Support the United States: Enact Comprehensive Tax Reform

Manufacturers in the United States have struggled to compete under our nation’s broken tax system for years so it’s natural that the NAM is a leader in calling for pro-growth, pro-competitive tax reform. Even though some say tax reform is “stalled” in Congress, NAM continues a constant drumbeat on the need to reform our nation’s tax code to bring us into the 21st century. Indeed, our voices are getting louder by the day as we see Washington policy makers drag their feet on reform or, worse yet,  suggest one-off changes to the tax code to address problems that would be eliminated entirely by overall reform.

While the NAM is a strong advocate for comprehensive reform of our current tax code, we also believe it is critically important to keep our current tax system in place until policymakers agree on a final reform plan. Piece-meal changes or repeal of long-standing rules will inject more uncertainty into business planning, making U.S companies even less competitive and threatening economic growth and U.S. jobs. A key objective for the association, as outlined in NAM’s “A Growth Agenda: Four Goals for a Manufacturing Resurgence in America,”[1]  is to create a national tax climate that promotes manufacturing in America and enhances the global competitiveness of U.S. manufacturers.  Manufacturers want the United States to be the best place in the world to manufacture and attract foreign direct investment. The way to do this is to enact a pro-growth, pro-competitive tax code

[1] Available at http://www.nam.org/

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Exporters for Ex-Im: U.S. Solar Cell Manufacturer Shines With Help of Bank

Suniva Inc., a metro-Atlanta based manufacturer of high-quality, high-efficiency crystalline silicon solar cells and modules, and the Export Import Bank (Ex-Im Bank) of the United States have been working together since 2007. Suniva has benefitted from the Ex-Im Bank’s buyer financing and working capital guarantees to support its exports to global markets.

Most recently, Suniva announced that Ex-Im Bank will guarantee a $780,000, 10-year loan to be made by UPS Capital Business Credit to finance the export of Suniva’s photovoltaic (PV) solar to a rooftop solar-power project of Grupo Metal Intra S.A.P.I. de C.V. (GMI). GMI Suniva Queretaro Airport 1MW 2014 02

“High-quality American solar products are coveted in many emerging markets. In these markets where there is an abundance of sun, and power is unreliable and/or expensive, solar power is particularly attractive,” said John Baumstark, chief executive officer of Suniva.

“It is critical for American companies to export to help strengthen our economy, and U.S. Ex-Im Bank has been instrumental in providing unique products that enhance the competitiveness of American companies around the world.  It is most fitting that the first major export and installation of our modules in Mexico is utilizing a guarantee from the U.S. Export-Import Bank with which we have a longstanding and valuable relationship,” said Baumstark.

“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 http://www.nam.org/Issues/Trade/Ex-Im-Bank.aspx.

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MAPI: Manufacturing Activity Continued to Improve in the Second Quarter

The Manufacturers Alliance for Productivity and Innovation (MAPI) said that its Composite Business Outlook Index rose from 69 in March to 71 in June. Indeed, this was the sixth consecutive quarterly gain in the manufacturing outlook, up from 55 in December 2012. Index readings over 50 indicate expansion, and as such, these data suggest mostly positive trends in the sector. The pace of new orders (up from 71 to 78) and export sales (up from 60 to 67) accelerated, and profit margins edged higher (up from 66 to 70).

In terms of investment, manufacturers completing the MAPI survey said that they were increasing their capital spending levels both in the U.S. (up from 59 to 67) and abroad (up from 59 to 64). At the same time, the rate of research and development spending slowed slightly in this survey (down from 69 to 67), albeit a still-healthy paces.

Yet, the forward-looking indicators provided mixed news. Prospective shipments within the U.S. eased slightly (down from 88 to 87) but are still expected to grow relatively strongly. Similarly, export shipments also decelerated somewhat (down from 81 to 76). Overall, the data indicate that there is still room for improvement. The percentage of respondent companies that were operating at above 85 percent capacity dropped from 35.7 percent to 30.0 percent.

Overall, though, these data support the notion that manufacturing activity continues to improve, mirroring similar findings from other indicators. As reported last month, MAPI has a generally upbeat outlook for this year. They predict that manufacturing production will increase by 3.2 percent and 4.0 percent in 2014 and 2015, respectively, suggesting accelerating growth from the 2.6 percent pace of 2013.

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

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On MTB, the Time for Talk has Expired; Manufacturers Need Action NOW

A year ago today, House Ways and Means Chairman Dave Camp (R-MI) introduced Miscellaneous Tariff Bill (MTB) legislation, H.R. 2708, along with his colleagues, Representatives Sander Levin (D-MI), Devin Nunes (R-CA), and Charles Rangel (D-NY). Unfortunately, the House has not taken any further action on MTB legislation and neither has the Senate.

It has been 562 days since the 2010-passed MTB expired and manufacturers have been calling on Congress to extend it ever since. It is long past due time that both chambers of Congress act on critical MTB legislation. As a result of Congressional inaction on an MTB package, manufacturers in America have been facing higher taxes that substantially increase their production costs and concretely threaten their competitiveness as well as their ability to retain and create new manufacturing jobs for American workers.

While some members of Congress provide explanations as to their inaction, there is no excuse. The MTB passed in 2010 enjoyed broad bipartisan support and sailed through the House by a vote of 378-43 and the Senate by unanimous consent. If both chambers acted on this crucial jobs legislation today, we would expect a similar show of support from both sides of the aisle.

In response to inside-the-beltway concerns that MTB provisions resemble earmarks, even stalwart conservatives like Grover Norquist, President of Americans for Tax Reform, has emphasized the importance of passing the MTB, saying that MTB measures “are not spending bills; they are tax cuts, period….While earmarks favor only a special few, the tariff-cuts benefit wide swaths of American industry and help create U.S. jobs and economic growth.” Mr. Norquist aptly points out that, without Congressional action, “the United States is applying a tax that only makes it harder for American companies to compete with their foreign competitors – and harder for them to create or even maintain existing jobs and economic growth.”

Job creators like PING, Bayer, BASF, and Lasko Products cannot afford to wait any longer for this cost-cutting legislation to be enacted.  If Congress is serious about supporting manufacturing in the United States, they will move MTB legislation without further delay.

Members of Congress can call the MTB whatever they like, but for manufacturers, it is nothing less than a jobs bill and it is time that Congress act on it now to support American manufacturers and workers.

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Philly Fed: Manufacturing Activity Expanded at Fastest Pace in Over 3 Years

The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded at its fastest pace in over three years (March 2011). The Business Outlook Survey’s composite index of general business activity increased from 17.8 in June to 23.9 in July. The shift stemmed largely from a drop in the percentage of manufacturers in the Philly Fed district who said that conditions had worsened, down from 18.6 percent to 8.9 percent. This helped to push the overall diffusion index higher in July, with roughly one-third of the respondents noting improvements for the month in overall conditions.

The pace of new orders (up from 16.8 to 34.2) and shipments (up from 15.5 to 34.2) were both up significantly in this report. Hiring (up from 11.9 to 12.2) and the average employee workweek (up from 7.3 to 12.5) continued to move in the right direction. One downside was elevated costs for raw materials, with nearly 36 percent of those taking the survey saying that input costs were increased in the month.

Over the course of the next six months, manufacturers in Philly Fed district were overwhelmingly upbeat about future activity. In fact, 56.1 percent of survey respondents said that they anticipate increased sales, and 60.4 percent predict higher shipment levels. Moreover, even as the indices edged a bit lower in July, roughly one-third of those completing the survey said that they planned to add workers and over one-quarter were going to increase their capital expenditures in the next six months.

In a couple special questions, 38.6 percent of manufacturing respondents noted increased exports over the past year, with just 7.0 percent saying that they had moderate decreases. The region exported mainly intermediate products (39.6 percent), with final business products (24.5 percent), capital goods (18.9 percent) and final consumer products (11.3 percent) also important components.

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

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Housing Starts Were Unexpectedly Lower in June

The Census Bureau and the U.S. Department of Housing and Urban Development said that housing starts unexpectedly declined for the second straight month. Starts dropped from an annualized 985,000 in May to 893,000 in June. This was down from the faster pace of 1,063,000 in April; although, that figure appears to be a bit of an outlier. Excluding April, the average rate of new housing starts through the first half of 2014 was 930,600. Even with that in mind, June’s pace was disappointing and a sign that the housing market remains weaker than we would prefer.

Indeed, new housing starts were off for both single-family (down from 632,000 to 575,000) and multi-family (down from 353,000 to 318,000) units.The pace for single-family starts was the lowest level since November 2012, highlighting some persistent softness in the residential construction market so far this year. While the longer-term trend remains positive, single-family housing starts have fallen 4.3 percent over the past 12 months.

Meanwhile, housing permits data also fell, down from 1,005,000 units at the annual rate in May to 963,000 in June. Unlike the starts figures, however, there were some encouraging signs. Single-family permitting rose for the second straight month, up from 597,000 in April to 615,000 in May to 631,000 in June. This could suggest stronger growth in the housing market in the coming months for single-family homes. At the same time, multi-family units have been weaker, pulling the headline figure lower. Multi-family permitting dropped from 462,000 to 390,000 to 332,000 over the same three months, with the most recent pace being the slowest in 10 months.

Overall, June’s housing numbers were quite discouraging. There was optimism a couple months ago that residential activity was beginning to pick up after weakness since last summer, and the consensus expectation had been for housing starts to exceed one million again in June. Yet, the housing market continues to underperform through the first six months of this year. Financial difficulties in obtaining credit (particularly for first-time home buyers) and economic uncertainties remain obstacles for some. Still, I continue to predict housing starts of 1.1 million by year’s end, and we can put some hope in the single-family housing permits figures and the possibility of improved activity moving forward.

For its part, the Housing Market Index (HMI) from the National Association of Home Builders (NAHB) and Wells Fargo, released yesterday, suggested that builders were more upbeat of late. The HMI increased from 49 in June to 53 in July, the first time the index has surpassed the all-important threshold of 50 since January. When the HMI exceeds 50, it indicates that more home builders are positive than negative in their views of the market. More importantly, the index of single-family sales increased from 53 to 57, with expected sales over the next six months rising from 58 to 64.

As such, NAHB Chief Economist David Crowe was more positive in his assessments of the housing market, with recently better jobs numbers boosting sentiment. He said, “As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home.” Hopefully, this improvement in home builder confidence helps to foreshadow better sales in the months ahead.

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

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Taking a Global Stand Against Harmful Trade Barriers

Over the past quarter century, incredible technological advancements and innovation have increased manufacturing productivity and transformed industry’s ability to expand into the global marketplace.  As a result, since 1990, U.S. manufactured goods exports more than quadrupled, establishing the U.S. as an important and willing trade partner.

Reaching nearly $12 trillion in 2011, worldwide trade imports have risen rapidly. As more and more countries seek to leverage this opportunity for growth, important internationally agreed upon policies were put in place to ensure a fair and level playing field for all countries. Despite the global good achieved through open markets, some countries have chosen to close off their markets to any perceived foreign competition by mandating the manufacturing of certain materials and products within its own borders. These forced localization are extremely detrimental to trade and create unfair disparities since the countries which implement the policy often maintain open access to customers in the United States and many countries in Europe, Asia, South America and beyond.

In India for example, policies have been put in place which block U.S. manufacturers. These include retail investment caps which require stores to purchase from Indian producers and domestic manufacturing requirements for solar materials which mandate certain materials be manufactured within the country’s borders. Not only do these types of policies threaten U.S. jobs, but they also restrict Indian business and consumers’ access to the next generation of innovative technologies. Manufacturers have remained diligent in our call for a dialogue with India to discuss the best path forward to address these concerns and develop solutions that will support India’s economy and job growth. However, until the recent election of India’s new Prime Minister Narendra Modi, these calls have largely gone unanswered.

However, the protectionist policies adopted by India have already begun to proliferate rapidly across other developing nations and are threatening the very foundation of a successful global trade market.  Now more than ever, it is crucial that these concerns be shared on a global stage not only to protect U.S. manufacturers and the jobs they create, but to also ensure the integrity of global trade for the future.

To that end, in anticipation of the upcoming G-20 trade ministers meeting in Sydney, Australia on July 19,  the  NAM as well as industry associations from around the world representing a multitude of sectors  sent a letter urging the ministers to address the growing challenge of forced localization that is creating barriers to global trade among many of the G-20 partners. This letter signifies worldwide concern of this growing trend and the strong support of 21st century trade disciplines (such as within bilateral, plurilateral and multilateral forums) to counter such policies.

Unless policymakers raise forced localization policies as a global economic priority and agree to take united action to address it, the impact on the U.S. economy and economies across the globe will be substantial.

As the letter states, “members of the G20 must lead by example as they jointly represent about two-thirds of the world’s population, 85 per cent of global gross domestic product and over 75 per cent of global trade.”

The NAM stands ready to join these important policy discussions and advance solutions that will break down the barriers to trade and create a level playing field for all nations.

 

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Manufacturers Welcome Renewed U.S.-India Dialogue, Urge Concrete Results

Regular engagement on both common priorities and bilateral disputes is essential to build and sustain trust and constructive ties between any two countries, and that’s certainly true for the sometimes troubled relationship between India and the United States.

As NAM President and CEO Jay Timmons remarked at a recent event co-hosted by the Weekly Standard, “India and the United States won’t see eye to eye on every issue. That’s not unusual. It must, however, become normal in the U.S.–India relationship to talk about those differences and work through them, not avoid or ignore them.”

That’s why NAM was so pleased to see trade representatives from the United States visiting India this week to prepare for a meeting of the U.S.-India Trade Policy Forum, which has not met since 2010. These talks follow a high profile meeting between Indian Prime Minister Narendra Modi and U.S. Deputy Secretary of State William Burns and precede an expected meeting between President Obama and Prime Minister Modi in September.

There are reasons for optimism. Modi’s government is rightly focused on incentivizing foreign investment to drive growth, create jobs, cut government debt and improve the nation’s infrastructure. In his recent budget speech, Indian Finance Minister Arun Jaitley proposed raising foreign investment caps for defense and insurance to 49 percent and charted a better way forward on difficult tax matters.

Yet it remains to be seen how the Modi regime will deal with prohibitively high tariffs in the auto and textiles sectors and with forced localization policies imposed by the last government that are blocking trade in telecommunications solar power generation equipment. Recent decisions to deny patents and uphold compulsory licensing of cancer medications have the troubling look and feel of business as usual.

Resumption of long-dormant dialogues is an important and long-overdue step in the right direction. But for this partnership to succeed, both the United States and India must not only engage constructively, but also deliver concrete progress and real results toward a more open business climate that promotes competitiveness and values innovation.

With progress and results, manufacturers can contribute importantly to India’s policy goals and to a fresh start for the bilateral commercial partnership. We will be watching to see whether promising talk and early steps achieve outcomes that can grow businesses and jobs in both countries.

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Exporters for Ex-Im: Washington Company Makes Springs Tough Enough For U.S. Military With Help Of Ex-Im Bank

Renton Coil Spring produces high quality, precision springs and assemblies that are tough enough for the U.S. military, aerospace equipment and race cars.

The company, based in Renton, Wash., exports 40% of its products internationally, said Bob Newberry, Vice President of Sales and Engineering.

Renton Coil Spring is one of the thousands of small and mid-sized companies that uses the Ex-Im Bank to grow and keep jobs local. The Ex-Im Bank has supported 1.2 million U.S. jobs in the last five years and in 2013 returned $1 billion to the U.S. Treasury Department.

It’s up for reauthorization September 30th. If it isn’t reauthorized, then U.S. manufacturers like Renton Coil Spring will RENTON EMPLOYEESbe put at a disadvantage.

Mr. Newberry said the Ex-Im Bank “has helped us to grow these exports by enabling us to insure our exports and lower the risk of developing new foreign customers.”

He said some of the company’s products are so unique that no other business makes them.

“Our products are installed into prosthetic limbs in Iceland, mountain bikes in Chile, landing gear in China, Industrial equipment in India and Formula One cars in Italy,” he said.

“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 http://www.nam.org/Issues/Trade/Ex-Im-Bank.aspx

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Manufacturing Production Expanded More Slowly in June

Manufacturing production increased 0.1 percent in June, its slowest pace since January’s weather-induced decline. In general, manufacturers continue to expand upon the softness earlier in the year, with year-over-year growth of 3.5 percent in June, up from 1.5 percent in January. However, the year-over-year rate was slightly lower than the 3.7 percent pace experienced the month before. Similar trends were seen with manufacturing capacity utilization, which declined from 77.2 percent in May to 77.1 percent in June. While lower for the month, it still represented progress from the 75.5 percent rate seen in January.

In June, the sector-by-sector data were largely mixed, with durable goods output up 0.1 percent but nondurable goods production off by 0.3 percent. Sectors with the greatest monthly growth included furniture and related products (up 1.4 percent), fabricated metal products (up 1.2 percent), primary metals (up 1.2 percent), plastics and rubber products (up 1.2 percent), aerospace and miscellaneous transportation equipment (up 1.1 percent) and nonmetallic mineral products (up 1.0 percent).

In contrast, food, petroleum and coal products (down 2.7 percent); apparel and leather products (down 1.3 percent); beverage and tobacco products (down 0.6 percent); machinery (down 0.5 percent); and motor vehicles and parts (down 0.3 percent) had lower production in June.

On a year-over-year basis, durable goods production has risen by a healthy 5.5 percent in June, an increase from 5.4 percent observed in May. Nondurable goods activity was up a less robust 1.5 percent over the past 12 months, down from 2.1 percent the month before. The largest gains in production over the past year were seen in the following sectors: plastics and rubber products (up 7.5 percent), motor vehicles and parts (up 6.8 percent), fabricated metal products (up 6.2 percent), machinery (up 6.1 percent), furniture and related products (up 5.9 percent), primary metals (up 5.9 percent) and nonmetallic mineral products (up 5.8 percent).

Meanwhile, overall industrial production rose 0.2 percent in June, slower than the 0.5 percent increase in May. On a year-over-year basis, industrial production has grown 4.3 percent. Mining accounted for the largest jump in output, up 0.8 percent for the month and 9.7 percent year-over-year. Utility output declined for the fifth straight month, down 0.3 percent in June but up 1.8 percent year-over-year. Total capacity utilization was unchanged at 79.1 percent.

In conclusion, manufacturers continued to expand output, with the sector recovering from softness earlier in the year. Yet, growth slowed in June, and we would like to see improvements coming from a broader base of the manufacturing sector. In general, manufacturers are cautiously upbeat about production in the second half of this year, but for those projections to materialize, we need to see stronger growth in the U.S. and globally. For that reason, policymakers should focus on those initiatives which will keep the economy growing moving forward.

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

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