Tag: manufactured goods exports

Global Manufacturing Economic Update – April 11, 2014

Here is the summary for this month’s Global Manufacturing Economic Update:

In its latest World Economic Outlook, the International Monetary Fund (IMF) now predicts global GDP growth of 3.6 percent in 2014 and 3.9 percent in 2015. The forecast for this year was essentially unchanged from the outlook in October, and it suggests that the global economy continues to recover. Global growth in 2013 was 3.0 percent. The IMF projects U.S. growth of 2.8 percent this year and 3.0 percent next year, up from 1.9 percent last year. Europe is another area where the IMF sees progress this year—albeit quite modestly—with real GDP growth of 1.2 percent in 2014 and 1.5 percent in 2015, with the continent emerging from its deep two-year recession. Despite the slightly better data overall, the IMF worries about low inflation in advanced economies, structural challenges in emerging markets and geopolitical risks.

The IMF also notes that China’s economy continues to decelerate, with real GDP growth of 7.5 percent in 2014 and 7.3 percent in 2015. This is consistent with recent data, which show activity in the manufacturing sector slowing down. The HSBC China Manufacturing Purchasing Managers’ Index (PMI) has contracted for three straight months with falling levels of new orders and output. On the positive side, export sales appeared to pick up a bit in March. Next week, we will get new data for industrial production, fixed-asset investment and retail sales. Each has eased significantly in recent reports. Still, even with these slower rates, the outlook for China remains strong overall, and China has already begun to put stimulative measures in place to boost the economy further. As noted in the past report, the Bank of China has also supported a depreciation of the yuan in the past few months, but it asserts that its actions have been mainly to fend off speculators.

Weaknesses in China and Russia have also weighed heavily on manufacturing activity figures for emerging markets. The HSBC Emerging Markets Manufacturing PMI fell below 50 for the first time since July as demand and production stagnated. Nonetheless, outside of China and Russia, the picture for emerging markets was somewhat more positive. Several countries continued to experience modest growth rates, albeit with a slower pace than the month before in some cases. Two notable strengths among emerging markets hail from Eastern Europe. The Czech Republic and Poland continue to see strong growth in their manufacturing sectors despite some deceleration in March. For instance, the production index in the Czech Republic has now exceeded 60 for two straight months, a sign that output is experiencing healthy gains of late.

In all of Europe, manufacturers report slow-but-steady progress. The Markit Eurozone Manufacturing PMI has now expanded for nine consecutive months, an encouraging sign after the deep two-year recession. France, which had lagged behind many of its peers on the continent, had its manufacturing PMI figure exceed 50 for the first time since July 2011. However, overall economic growth remains modest. The unemployment rate continues to be elevated, even as it fell below 12 percent for the first time in 13 months. Weak income growth has caused many to worry about possible deflationary concerns. Annual inflation rates in the Eurozone have fallen from 1.7 percent in March 2013 to 0.5 percent in March 2014, and producer prices declined in February. Aware of these trends, the European Central Bank (ECB) held interest rates steady and said it was prepared to pursue quantitative easing, if necessary, to stimulate the economy further.

Meanwhile, the U.S. trade deficit widened in February due to a decrease in goods exports and an increase in service-sector imports. Manufactured goods exports in the first two months of 2014 were 0.6 percent lower than during the same time period last year, which was disappointing. Nonetheless, we continue to be optimistic that better economic growth rates abroad will lead to improvements on the export front. Fortunately, four of our top five markets for U.S.-manufactured goods notched year-to-date increases in the first two months relative to last year, including Mexico, China, Japan and Germany.

Efforts to move forward U.S.–European and Asian–Pacific negotiations continue, and the World Trade Organization (WTO) is heading to the next stage of implementing the recently completed Trade Facilitation Agreement. On the legislative side, Export-Import (Ex-Im) Bank reauthorization efforts continue, while manufacturers keep pressing for congressional action on key trade legislation, such as Trade Promotion Authority (TPA) and the Miscellaneous Tariff Bill (MTB).

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

eurozone inflation rates - apr2014

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Monday Economic Report – April 7, 2014

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

Manufacturers appear to be recovering from softness in the first two months of the year, mainly due to the number of severe winter storms. The Institute for Supply Management (ISM) reported that its Purchasing Managers’ Index (PMI) edged higher, up from 53.2 in February to 53.7 in March. Production began expanding again, with the pace of new orders and exports picking up slightly. Despite some degree of progress in March, sentiment remains lower than just a few months ago. PMI values averaged 56.3 in the second half of last year, with sales and output measures exceeding 60—indicating strong growth—each month from August to December.

Likewise, new factory orders increased 1.6 percent in February, partially offsetting the sharp declines in December and January. Beyond autos and aircraft, however, durable goods sales were just barely higher, suggesting more needs to be done for broader growth in the sector. Meanwhile, the Dallas Federal Reserve Bank’s manufacturing survey reflected a rebound in activity consistent with other Federal Reserve districts. Texas manufacturers remain positive about sales, output, hiring and capital spending moving forward. For example, more than half of respondents anticipate increased demand over the next six months. Still, some cited regulatory, pricing pressure, workforce and foreign competition concerns.

On the hiring front, Friday’s jobs numbers provided mixed news for manufacturers. The sector lost 1,000 workers in March, mainly due to declines in nondurable goods industries. This was particularly disappointing given consensus expectations that were closer to the ADP’s estimates, which had a gain of 5,000 workers for the month. Yet, revisions to January and February data provided some comfort, adding 15,000 more employees than original estimates. As a result, the longer-term trend for manufacturing did not change much despite March’s lower figure. Manufacturers have added more than 600,000 workers since the end of the recession, and since August, the sector has generated an average of 12,125 net new jobs per month. Another positive in this report was that the average number of hours worked and average compensation both rose, findings that mirror the rebound in overall activity.

Meanwhile, the latest international trade figures were also disappointing. The U.S. trade deficit widened from $39.28 billion in January to $42.30 billion in February. This was the highest deficit since September and the result of a decrease in goods exports and an increase in service-sector imports. Petroleum exports were also marginally lower. The numbers were particularly discouraging given that manufactured goods exports in January and February of this year were 0.6 percent lower than the first two months of last year. Still, outside of softness in our goods exports to Canada, the other top-five export markets for U.S.-manufactured goods registered increases year-to-date in 2014 relative to 2013. In addition, there remains cautious optimism that export sales will improve in the coming months.

This week, the focus will be on the release of the minutes from the March Federal Open Market Committee (FOMC) meeting. The minutes will provide additional insights on the internal debates that led the Federal Reserve Board to continue tapering but to also change its forward guidance for short-term interest rates. On Friday, the release of producer price data should continue to show that overall inflation remains minimal. Other highlights include the latest data on consumer confidence, job openings, small business optimism and wholesale trade.

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

ism pmi - apr2014

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U.S. Trade Deficit Widened Further in February

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit rose from $39.28 billion in January to $42.30 billion in February. This was the highest deficit since September, and it was the result of a decrease in goods exports (down from $133.75 billion to $131.72 billion) and an increase in service sector imports (up from $38.49 billion to $39.29 billion).

The increased goods trade deficit (up from $59.50 billion to $61.73 billion) was almost evenly distributed by petroleum and non-petroleum factors. Petroleum exports declined somewhat (down from $12.34 billion to $11.09 billion), but petroleum imports also decreased slightly (down from $31.68 billion to $31.03 billion).

Looking specifically at goods exports by sector, the February numbers were mostly lower. The exceptions were the consumer goods (up $1.19 billion) and automotive vehicles and parts (up $96 million) sectors. These gains were more than counterbalanced by lower export levels for industrial supplies and materials (down $2.67 billion), non-automotive capital goods (down $894 million), and foods, feeds and beverages (down $18 million).

Growth in manufactured goods exports continue to disappoint. Exports in the first two months of 2014 were $182.75 billion using non-seasonally adjusted data. This was down 0.6 percent from the $183.78 billion observed for January and February 2013. As such, it indicates that manufactured goods exports remain soft despite some economic progress abroad in recent months, continuing a trend that we saw last year.

In 2013, manufactured goods exports rose 2.4 percent, decelerating from the 5.7 percent annual growth rate observed in 2012. It is also well below the 15 percent rate that would be needed to double exports by 2015, as outlined in the President’s National Export Initiative. Hopefully, cautious optimism for better worldwide growth rates will produce improved manufactured goods exports moving forward.

On the positive side, goods exports to our five largest export trading partners were mostly higher year-to-date. For instance, Mexico (up from $35.61 billion to $37.50 billion), China (up from $18.69 billion to $20.24 billion), Japan (up from $10.18 billion to $10.88 billion), and Germany (up from $7.65 billion to $8.22 billion) all notched increases in exports in the first two months of this year relative to last year. The lone holdout was our largest trading partner, Canada (down from $46.35 billion to $46.15 billion), which had marginal declines.

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

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Global Manufacturing Economic Update – February 14, 2014

Here is the summary for this month’s Global Manufacturing Economic Update:

Worldwide equity markets have grappled with struggles in emerging markets in recent weeks, with some countries forced to defend their currencies by raising interest rates. Turkey, for instance, raised its key interest rate to as much as 12 percent to stem significant declines in its lira. Argentina, India, South Africa and other countries have taken similar moves. While many of these nations have suggested that the Federal Reserve’s polices have contributed to their current plight, recent events have exposed larger structural weaknesses in these countries that the Federal Reserve’s quantitative easing program might have camouflaged. Realizing that these challenges might be more isolated, global stock markets have recovered mostly of late.

For manufacturers, the latest data continue to show improvements in most major economies, including emerging markets. Some measures indicated a pullback to begin the new year, with the JPMorgan Global Manufacturing PMI down slightly from 53.0 in December to 52.9 in January. Yet, the larger story is that manufacturer sentiment has increased globally for 15 straight months, and several of our largest trading partners are experiencing multiyear highs. The Markit Eurozone Manufacturing PMI, for example, reflected the fastest pace of growth since May 2011, buoyed by strong gains in new orders and output in countries such as Germany, Italy and Spain. Even Greece had positive manufacturing activity for the first time since August 2009. France remains one of the few European countries that continues to struggle.

In all, nine of the top 10 markets for U.S.-manufactured goods had manufacturing PMI values greater than 50—the threshold for expansion. The one country where the manufacturing sector contracted in January was China. The HSBC China Manufacturing PMI dropped from 50.5 to 49.5, its lowest level in six months. However, we should not make too much of this decline, particularly if February’s data rebound. The measure for output continued to show modest growth, albeit at a slower pace. Moreover, real GDP in China grew 7.7 percent in the fourth quarter and for all of 2013, higher than the 7.5 percent rate in the third quarter. While Chinese economic growth has decelerated from past years, the country has shown improvements from mid-2013 and still continues to grow strongly.

Meanwhile, the U.S. trade deficit narrowed in 2013 overall, but it rose somewhat in December. Spurred energy production in the United States has helped the overall trade balance, with petroleum exports up and imports down for the year. Still, one of the more frustrating storylines of 2013 was the sluggish growth of manufactured goods exports, up just 2.4 percent for the year. This was below the 5.7 percent pace of 2013, and the disappointing increase remained true even with overall improvements in the global economy. Exports of manufactured products to South America and Europe were down 2.0 percent and 0.1 percent, respectively, with an easing in the growth rate of exports to our two largest trading partners—Canada (0.7 percent) and Mexico (5.1 percent). One of the brighter spots was China—defying conventional wisdom—with U.S.-manufactured goods exports up 18.4 percent in 2013. To be fair, however, the manufactured goods trade deficit with China remains large.

From the President’s remarks on Trade Promotion Authority (TPA) in his State of the Union address to hearings on the reauthorization of the Export-Import (Ex-Im) Bank, trade legislation is a prominent part of the discussion in our nation’s capital. Globally, U.S. negotiators will be seeking to make progress in the next rounds of the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (T-TIP) this month and next. India garners substantial attention from the Office of the United States Trade Representative (USTR) and business groups, while the sanctions agreement with Iran takes effect.

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

manufactured exports growth - feb2014

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Monday Economic Report – February 10, 2014

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

Hiring in the manufacturing sector continued to expand in January, averaging 15,500 per month since August. This uptick in employment for manufacturers has corresponded to the acceleration in product demand and production in the second half of 2013, with cautious optimism for 2014. However, the overall jobs numbers were disappointing for the second straight month. Nonfarm payrolls grew by just 75,000 and 113,000 in December and January, respectively, which was well below the consensus expectation of 175,000 and the 2013 average monthly gain of 193,500.

Some of the releases out last week show the negative impact that weather has had on activity. For instance, new factory orders declined 1.5 percent in December, with broad-based weaknesses in the durable goods sector pulling the data lower. Shipments were also down. Likewise, manufacturing construction spending fell 5.1 percent in December, which was notable because of a mostly upward trend from June to November. Overall construction activity edged marginally higher in December, boosted by strong residential construction activity, but nonresidential and public spending was down.

The Institute for Supply Management’s Purchasing Managers’ Index (PMI) report showed a considerable decline in manufacturing sentiment, down from 56.5 in December to 51.3 in January. The biggest declines were in new orders, output and employment, but the pace of export orders was off only slightly. The pace of export orders was off only slightly. This indicates that domestic factors were the main contributors of the decline.

Meanwhile, the U.S. trade deficit rose from $34.56 billion in November to $38.70 billion in December, but the deficit narrowed for 2013 as a whole. Petroleum was a major factor in the smaller trade deficit last year, with increased petroleum exports and fewer imports. Unfortunately, manufactured goods exports did not increase as much last year as we would have preferred, up just 2.4 percent in 2013 versus 5.7 percent in 2012. We hope stronger global economic growth will produce improved manufactured goods exports in 2014.

In other news, the Congressional Budget Office released its 10-year budget and economic outlook. The deficit will be $514 billion in fiscal year 2014, an improvement from the more than $1 trillion deficits in fiscal years 2009–2012 and the $680 billion deficit in fiscal year 2013. The report shows the growth of mandatory spending rising from $2.03 trillion in fiscal year 2013 to $3.74 trillion in fiscal year 2024. Because of this, federal deficits will start to rise again beginning in fiscal year 2017, with deficits exceeding $1 trillion in fiscal year 2022. With such facts, it should not be a surprise that 86.3 percent of manufacturers want policymakers to find a long-term federal budget deal that tackles the debt and deficit, including reining in entitlements.

This week, we will get new industrial production data on Friday. The last report showed manufacturing output rising at an annualized 4.2 percent rate in the second half of 2013, but we will see if the data show production easing somewhat in January due to weather or other factors. The consensus expectation is for modest output gains of roughly 0.3 percent. Other highlights will be the latest figures on consumer confidence, job openings, retail sales and small business optimism.

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

cbo entitlement spending - feb2014

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U.S. Trade Deficit Narrowed in 2013, but Rose Somewhat in December

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit rose from $34.56 billion in November to $38.70 billion in December. The drop stemmed entirely from a drop in good exports, down from $137.05 billion to $132.76 billion. Goods imports were essentially unchanged, up from $191.28 billion to $191.58 billion. Meanwhile, the service sector trade surplus increased somewhat, up from $19.68 billion to $20.12 billion.

Despite the higher trade deficit in December, it is notable that the deficit narrowed in 2013 as a whole. The average monthly trade deficit in 2013 was $39.29 billion, or $5.26 billion less than the $44.56 billion average observed in 2012. Behind this figure, the goods trade deficit declined from an average of $61.79 billion in 2012 to $58.60 billion in 2013, with the service sector trade surplus rising from $17.24 billion to $19.30 billion.

The decline in goods exports in December were primarily from non-petroleum factors. While the petroleum trade deficit increased slightly (up from $9.07 billion to $9.59 billion), the larger contributor to the higher total trade deficit stemmed from the non-petroleum trade deficit (up from $41.36 billion to $45.18 billion). With that said, one of the bigger trade stories of the past year has been the narrowing of the petroleum trade deficit, down from an average of $13.15 billion each month in 2012 to $11.00 billion in 2013. Increased exports and fewer imports of petroleum led to this result.

Looking specifically at the goods exports sector, the December numbers were mostly lower, as noted. There were reduced exports in the industrial supplies and materials (down $1.1 billion), non-automotive capital goods (down $1.1 billion), automotive vehicles and parts (down $769 million), and consumer goods (down $708 million) sectors. On the positive side, exports of foods, feeds and beverages increased by $364 million, mainly due to higher exports for soybeans and wheat.

Growth in manufactured goods exports was disappointingly slow last year. Manufactured goods exports totaled $1.183 trillion in 2013 using non-seasonally adjusted data. This was up just 1.6 percent from the $1.164 trillion observed in 2012. As such, it indicates that growth in manufactured goods exports remains soft, decelerating from the 5.7 percent growth rate observed through all of last year. It is well below the 15 percent rate that would be needed to double exports by 2015, as outlined in the President’s National Export Initiative.

Hopefully, stabilization in the global economy and cautious optimism for better worldwide growth rates in 2014 will produce improved manufactured goods exports moving forward.

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

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Global Manufacturing Economic Update – January 10, 2014

This is the summary for this month’s Global Manufacturing Economic Update:

As we begin 2014, the global economy appears poised to grow stronger than it did last year. For only the second time since we have prepared this report, all top 10 markets for U.S.-manufactured goods were expanding, with Purchasing Managers’ Index (PMI) readings greater than 50. (The other time was last October) As recently as September, just six of these nations were growing. Such progress suggests that weaknesses experienced over the summer months have begun to dissipate, and indeed, we have seen stabilization in both China and Europe since then.

The U.S. manufacturing sector has also begun to pick up, with sales and production accelerating from the third quarter forward. Moreover, the budget deal passed in December and negotiated by Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI) hopefully will avoid a potential government shutdown until the fall of 2015—something that has helped ease some anxieties in the business community. Christine Lagarde, managing director of the International Monetary Fund (IMF), has said that the improved outlook in the United States will allow the fund to revise its global growth prospects. In contrast, the IMF had downgraded its estimates for worldwide growth in the midst of October’s budget impasse. At that time, it predicted 3.6 percent growth in world output for 2014, down from 3.8 percent in its summer forecast. The IMF will release its next World Economic Outlook by the end of January.

Despite progress on the international economic front, exports of U.S.-manufactured goods have continued to grow very slowly. Through the first 11 months of 2013, manufactured goods exports have risen just 2.0 percent relative to the same time frame in 2012. This represents a deceleration from the 5.7 percent annual pace for 2012 and the roughly 15 percent required to meet President Obama’s National Export Initiative goals. Goods exports to Europe fell from 2012 to 2013, and we saw some easing in many other key markets as well. One of the brighter spots was goods exports to China, even as we continue to have a large trade deficit with that country.

We hope the better global growth will yield improvements for U.S.-manufactured exports in 2014. Many markets ended the year with manufacturing activity on a positive note. The Markit Eurozone Manufacturing PMI rose from 51.6 in November to 52.7 in December, expanding for the sixth consecutive month and reaching a level not seen since May 2011. While growth in Europe still has much room for improvement, it is clear that its emergence from the continent’s deep two-year recession has had a positive impact on overall sentiment. Likewise, manufacturing activity was generally higher in Asia and the emerging markets, even as the pace of growth in many of these economies eased a bit in December. For instance, the HSBC China Manufacturing PMI decreased from 50.8 to 50.5, but more importantly, activity has now risen modestly in the country for five straight months.

Our two largest trading partners have also made progress in recent months. While the RBC Canadian Manufacturing PMI fell from 55.3 to 53.5, manufacturers in Canada have reported steady improvements in activity since contracting briefly in March. Similar to the United States, the Canadian economy has picked up, with real GDP rising from 1.6 percent at the annual rate in the second quarter to 2.7 percent in the third quarter. Manufacturing capacity utilization rose to 80.5 percent in the third quarter, which was better than the 79.9 percent rate in the second quarter (but still below the 81.7 percent rate one year ago). Meanwhile, manufacturing activity in Mexico has risen for the fifth straight month, with stronger sales and production in December. Nonetheless, Mexican growth continues to climb quite slowly, with real GDP up just 1.6 percent in the second quarter and 1.3 percent in the third quarter.

Legislatively, House and Senate trade champions moved forward this week on new trade promotion authority (TPA) legislation, while trade negotiations in the Asia-Pacific region and with Europe continue to move forward.

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

emerging markets PMI - jan2014

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U.S. Trade Deficit Fell Sharply in November to its Lowest Level in Over 4 Years

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit fell sharply from $39.33 billion in October to $34.25 billion in November. This was the smallest deficit observed since August 2009, and it was the result of rising goods exports and, more particularly, a decline in goods imports for the month. Goods exports increased from $135.61 billion to $137.07 billion (an all-time high). At the same time, goods imports dropped from $194.45 billion to $191.00 billion.

A fair share of the improved trade balance in November came from lower petroleum imports, which declined from $32.09 billion to $28.49 billion. Not surprisingly, this corresponded with reduced petroleum prices. The average cost of one barrel of West Texas intermediate crude oil decreased from $106.29 in September to $100.54 in October to $93.86 in November.

In terms of goods exports, major sectors with the largest gains in November were industrial supplies (up $707 million), non-automotive capital goods (up $336 million), and automotive vehicles and parts (up $141 million). These were somewhat offset, though, by declining exports for consumer goods (down $515 million) and foods, feeds, and beverages (down $124 million).

One consistent theme in the international trade data in 2013 has been the frustrating pace of growth for manufactured goods exports. Manufacturers exported $1.086 trillion in goods through the first 11 months of the year, a 2.0 percent increase over the $1.065 trillion exported during the same time frame in 2012. As such, there has been a clear deceleration in manufactured goods export growth, down from the 5.7 percent annual gains of 2012 and the roughly 15 percent required to meet the President’s National Export Initiative goals.

Goods exports to Europe remain lower year-to-date in 2013 relative to 2012, down from $243.74 billion through the first 11 months of 2012 to $241.40 billion in 2013. On the positive side, goods exports with Canada (up from $270.29 billion to $277.04 billion), Mexico ($277.04 billion), and China (up from $100.17 billion to $108.93 billion) have increased. Nonetheless, these gains with our three largest trading partners have been more modest than we might prefer.

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

 

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Global Manufacturing Economic Update – December 13, 2013

Here is the summary for this month’s Global Manufacturing Economic Update:

The Organisation for Economic Co-operation and Development (OECD) says that world trade should rebound next year, with growth increasing from its annual pace of 3.7 percent in 2013 to 5.5 percent in 2014. The OECD also forecasts improvements in real GDP for the United States (up from 1.7 percent to 2.9 percent), Europe (up from -0.4 percent to 1.0 percent) and China (up from 7.7 percent to 8.2 percent). Despite such gains, weaknesses persist in emerging markets, and continued political risks could dampen the prospects for better growth.

The prospects for faster global growth should help drive more manufacturing exports in the coming months. The U.S. trade deficit narrowed in October, averaging $40.2 billion through the first 10 months of 2013. That is lower than the $46.4 billion and $44.6 billion deficits in 2011 and 2012, respectively. Yet, growth in U.S.-manufactured goods continues to be frustratingly slow so far this year, up just 1.9 percent year-to-date relative to the same time period last year. Such a sluggish rate will make it hard to meet the President’s goal of doubling exports by 2015, as outlined in the National Export Initiative. Yet, we hope export sales will improve in 2014, especially with stabilizing economies in our largest international markets.

The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) rose to its highest level in more than two years, up from 52.1 in October to 53.2 in November. The key drivers of the increased activity were higher levels for new orders (up from 53.3 to 54.8), exports (up from 51.9 to 52.8) and output (up from 52.9 to 55.3). With the exception of Brazil, all of the other top 10 markets for U.S.-manufactured goods expanded in November. This is an improvement from September, when only six of these economies were growing. The recent progress worldwide has produced notable strides in manufacturing activity for a number of countries, with many reaching PMI levels not seen in several months or even several years. For instance, Japan’s manufacturing PMI reported new orders up at their fastest pace since February 2006. Such data are indicative of the recent gains in the global market, which, while not growing robustly, have made progress of late.

Meanwhile, we are often reminded that we live in an ever-increasing global marketplace, with China’s influence continuing to grow. Last week, we got another example of this. The Society for Worldwide Interbank Financial Telecommunication reported that the Chinese yuan has overtaken the euro as the second-most used currency for foreign trade transactions. In October, the yuan was used 8.66 percent of the time in such transactions, up from just 1.89 percent in January 2012. This suggests a substantial increase in the use of the yuan in trade in a very short period of time. The U.S. dollar continues to be the dominant currency used in trade finance, with parties using the dollar 81.08 percent of the time. However, it does illustrate the changing nature of international commerce and the rising stature of China on the trade front.

Much of the policy news recently has focused on trade negotiations and global competitiveness. While the World Trade Organization (WTO) reached a Trade Facilitation Agreement in Bali, other negotiations with the Asia-Pacific, with Europe and separately on information technology will continue into 2014. Preparations are also underway for major legislative activity in 2014, including on Trade Promotion Authority (TPA), reauthorization of the Export-Import (Ex-Im) Bank and international tax reform.

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

global pmi values - dec2013

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Monday Economic Report – December 9, 2013

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

The Federal Reserve Board’s Beige Book, released last week, suggested that the U.S. economy was expanding at a modest to moderate pace nationally. Other data were even more encouraging, including strong numbers for economic growth, manufacturing activity and overall hiring. For instance, the Bureau of Economic Analysis reported that real GDP increased by 3.6 percent during the third quarter, up from its previous estimate of 2.8 percent. This was the fastest pace of growth since the first quarter of 2012. One drawback in the report was that much of the increase stemmed from the restocking of inventories—something that will likely not be replicated in the current quarter. Yet, consumer and business spending also made significant contributions to the economy, with relatively healthy gains for goods exports and improvements in the financial positions of state and local governments.

The stronger domestic and global economy has helped buoy the manufacturing sector, with stronger sales and output seen since the beginning of the third quarter. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) has soared to 57.3, its highest point since April 2011. This was the fourth straight month with the new orders index greater than 60.0, indicating very robust growth in sales. More importantly, export orders also had healthy increases, up from 57.0 to 59.5. With manufactured goods exports up only 1.9 percent year-to-date, the fact that our overseas sales were beginning to pick up was welcome news. Overall, the ISM report—while much more optimistic than other sentiment surveys—mirrors the mostly upbeat outlook within the sector. Yet, sample comments also note downside risks associated with government uncertainty—a lingering issue that has dampened demand on and off over the past few years.

Friday’s jobs numbers were another boost for the U.S. economy. Manufacturers added 27,000 net new workers in November, the most in any month since March 2012. Moreover, it appears that businesses have begun to accelerate their hiring in recent months. The average monthly job gain over the past four months (August to November) was 16,500, a definite sign of progress from the average decline of 8,000 in the five months prior to that (March to July). A similar pattern exists for nonfarm payroll workers, with the average over the past four months jumping to 204,000. The unemployment rate fell to 7.0 percent in November, a rate not seen since November 2008. Yet, despite the strong employment gains, hiring plans remain mostly modest at best over the next year, and manufacturers have accounted for just 3.3 percent of the net new job gains over the past 12 months.

Consumers have seen their spirits lifted recently, particularly as we move further away from the government shutdown. Preliminary data from the University of Michigan and Thomson Reuters indicate that consumer confidence has returned to where it was before the budget impasse, even as lingering anxieties persist. (Sentiment remains lower than it was over the summer.) As their attitudes about the economy have improved, Americans have also opened their wallets, albeit somewhat tepidly. Personal spending rose modestly in October, with higher purchases for both durable and nondurable goods. Perhaps more timely, “Cyber Monday” retail sales set a new record, even as overall spending gains have been mixed for the holidays.

Today, we will release the results of the latest NAM/IndustryWeek Survey of Manufacturers. The report captures the mixed nature of the current economic landscape, which is both hopeful and cautious at the same time. The percentage of respondents who were positive about their own company’s outlook continued to edge higher, up from 76.1 percent in September to 78.1 percent in December. Yet, many subcomponents reflected some easing in activity expected over the next year. For example, respondents now anticipate sales growth of 3.0 percent in the next 12 months, down from 3.3 percent in September’s survey. Nonetheless, the report also found that manufacturing production should accelerate over the next two quarters, with the rising stock market and rebounding housing market helping to drive these estimates higher. The NAM/IndustryWeek survey also includes a number of special questions on the Affordable Care Act and the ongoing budget negotiations.

Other economic reports out this week include the latest numbers for job openings, producer prices, retail sales, small business confidence and wholesale trade.

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

contributions to real gdp - dec2013

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