must-Do Item This Year, and the Sooner the Better

NAM continues to urge Congress to act on tax extenders as soon as possible as a bridge of certainty until comprehensive tax reform can be enacted.

The NAM is leading meetings with members of the House and Senate to call on Congress to act immediately when they return for the Lame Duck session to enact a package of over 50 expired and expiring tax provisions, typically called “tax extenders”. Several expired tax provisions are integral for manufacturers to innovate, grow, and compete in the global marketplace. These provisions include the R&D tax credit, enhanced Section 179 expensing, bonus depreciation, the “look-through” rule for controlled foreign corporations (CFCs), and deferral for active financing income. In the coming weeks, the NAM will outline in a series of Shopfloor Blog posts exactly how important these provisions are to the U.S. economy.

Manufacturers are not alone in calling upon Congress to act to restore the expired tax provisions immediately. Recently, IRS Commissioner John Koskinen wrote in a letter to Senate Finance Committee Chairman Ron Wyden (D-WY) that Congress should act on tax extenders no later than November to avoid disruptions and delays to the 2015 tax filing season. In the letter, Koskinen points out that the uncertainty in whether and when Congress may reinstate the expired tax provisions could delay the 2015 filing season and “delay the processing of tax refunds for millions of taxpayers.” The Commissioner also warned that waiting until 2015 to extend the provisions would be even more problematic.

NAM members echo these concerns, and want Congress to know that a failure to enact a retroactive extension of the tax extenders by the end of the year equates to a tax increase on U.S. manufacturers.

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Monday Economic Report – October 20, 2014

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

Global financial markets were highly volatile last week, with investors concerned about slower growth in Europe and an Ebola outbreak in the United States, among other factors. Indeed, industrial production in the Eurozone fell 1.8 percent in August, and activity was down largely across-the-board, most notably in Germany (down 4.3 percent), the Eurozone’s largest economy. Sluggish income and labor market growth in Europe has also pushed inflationary pressures lower, with year-over-year pricing changes of just 0.3 percent in September. Despite such worries, equity markets began to rebound on Friday, with the Dow Jones Industrial Average (DJIA) closing at 16380.41. Nonetheless, the DJIA remains 5.2 percent below its all-time high of 17279.74 on September 19.

Still, the U.S. economy has shown signs of resilience. Despite a softer August, manufacturing production increased 0.5 percent in September. Over the past 12 months, output in the sector has risen 3.7 percent. While this was slower than its July year-over-year pace, it reflects a nice improvement from the more sluggish 1.5 percent rate in January.

Moreover, surveys from the Manufacturers Alliance for Productivity and Innovation (MAPI) and the New York and Philadelphia Federal Reserve Banks observed expanding activity levels in their latest reports. Each measure eased somewhat in October, but they were expansionary nonetheless. The weakest of these reports was the Empire State Manufacturing Survey, which observed a slight contraction in new orders. Yet, even there, respondents remained mostly optimistic about demand and output over the next six months. Along those lines, MAPI has a generally upbeat outlook, predicting that manufacturing production will increase by 3.4 percent in 2014 and 4.0 percent in 2015.

Housing starts exceeded 1 million again, increasing from an annualized 957,000 units in August to 1,017,000 in September. This continues a slow-but-steady trend upward, with an average of 978,111 so far in 2014 relative to an average of 930,000 for all of 2013. Still, there was relatively weak housing activity throughout much of the second half of last year and the first half of this year, and the latest data suggest that the sector has begun to stabilize somewhat. I continue to predict housing starts solidly in the 1.1 million unit range by the beginning of 2015. Homebuilder confidence has also reflected a positive outlook despite slipping a bit in October. Lower mortgage rates might spur more residential construction activity. According to Freddie Mac, average 30-year fixed mortgage rates fell to 3.97 percent this past week, their lowest level since June 2013.

Meanwhile, there was mixed news on the consumer front. On the positive side, consumer confidence reached a pre-recessionary high, according to the University of Michigan and Thomson Reuters. This is a sign that improvements in the economy and lower gasoline prices have helped to lift Americans’ spirits. Yet, there are also lingering worries about income and labor market growth, and consumers remain somewhat cautious overall. Retail spending declined 0.3 percent in September, suggesting softness as we begin autumn. At the same time, year-over-year growth in retail sales was up 4.3 percent, a fairly decent rate, and the holiday season retail outlook looks pretty strong. We hope we will see better consumer spending data in the coming months.

This week, we will get additional insights regarding the health of the global economy. Markit will release Flash Purchasing Managers’ Index (PMI) data for China, Japan, the Eurozone and the United States. The European data are expected to show continued weakness, but we will be watching for signs of progress in the Chinese manufacturing sector, which has decelerated in recent months. The Kansas City Federal Reserve Bank will also unveil its latest manufacturing survey, and it is expected to show continued expansion in its district. Beyond these surveys, we will learn about growth in consumer prices, and if they are similar to the producer price index data released last week, they will reflect easing in both food and energy costs. Other highlights this week include reports on existing and new home sales, leading indicators and state employment.

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

DJIA - oct2014

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