With consumers and businesses more confident, the U.S. economy continues to expand modestly. An improved – but still weaker-than-desired – jobs picture is part of that. The U.S. added 227,000 net new jobs in February, or 1.2 million in the past six months. Manufacturing has played a significant role in the recent rebound and since the end of the recession. In fact, over the past three months, manufacturers have added 111,000 new workers as overall activity has picked up. The manufacturing sector has contributed over 13 percent of all net new jobs created in the nonfarm economy since December 2010.

To be fair, the recent job gains in manufacturing have not been as broad-based as we might prefer. They have stemmed primarily from durable goods producing industries, with nondurables continuing to lag. This trend has been fairly consistent over the past two years, yet it would be nice to see greater employment gains across-the-board. Of course, this also mirrors industrial production data, with stronger growth tending to concentrate among the motor vehicle, aerospace, fabricated metals, machinery and primary metals sectors.

One of the larger threats to growth is a slower global economy. Mario Draghi, the European Central Bank president, announced a lower forecast for real GDP growth, with output slightly contracting for the continent as a whole this year. Meanwhile, other economies are also slowing. China, for instance, just cut its growth target to 7.5 percent. This slower growth shows up in the international trade figures released on Friday. Goods exports dropped in most regions of the world, including those to China and Europe. Increased imports of petroleum were another factor, with the overall trade deficit widening for the third consecutive month.

This week, we will gain further insights into the strength of the current rebound. New industrial production figures will be released on Friday, following regional survey data from New York and Philadelphia. The Federal Reserve Board will also announce on Tuesday whether or not it intends to pursue any new monetary policies. As always, the Fed will be mindful of inflation, and later in the week, the Bureau of Labor Statistics will issue updates on both consumer and producer prices. In addition to those releases, other highlights for the week include updates on consumer and small business sentiment, job market turnover and retail sales.  

Chad Moutray is chief economist, National Association of Manufacturers.

 Two narratives dominated last week’s economic discussion. First, as the Beige Book from the Federal Reserve Board stated, the economy “continued to increase at a modest to moderate pace in January and early February.” In his congressional testimony, Chairman Ben Bernanke was also quick to cite the important role that manufacturing has played in the recent rebound, with higher levels of activity reported in most areas of the country. Indeed, regional surveys from the Dallas and Richmond Federal Reserve Banks observed greater production activity and increased optimism for the next six months.

This upbeat assessment is shared by business economists at the National Association for Business Economics, who see a stronger outlook. Their consensus estimates for real GDP growth for this year and next are 2.4 percent and 2.8 percent, respectively. Adding to this sentiment, the Bureau of Economic Analysis (BEA) revised its estimates for fourth quarter 2011 growth up from 2.8 percent to 3 percent, led by increased consumer spending and business inventory accumulation. BEA also reported modest growth in personal income and spending for January, with strong gains in durable goods purchasing. Consumers, too, are more confident, according to the Conference Board, with their sentiments about the current and future economy at their highest level since this time last year.

In contrast to the more positive tone of many of these studies, the second narrative of last week focused on a series of indicators that unexpectedly declined. Most of us were anticipating growth for the Institute for Supply Management’s purchasing managers index, but it declined from 54.1 in January to 52.4 in February. This was led by a slower pace of growth for new orders, with production and employment also easing. Likewise, the Census Bureau reported reduced durable goods orders and construction spending in January.

In each of these cases, the longer-term trend remains a positive one and is in line with the first narrative. November and December figures were sharply higher, and so it might be expected to have some easing afterwards. Growth should resume in the coming months, especially as industrial production should grow around 4 percent this year. Even with that said, it is also clear that manufacturers are closely watching the events of Europe, once-again resurgent energy and raw material prices, and policy actions stemming from Washington. They remain cautious that one of these headwinds might derail growth, even with higher optimism overall.

This week, everyone will be focused on Friday’s jobs numbers. With 82,000 net new jobs created in the past two months, I anticipate continued improvements in employment for the sector, but perhaps not as large as were seen in November and December. Other key indicators of note include the release of revised productivity data on Wednesday and international trade findings on Friday.

Chad Moutray is chief economist, National Association of Manufacturers.

Exports of manufactured goods continued to dominate total U.S. exports in September, per the Commerce Department trade data released today.  Manufactured goods accounted for 80 percent of goods exports and nearly 60 percent of overall exports of goods and services in September.

Manufactured goods exports in September were $100 billion — 15 percent larger than in September 2010, exactly the growth rate needed to double in five years – the Administration’s export goal.  Manufactured goods imports in September were $140 billion — up 9.5 percent, considerably more slowly than exports. 

But because of the larger size of imports, the slower growth rate of imports generated about the same dollar increase as exports – so the manufactured goods trade deficit for September remained unchanged from a year ago, at $40 billion.

The important sector of capital goods, accounting for over 40 percent of manufactured goods exports, showed a warning flag. September capital goods exports were up 11 percent over the year-earlier period, a significantly slower growth rate than for overall manufactured goods. The slow economic growth of major U.S. customers, particularly in Europe, is holding back demand for machinery and other capital goods. In fact, 19 of the 32 capital goods categories showed export declines in September compared to last month.

On the import side, consumer goods imports registered much lower growth than in earlier periods, with September consumer goods imports up only 3.6 percent over September last year – reflecting the slow growth in U.S. consumer purchases.

The latest Commerce Department data for free trade agreement (FTA) partners shows they continue to be the brightest part of manufactured goods trade. The manufactured goods trade balance with FTA partners so far this year is on track to register a record surplus of $40 billion or more for 2011, compared to the huge deficit with countries that have not opened their markets to U.S. exports through free trade agreements.

Frank Vargo is vice president for international economic affairs, National Association of Manufacturers.

Commerce Department trade data released today show that overall U.S. exports of goods and services in July were up 15 percent over July 2010, still on track for doubling in five years.  However, this was due to a 30 percent increase in exports of industrial supplies and raw materials and a 22 percent increase in agricultural exports.

Manufactured goods, by far the largest U.S. export category, lagged behind, up 11 percent over July 2010.  Services exports also lagged, up 10 percent over last July.  Both of these vital categories of U.S. export have fallen below the 15 percent annual rate of growth path necessary for doubling in five years.

Capital goods exports, which comprise nearly half of manufactured goods exports, rose only 9 percent over last July. 

The slowing rates of growth for these important exports indicate that renewed attention is needed to spur U.S. export growth.  Importantly, greater access to foreign markets is needed, beginning with the need to pass and implement the three pending bilateral trade agreements with Colombia, Korea, and Panama.

The importance of bilateral agreements is evident in the Commerce Department’s figures www.trade.gov/fta  that show a large and rising U.S. trade surplus in manufactured goods.  That surplus has cumulated to over $20 billion for the first half of this year.

That surplus contrasts with the large manufactured goods deficit with the rest of the world.  For the first seven months of this year, the total manufactured goods deficit was $255 billion, up from $214 billion for the comparable period of 2010.

The U.S. deficit in petroleum and products was $194 billion for the first seven months of the year, compared to $157 for the first seven months of 2010.  This figure continues to underscores the urgency of taking additional steps to develop additional domestic sources of energy. 

Frank Vargo is vice president for international economic affairs, National Association of Manufacturers.