Monday Economic Report – May 18, 2015

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

One of the larger headlines of the past week was the renewed strength of the euro, which closed at $1.1449 on Friday. To put that exchange rate in perspective, the euro traded for $1.0582 on April 13, and Friday’s close was the highest level for the euro since February 2. To be fair, the U.S. dollar remains strong against the euro, up 17.8 percent since May 6, 2014. Yet, the recent weakness in the dollar (and strength in the euro) has been the result of weaker-than-expected economic data in the United States and better-than-anticipated numbers coming out of Europe. Many of the underlying long-term fundamentals in these two regions remain the same, but those manufacturers worried about the negative impact of a soaring dollar got some welcome relief last week in the recent easing of the greenback. (continue reading…)

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New UNCTAD Report Confirms Credibility and Utility of ISDS

And Contradicts Many Critics’ Claims

A few hours ago, the United Nations Conference on Trade and Development (UNCTAD) released its annual review of the investor-state dispute settlement (ISDS) mechanism.  Some key highlights are important to note as they demonstrate the utility of the ISDS mechanism, while effectively contradicting many of the critics’ claims.  Consider these four highlights from the UNCTAD report: (continue reading…)

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Senate Approves Customs and Trade Preferences Legislation

The Senate considered today a bundle of trade bills under a bipartisan deal to allow votes on customs and preferences legislation, as well as a cloture vote on the motion to proceed to Trade Promotion Authority (TPA). The NAM strongly supports the customs modernization, intellectual property enforcement, miscellaneous tariff bill process and provisions to prevent trade remedy evasion that are contained in Trade Facilitation and Trade Enforcement Act of 2015 and the trade preference provisions contained in the Trade Preferences Extension Act of 2015 (S.1267). The Senate passed the customs legislation by a vote of 78-20 and the trade preferences bill by a vote of 97-1.

The Trade Facilitation and Trade Enforcement Act (S. 1269), introduced in April by Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR), passed the Senate Finance Committee by voice vote. During the Senate Finance Committee mark-up, several amendments to the bill were adopted. The bill would reauthorize U.S. Customs & Border Protection and contains customs modernization provisions on key issues like duty drawback, exemption from duty for container residue and intellectual property protection. The bill also includes the Enforcing Orders and Reducing Customs Evasion Act (ENFORCE) that provides basic due process procedures for domestic manufacturers, including timelines for CBP to act and the potential for judicial review, to address growing problems with the evasion of trade-remedy orders. (continue reading…)

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Industrial Production Unchanged in April

Manufacturing production was unchanged in April, slowing from the 0.3 percent gain experienced in March. Overall, output in the sector has been very soft for five straight months. Manufacturers have struggled with a number of significant headwinds in the U.S. and global economies, including challenges in growing exports, residual impacts from the West Coast ports slowdown, regional weather challenges and an anxious consumer. As a result, the year-over-year pace has slowed from 4.5 percent in November to 2.3 percent in April.  Similarly, capacity utilization in manufacturing has dropped from 79.8 percent five months ago to 78.2 percent today.

Durable goods production increased 0.1 percent in April, with output for nondurable goods firms off 0.1 percent. There were strong increases for manufacturing production for nonmetallic mineral products (up 1.4 percent), electrical equipment and appliances (up 1.3 percent), motor vehicles and parts (up 1.3 percent) and wood products (up 1.3 percent). However, these were offset by declining output in the machinery (down 0.9 percent), aerospace and miscellaneous transportation equipment (down 0.6 percent), and food, beverage and tobacco products (down 0.6 percent) sectors, among others. (continue reading…)

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NAM Hosts Executive Insights Series in Chicago

NAM’s Jay Timmons joined leading manufacturing CEOs from Tenneco, Caterpillar, USG Corporation and Neenah Enterprises in Chicago today as part of the NAM’s Executive Insights Series. Panelists discussed several manufacturing priorities, but at the top of that list was passage of a Trade Promotion Authority (TPA) bill.

As the president and Congress continue to seek a path forward on TPA, it’s important to understand how crucial this legislation is to enabling market-opening trade deals that level the playing field for manufacturers in the U.S., drive manufacturing growth and the economy, and create and support high-paying jobs here at home. (continue reading…)

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Reduced Energy Costs Continue to Push Producer Prices Lower in April

The Bureau of Labor Statistics said that producer prices for final demand goods and services fell 0.4 percent in April, with prices for goods down 0.7 percent. Final demand goods prices have declined in nine of the past ten months, driven lower largely on reduced energy costs. Final demand energy goods were off 2.9 percent in April, or 24.3 percent since peaking 10 months ago in June. Producer prices for final demand food goods also declined in April, down 0.9 percent. Sharply lower egg prices helped push overall food costs down, along with chicken, cooking oils, oilseeds, pork, processed fruits and vegetables and roasted coffee. Through the first four months of 2015, food costs have declined 4.2 percent. (continue reading…)

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Congress Takes Critical Step for Manufacturers on “WOTUS” Regulation

Manufacturers secured a key victory Tuesday with the passage of H.R. 1732, the Regulatory Integrity Protection Act of 2015.  A strong coalition of Democrats and Republicans voted together to stop the Administration’s sweeping new reinterpretation of federal water regulations.  By a vote of 261 to 155, the U.S. House of Representatives passed legislation that would require the EPA to withdraw its controversial water rule and work with states and stakeholders in fashioning a new rule.

Over the past year small businesses, family farmers, American manufacturers, and community leaders have repeatedly asked the EPA to detail exactly what water resources the federal government would control under the proposed rule.  However, the EPA’s failure to provide clarity has reinforced widespread concerns that the Administration’s proposed water rule represents an enormous regulatory expansion. (continue reading…)

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Industry Leaders, Mayors and Local Leaders Unite Over Infrastructure Need

Today, as a part of the third annual Infrastructure Week, National Association of Manufacturers (NAM) President and CEO Jay Timmons and Laborers’ International Union of North America (LIUNA) General President Terry O’Sullivan participated in a press event with mayors from around the country and Former Department of Transportation Secretary Anthony Foxx.

Participants at the event highlighted the need for updated infrastructure and a reauthorization of the Highway Trust Fund. Leaders from business, labor, and mayors of cities around America also kicked where advocates will meet with nearly 300 Members of Congress and their offices throughout the day and week. (continue reading…)

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Chief Senate Tax Writer Calls for IRS to Stop Use of “Hired Guns” in Taxpayer Exams

Senate Finance Committee Chairman Orrin Hatch (R-UT) this afternoon sent a strongly worded letter to IRS Commission John Koskinen asking him to “immediately halt” the practice of using private attorneys to carry out taxpayer examinations including taking sworn testimony from taxpayers. In May of 2014, the IRS retained the global litigation firm of Quinn Emanuel on a $2.2 million contract to assist in the income tax audit and investigation of a corporate taxpayer, including the conduct of sworn interviews.  Shortly after retaining the firm, Treasury and IRS issued a temporary regulation allowing third party contractors to take compulsory, sworn testimony in connection with an IRS investigation.  According to the IRS, the temporary regulation—issued without a notice and comment period—represented a “clarification” of existing law.

The Finance Committee Chairman doesn’t agree with the IRS’ assessment, noting that the temporary regulation represents “an unprecedented expansion of the role of outside contractors in the examination process.” Moreover, according to Senator Hatch, the IRS’ hiring of a private law firm to conduct a taxpayer exam: appears to violate federal law and the express will of Congress; removes taxpayer protections by allowing the performance of inherently governmental functions by private contractors; and calls into question the IRS’s use of its limited resources.

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Consumers Remained Cautious in their Spending in April

Consumers remained cautious in their spending in April, according to the Census Bureau. Retail sales were unchanged for the month, softening from the rebound seen in March. Overall, spending has decelerated significantly over the past few months, down from a year-over-year rate of 4.7 percent in November to just 0.9 percent in April.

With that said, the longer-term view is perhaps more encouraging than the headline number might suggest. Total retail spending includes gasoline station sales, which have fallen 22.0 percent since April 2014 on lower prices. Excluding gasoline stations, retail sales grew 3.6 percent year-over-year. This suggests modest growth in the broader retail market over the past 12 months. Still, this figure has also eased recently, down from 5.8 percent year-over-year in November. (continue reading…)

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