Tag: investment

MAPI: Manufacturing Activity Expanded at a Slightly Slower Pace in October

The Manufacturers Alliance for Productivity and Innovation (MAPI) Foundation said that its Composite Business Outlook Index dropped from 71 in July to 67 in October. Despite the decline, manufacturing activity remained quite strong, with index readings over 50 indicating expansion. Indeed, the pace of new orders was unchanged (78) at a healthy rate of growth in the fourth quarter report, continuing to reflect improvements from six months ago (71).

Still, several of the key indicators eased in this survey. This included export orders (down from 67 to 65), the orders backlog (down from 72 to 69), prospective U.S. shipments (down from 87 to 83) and prospective foreign shipments (down from 76 to 72). Each of these readings, however, continues to reflect both strong growth.

In contrast, there were some areas of weakness to note. The percentage of respondents operating above 85 percent capacity dropped from 30.0 percent in July to 26.7 percent in October. Expected business investments also slowed considerably in this survey, with 2015 U.S. investment spending nearly just barely above 2014’s pace (down from 67 to 52) whereas foreign investment activity was expected to decline next year relative to this year (down from 64 to 48). On the other hand, the rate of R&D spending was expected to accelerate slightly (up from 67 to 70).

Overall, these data support the notion that manufacturing activity continues to improve, mirroring similar findings from other indicators. The MAPI Foundation has a generally upbeat outlook for the coming months. They predict that manufacturing production will increase by 3.4 percent and 4.0 percent in 2014 and 2015, respectively.

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

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Manufacturing Construction Spending Rose 1.5 Percent in August

The Census Bureau said that manufacturing construction spending rose 1.5 percent in August, increasing for the fifth straight month. Manufacturers have continued to edge their construction dollars higher since bottoming out at $46.84 billion at the annual rate in March. Manufacturing construction rose from $55.47 billion in July to $56.31 billion in August, with year-over-year growth of 14.9 percent. This indicates that manufacturers are stepping up their investments in new structures, which is consistent with the recent pickup in demand and output.

Meanwhile, total construction spending fell 0.8 percent in August, pulling back from the 1.2 percent gain observed in July. Both private and public sector spending were lower for the month, down 0.8 percent and 0.9 percent, respectively. Private, nonresidential construction activity was off 1.4 percent. In addition to manufacturing, other areas with higher levels of spending in August were communication (up 3.6 percent), educational (up 1.4 percent), religious (up 0.9 percent) and lodging (up 0.4 percent) projects. However, these were offset by declines for power (down 3.9 percent), amusement and recreation (down 3.7 percent), commercial (down 3.5 percent), and transportation (down 2.0 percent) firms, among others.

It should be noted that the year-over-year data for private, nonresidential construction spending, which has risen 9.2 percent over the past 12 months. The top five areas for growth in the past year were office (up 18.6 percent), power (up 17.2 percent), manufacturing (up 14.9 percent), commercial (up 10.2 percent) and lodging (up 9.7 percent) construction projects.

Public, nonresidential construction spending was off 1.0 percent for the month but has increased 2.3 percent over the past 12 months. Some bright spots at the public sector level year-over-year include office (up 20.2 percent), conservation and development (up 18.3 percent), amusement and recreation (up 16.2 percent), power (up 9.9 percent), sewage and waste disposal (up 4.7 percent), transportation (up 3.2 percent) and educational (up 2.9 percent) endeavors.

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

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Toyota Will Boost Production in U.S. and Create More Jobs

Today Toyota Motor Manufacturing announced that the company plans to begin manufacturing the Lexus ES 350 in Kentucky. Production will take place at the company’s Georgetown plant and will create 750 new jobs. The company is investing $360 million in the facility and will start producing vehicles in 2015. This will be the first time Toyota has manufactured Lexus vehicles in the United States.

This is positive news for manufacturing in the United States and also shows the benefits of direct foreign investment for job creation. One of the top goals of the NAM which is laid out in our Growth Agenda is to make the United States the best place in the world to manufacture and attract direct foreign investment.

Just yesterday the NAM’s Vice President of International Economic Affairs Linda Dempsey testified before the House Energy & Commerce Subcommittee on Commerce, Manufacturing and Trade hearing about global investment in America. She discussed the economic impact of foreign investment on manufacturing in the United States.

“Foreign Direct Investment (FDI) plays a critical role in manufacturing. Based on data from the Commerce Department’s Bureau of Economic Analysis, FDI inflows in manufacturing equaled nearly $83.4 billion in 2012, accounting for almost 50 percent of total FDI inflows. FDI in manufacturing has shown substantial growth since 2003 and is showing a rebound from the weakness in 2008 and 2009. About 95 percent of all FDI in the United States comes from developed countries, starting with the United Kingdom. While the share fluctuates yearly, a substantial portion of such investment since 2005 has been in the manufacturing sector. The most recent data from 2012, which are still preliminary, show that FDI in manufacturing accounts for nearly 50 percent of total FDI that year.”

With the global competition growing there is clearly more room for growth in FDI. It currently remains 20 percent more expensive to manufacture in the United States compared to our largest trading partners.  To make America the best place for foreign direct investment policymakers must move forward with pro-growth policies laid out in the NAM’s Growth Agenda.

 

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Manufacturing Construction Spending Was Lower in November

The Census Bureau said that construction spending decreased 0.3 percent in November, its first decline since March. The decrease was largely due to lower levels of activity in the nonresidential sector, which decreased 0.7 percent and was negative four of the past six months. With businesses anxious about the impending fiscal cliff and tighter government budgets dampening public sector spending, nonresidential activity has been soft at best for much of the second half of 2012.

This has definitely been true in the manufacturing sector, which had seen its construction spending levels fall 2.0 percent since September. With at least some of the uncertainties surrounding the fiscal cliff over, I would expect for these figures to improve moving into 2013 if sales improve and the global economic environment stabilizes.  As a sign that manufacturers have been willing to invest for the future, increased construction spending earlier in the year helped to push up year-over-year activity by 5.1 percent.

Looking specifically at the November numbers, the one bright spot was the residential sector, with construction spending up 0.4 percent for the month and private sector housing activity up 19.0 percent since November 2011. On the private sector nonresidential side, construction was down across-the-board, with only transportation and communications sector activity higher.

Public sector nonresidential spending was off 0.5 percent, but it was more mixed. Sectors with increased public sector activity included commercial, power, sewage and waste disposal, highway and street, and transportation projects. The largest monthly declines were in conservation and development, amusement and recreation, office, water supply, and public safety projects.

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

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More Evidence in Favor of Keeping Tax Rates Low on Investment

As each day goes by, manufacturers across the country are eyeing ever more warily the “perfect storm” of tax increases that will take effect at the end of this year if Congress doesn’t act to stop them. The need to extend one particular tax benefit – which reduced and paired the tax rate on savings and investment – in current law is highlighted in a new study released today by the Alliance for Savings and Investment. This coalition of dividend paying companies, investor organizations and trade associations – including the NAM – fights for a continuation of these policies that promote economic growth and job creation by fostering private savings and investment. In a nutshell the study finds that:

Taking into account both the corporate and investor level taxes on corporate profits and state level taxes, the United States has among the highest integrated tax rates among developed countries and these integrated tax rates will rise sharply in 2013:

  • The current top US integrated dividend tax rate of 50.8 percent will rise to 68.6 percent in 2013, significantly higher than in all other OECD and BRIC countries.
  • The current top US integrated capital gains tax rate of 50.8 percent will rise to 56.7 percent in 2013, the second highest among OECD and BRIC countries.

The reduced tax rate on capital gains and dividends was enacted in 2003 as part of an effort to reduce the burden of double taxation on corporate profits while also synchronizing the tax rates on dividends and capital gains in an effort to eliminate any bias for one type of investment over another.

Although obvious to the astute observer, it is essential that in this debate – and in any debate about corporate tax policy – one remember that capital is more mobile in today’s world than ever before and tax policy can go a long way to influence decision making of investors both on the individual and the institutional level.

The NAM has long held that an important objective of long-term tax policy is to maintain competitive tax rates that are low enough to attract the capital formation and investment necessary to ensure durable economic growth – making permanent the synchronized, lower rates on capital gains and dividends is essential to that task.

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Circumnetting Manufacturing and the Economy

John Engler, president of the National Association of Manufacturers, explains how important passage of the Miscellaneous Tariff Bill was to manufacturers in the United States and urges President Obama to sign the bill quickly. From The Pittsburgh Post-Gazette, “Manufacturing needs law suspending tariffs“: “Studies show that if enacted, these provisions would increase production by $4.6 billion and support almost 90,000 jobs. Without these tariff reductions, the cost of manufacturers’ products will inevitably increase, forcing them to pass higher costs on to consumers and making their products less competitive.”

Donald Lambro of Human Events, interviews business leaders including Engler about what policies are necessary to revive the U.S. economy. The main piece is “Obama’s Economic Faux Pas Finally Recognized,” and Lambro’s blog post, “Business Leaders Explain How to Create Jobs” reviews the policies recommended by Engler, Frederick W. Smith, chairman and chief executive of Fedex Corp., the National Association of Wholesalers and Distributors, U.S. Chamber Of Commerce, National Federation of Independent Business, Lawrence Kudlow, Wall Street economist and CNBC business analyst, and Arthur B. Laffer, chairman of Laffer Associates.

Larry Kudlow, National Review Online
, “The Washington War on Investment“: “Geithner tries to make a deficit-reduction argument, saying that extending tax cuts for the wealthy will cost $700 billion over the next ten years. But the real debate in advance of the Erskine Bowles deficit commission, which will restructure budget and tax reform, is about a one-year extension of the Bush tax cuts. That’s priced at $30 billion by the White House, about the same as the new bill to aid state and local governments. Which policy would help growth more?”

Thomas F. Siems, senior economist at the Federal Reserve Bank of Dallas, Wall Street Journal, “Government and the Uncertainty Trap“: “Consumers, investors and business leaders are nervous and uncertain regarding the economic outlook, the legislation newly passed and proposed, and how federal, state and local governments will manage public finances. This uncertainty is inhibiting spending and investment and leading to slower economic growth. In short, there is a crisis of confidence in America.”

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