Tag: manufactured goods exports

Global Manufacturing Economic Update – July 11, 2014

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

The global economy improved slightly in June, showing some signs of stabilization from weaknesses in prior months. The J.P. Morgan Global Manufacturing Purchasing Managers’ Index (PMI) increased from 52.1 in May to 52.7 in June, its fastest pace since February. Various measures of activity were mostly higher, including new orders, production and employment. Behind this figure, the data also reflected economic progress in countries such as China, Hong Kong and Japan, each of which shifted from a contraction in May to slight growth in June. As a result, just 2 of the top 10 markets for U.S.-manufactured goods had PMI values below 50 in June, an improvement from the five that registered contracting levels in May. Our largest trading partner’s values, the RBC Canadian Manufacturing PMI, increased from 52.2 to 53.5, reaching its highest point since December.

Europe dominated economic headlines on July 10, with worries about a large Portuguese bank and falling industrial production figures for France (down 1.7 percent), Germany (down 1.8 percent) and Italy (down 1.2 percent). Indeed, European growth has continued to ease, with the Markit European Manufacturing PMI down from 52.2 to 51.8. On the positive side, manufacturing activity has now expanded for 12 straight months, but the economy in the Eurozone remains subpar overall. Real GDP was up just 0.2 percent in the first quarter and is expected to increase around 1 percent in 2014 as a whole. Still, growth varied widely from country to country. France sits on one end of the spectrum, with manufacturing sentiment worsening and falling to a six-month low. Meanwhile, Ireland and Spain experienced multiyear highs for sales growth, and new orders in the United Kingdom expanded rather robustly (up from 59.5 to 61.0).

In the emerging markets, manufacturers in Brazil, Russia, South Korea and Turkey reported contracting levels of activity in June, although Russian production grew for the first time in six months and South Korean exports began to stabilize. Overall, however, manufacturing activity in the emerging markets expanded for the second straight month, spurred higher by better news in some Asian economies. Stronger sales and output resulted in increased manufacturing PMI data for China, India, Indonesia and Taiwan. India also benefited from greater export growth. Next week, we will get new data on Chinese GDP, industrial production, fixed-asset investment and retail sales. Real GDP is expected to pick up slightly, from the 7.4 percent annualized growth rate experienced in the first quarter, with a consensus estimate of around 7.5 percent. While this is a marginal improvement, it also continues to reflect decelerating rates of growth from what was experienced in the past.

Looking at U.S. trade flows, petroleum helped to narrow the U.S. trade deficit in May, with more exports and fewer imports improving the headline figure. This continues a trend seen over the past few years whereby improved energy production in the United States has slightly helped balance the trade picture. Outside of petroleum, the numbers were less favorable. The average monthly deficit so far in 2014 reached $43.65 billion, higher than the $39.70 billion average for all of 2013. In addition, U.S.-manufactured goods exports continue to grow at a disappointing rate, up just 0.5 percent year-to-date versus this time last year using non-seasonally adjusted data. Nonetheless, exports of manufactured goods increased to all five of our largest trading partners through the first five months of this year: Canada, Mexico, China, Japan and Germany. That is an encouraging sign, even if we would like to see faster growth in our international sales overall.

On the policy front, the congressional debate on reauthorization of the Export-Import (Ex-Im) Bank continues to move forward, while action on other trade legislation is currently stalled. The World Trade Organization (WTO) officially began environmental goods negotiations, while both the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (T-TIP) continue. The U.S. trading relationship with key partners, including India, China and Russia, continues to be a focus.

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

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Monday Economic Report – June 9, 2014

Here are the files for this week’s Monday Economic Report:

The latest NAM/IndustryWeek Survey of Manufacturers—being released today—found that roughly 86 percent of manufacturers were either somewhat or very positive about their own company’s outlook, essentially unchanged from three months ago. Yet, the underlying data show higher levels of anticipated activity across the board over the next 12 months. For instance, sales are expected to grow 4.1 percent on average over the next year, up from an average of 3.6 percent in the last survey and the fastest pace in two years. Capital spending and hiring plans were also anticipated to increase, with almost half of respondents planning to add workers in the coming months.

Nonetheless, the survey also found that manufacturers remain frustrated with the slower-than-expected pace of economic growth this year and with the political process. The top challenges continue to be health care costs, the tax and regulatory environment and the skills gap. Along those lines, the Federal Reserve’s Beige Book reported that manufacturing activity expanded across the country in its analysis, with rebounds noted in many of its districts. In addition, several businesses are having difficulty finding skilled workers, a challenge that has concerned manufacturers for some time. For instance, a recent study from Accenture and the Manufacturing Institute found that more than 75 percent of manufacturers have a moderate to severe shortage of skilled resources.

Several data releases last week support the view that the economy is rebounding. For instance, the number of nonfarm payroll workers rose by 217,000 in May, with an average of 231,000 over the past four months. This helped push nonfarm payrolls over its pre-recessionary levels for the first time—a feat that took roughly five years. The news for manufacturers was more mixed. While manufacturing has averaged just shy of 12,000 additional workers per month since August, the pace has slowed this year, and May’s 10,000-worker gain stemmed mainly from durable goods firms. We would like to see broader-based job increases in the sector moving forward, with monthly hiring growth between 15,000 and 20,000 on average.

Meanwhile, the Institute for Supply Management’s Purchasing Managers’ Index (PMI) has risen each month since January, up from 54.9 in April to 55.5 in May. The data were mostly positive, with higher levels for both new orders (up from 55.1 to 56.9) and production (up from 55.7 to 61.0). The output index exceeded 60—signifying strong monthly gains—for the first time since December. At the same time, new factory orders increased for the third straight month, up 0.7 percent in April and building on healthy figures for both February and March. This release was another sign of recovery in manufacturing sales after weather-related softness in December and January. Yet, the underlying data also indicated some weaknesses beyond defense capital goods spending. Excluding defense, new durable goods orders would have shrank by 0.1 percent for the month. As such, there is room for improvement even with the recent rebound in activity.

While total construction spending increased for the third straight month, manufacturing construction declined 1.1 percent in April, and it has been down slightly since December. Still, the longer-term trend remains more encouraging, up 7.3 percent year-over-year. On the trade front, manufactured goods exports have seen marginal gains so far in the early months of 2014 relative to 2013, but we have seen increased exports in each of the top-five export markets so far this year. Still, export growth has been disappointing of late, and due to a significant increase in goods imports in April, the trade deficit rose to its highest level in 12 months. One positive continues to be energy, with the petroleum trade deficit narrowing on increased exports and fewer imports.

This week, we will get new data releases for consumer confidence, job openings, producer prices, retail trade and small business sentiment. In particular, we will see if Americans are becoming more confident and if the rebound will translate into increased purchasing. The expectation is that May retail sales will bounce back from slower April numbers. Regarding inflation, producer prices in April were higher mainly due to increased costs for food—namely, meat, eggs and dairy products. Energy costs were also up a bit. Analysts will be looking to see if core inflation creeps ever closer to the Federal Reserve’s 2 percent goal, which is anticipated.

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

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U.S. Trade Deficit Widened to its Highest Level in Two Years

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit widened from $44.18 billion in March to $47.24 billion in April, its highest level since April 2012. The trade deficit has edged higher each month since November, when it hit a four-year low of $35.97 billion. Over that time frame, we have seen goods imports rise from $191.52 billion to $200.90 billion, essentially explaining much of the shift over the past five months. At the same time, goods exports declined slightly from $136.75 billion in November to $135.11 billion in April.

The goods trade deficit increased from $62.52 billion in March to $65.79 billion in April. This was due to mainly non-petroleum forces, as the petroleum trade deficit narrowed from $19.03 billion to $18.00 billion. Petroleum exports rose by $355 million in the month, with petroleum imports declining by $666 million. This continues a trend seen over the past couple years whereby improved energy production in the U.S. has slightly helped the trade balance picture.

Looking specifically at goods exports by sector, there were declining levels of exports for non-automotive capital goods (down $303 million); foods, feeds and beverages (down $262 million); automotive vehicles and parts (down $173 million); and consumer goods (down $87 million). The one major area with export growth in April was industrial supplies and materials (up $237 million), boosted by fuel oil (up $632 million), organic chemicals (up $343 million) and natural gas (up $128 million).

Meanwhile, year-to-date growth in manufactured goods exports increased from $384.70 billion in 2013 to $385.79 billion (using non-seasonally adjusted data), or a gain of 0.3 percent. As such, export growth for manufacturers continues to be lower than desired, with weaker global economic activity impacting our ability to grow international sales. (Note that using seasonally-adjusted data from Trade Stats Express, manufactured goods exports growth was slightly higher for the first quarter of 2014, up 1.1 percent over last year, but still disappointing.)

Still, we have seen increased exports in each of our top 5 export markets in the first four months of this year relative to the same time frame last year: Canada (up $98.96 billion to $99.62 billion), Mexico (up from $73.50 billion to $77.28 billion), China (up from $37.00 billion to $40.09 billion), Japan (up from $20.79 billion to $22.22 billion), and Germany (up from $15.84 billion to $16.98 billion). Each of these figures is not seasonally-adjusted.

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

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Monday Economic Report – May 12, 2014

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

In her testimony before the Joint Economic Committee last Wednesday, Federal Reserve Chair Janet Yellen discussed progress to date in the economy since the recession and touched on some of the weaknesses during the first quarter of this year. Specifically, she said the following:

Although real GDP growth is currently estimated to have paused in the first quarter of this year, I see that pause as mostly reflecting transitory factors, including the effects of the unusually cold and snowy winter weather. With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter. One cautionary note, though, is that readings on housing activity—a sector that has been recovering since 2011—have remained disappointing so far this year and will bear watching.

The Federal Reserve expects real GDP to grow 2.8 percent to 3.0 percent this year, and for that to happen, it would suggest a relatively strong rebound in activity in the coming months. This is particularly true given the stagnant growth in the first quarter. Nonetheless, the Federal Open Market Committee continues to worry about sufficient “slack” in the labor market, even with recent progress. Weak manufacturing job openings figures tend to support this view. Yellen testified that “a high degree of monetary accommodation remains warranted.” The Federal Reserve is expected to maintain historically low short-term interest rates for the foreseeable future, with rates starting to rise sometime in 2015. Regarding its asset purchasing program, it is anticipated to wind down by this autumn.

Consumers, meanwhile, remain hesitant to take on too much credit card debt, a deleveraging trend that we have seen throughout the economic recovery. While consumer credit outstanding rose 6.7 percent in March, the bulk of that increase stemmed from gains in nonrevolving loans. Nonrevolving credit, which includes auto and student loans, has increased 7.8 percent over the past 12 months. Yet, revolving credit, which includes credit cards and other credit lines, was up just 0.85 percent year-over-year. However, consumers are continuing to increase their spending, but they might be dipping into savings more to make these purchases, with the savings rate down to 3.8 percent in March. This was off from an average of 5.3 percent and 4.5 percent in 2012 and 2013, respectively.

On the trade front, manufactured goods exports have risen at a very slow 1.1 percent pace in the first quarter relative to the same time frame in 2013. This continues the deceleration in the growth rate for manufactured goods exports that we have seen over the past two years, with 2014 year-to-date growth down from last year’s 2.4 percent pace. On the positive side, exports of U.S.-manufactured goods to many of our largest trading partners rose in the first quarter of 2014. However, exports to our largest trading partner (Canada) remain soft, down 0.4 percent in the first three months of this year versus last year. We remain hopeful that exports will improve in the coming months. For more on international trends, see the latest Global Manufacturing Economic Update, which was released on Friday.

There will be a lot of new data out this week to digest. Several indicators will show the health of the manufacturing sector in the United States, including April readings on industrial production and new May surveys from the New York and Philadelphia Federal Reserve Banks. They are expected to show modest pickups in demand and output, building on recent rebounds. The other key figure to watch—particularly with the attention given to it in Yellen’s testimony and in the media—will be housing starts. Consensus estimates for new residential construction reflect some easing from March’s 946,000 unit annualized pace, probably down to around 910,000 to 920,000. Other highlights this week include new data on consumer confidence, consumer and producer prices, retail sales, small business sentiment and state employment.

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

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Global Manufacturing Economic Update – May 9, 2014

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

The global economy continues to expand, boosted by strengths in North America and Europe. Yet, there are also notable weaknesses, particularly in Asia and South America, where growth is decelerating. As a result, four of the top 10 markets for U.S.-manufactured goods experienced declining manufacturing activity levels in April, up from two in March. The four countries with manufacturing contractions were Brazil, China, Hong Kong and Japan. Fortunately, our two largest trading partners—Canada and Mexico—expanded modestly in April, albeit at a slower pace than a few months ago. At the same time, the fastest pace of growth among our top trading partners was in Europe, including the United Kingdom and Germany.

Reflecting some of the softness abroad, the JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) declined for the second straight month in April (down from 52.4 to 51.9), its lowest point since October. Even with the easing, growth in manufacturing demand and output remained positive, increasing modestly. Roughly one-quarter of the global PMI data stems from activity in the United States, which continues to see a rebound from winter-related slowdowns earlier in the year. In fact, Markit reported that production growth (up from 57.5 to 58.2) was at its highest level since March 2011. Nonetheless, even with recent progress, the U.S. market continues to have its challenges, with stagnant real GDP growth in the first quarter, mixed news about the labor market and lingering uncertainties about the economy and government policies.

Most notably, one of the larger U.S. concerns so far this year has been export growth. Manufactured goods exports in the first quarter rose just 1.1 percent relative to the first three months of 2013, continuing a trend of decelerated growth in international sales over the past two years. On the positive side, manufactured goods exports achieved an all-time high last year, with $1.38 trillion in goods sold overseas. We remain hopeful that the export market will pick up in the coming months. Moreover, most of our top markets saw modest gains year-to-date relative to the same time frame last year. The exception is Canada, our largest trading partner, with exports down 0.4 percent year-to-date.

Trade negotiations and legislation as well as NAM trade events are top of mind this month, aptly designated as World Trade Month (an annual designation by the President). Debate on Capitol Hill is heating up on the reauthorization of the Export-Import (Ex-Im) Bank, a top priority of manufacturers, and efforts also continue to move forward the Miscellaneous Tariff Bill (MTB), which expired more than 17 months ago. Bilateral and plurilateral discussions on the Trans-Pacific Partnership (TPP) talks as well as U.S.–EU trade negotiations are also ongoing.

On key policy issues, manufacturers won a partial victory on conflict minerals, but are awaiting action on their request to stay the May reporting deadline. The Obama Administration released its annual report on intellectual property (IP) rights overseas, echoing manufacturers’ concerns in several countries, including China, Russia, Brazil, India, Canada and others. In April, Sens. Chris Coons (D-DE) and Orrin Hatch (R-UT) introduced new trade secret legislation, on which manufacturers are seeking action.

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

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U.S. Trade Deficit Narrowed Slightly in March on Increased Goods Exports and Imports

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit narrowed slightly from $41.87 billion in February to $40.38 billion in March. The average trade deficit in the first three months of 2014 was $40.51 billion, up somewhat from the $39.57 billion average of 2013 but down from the $44.56 billion average of 2012. The change in the March deficit resulted from an increase in goods exports (up from $131.38 billion to $135.10 billion) that mostly offset the rise in goods imports (up from $192.73 billion to $195.84 billion). In addition, the service sector surplus increased by $899 million in March.

Looking specifically at goods exports by sector, the largest increase came from non-automotive capital goods (up $2.11 billion). Civilian aircraft, including engine components, accounted for $1.53 billion of this figure. Other gainers included industrial supplies and materials (up $888 million); automotive vehicles, parts and engines (up $596 million); and foods, feeds and beverages (up $97 million). Consumer goods exports declined by $304 million for the month, led by decreases in pharmaceuticals and cell phones.

Growth in manufactured goods exports continue to disappoint. Exports in the first three months of 2014 were $286.90 billion using non-seasonally adjusted data. This was down 0.1 percent from the $287.31 billion in manufactured goods exports in the first quarter of 2013. As such, it indicates that growth in manufactured goods exports were essentially unchanged this year 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.

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

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The U.S. Economy Stagnated in the First Quarter of 2014

The Bureau of Economic Analysis said that real GDP grew a paltry 0.1 percent in the first quarter of 2014, according to preliminary data. This was well below the 2.6 percent growth rate experienced in the fourth quarter of 2013, but it was also a significant disappointment from the 1.5 percent consensus expectation. Severe winter storms wreaked havoc with both consumer demand and overall business activity, and manufactured goods exports were very weak in both January and February. These factors were widely anticipated to have dampened economic growth in the first quarter, but those negative impacts were obviously larger than predicted.

To be fair, I would not be surprised if this figure is revised upward somewhat when the March data comes into clearer focus, which had already indicated a rebound from weather-related softness in the prior two months.

Digging into the first quarter data, there were drags on growth from business investment, net exports, and government. The largest positive was consumer spending (up an annualized 3.0 percent in the quarter), primarily from services (up 4.4 percent). Spending on both durable and nondurable goods was higher, but just barely (up 0.8 percent and 0.1 percent, respectively). Personal consumption expenditures added 2.04 percentage points to real GDP in the first quarter, with 1.96 percent coming from service-sector spending.

Meanwhile, reduced business investment subtracted 1.01 percentage points from real GDP. This stemmed from declines in residential and nonresidential investment and from changes in private-sector inventories. The data were down mostly across-the-board, with industrial equipment purchases and investments in intellectual property being the only positives. The 2.8 percent decrease in fixed investment represented the first decline in one year, essentially offsetting the 2.8 percent increase in the fourth quarter. As such, it highlights the need for stimulating more business investment moving forward, particularly if we are to have stronger growth for the year as a whole.

On the trade front, manufactured goods exports were 0.6 percent lower in January and February 2014 than in the same two months in 2013. (March data will be released next week.) Therefore, we had largely expected net exports to be weaker in the real GDP data. Indeed, goods exports subtracted 1.19 percentage points from growth in the first quarter, the largest drag on growth from the category in five years. Hopefully, export growth will pick up in the coming months, building on stronger growth in many of our key markets.

Government spending subtracted 0.09 percentage points from real GDP, an improvement from the nearly one percentage point loss at the end of last year. The prior quarter had been negatively influenced by the government shutdown, sequestration, and continuing budget uncertainties. In the first quarter, the largest drags came from public investments at the state and local level and from reduced federal defense spending.

Weather provides much of the explanation for why real GDP slowed to a crawl to begin the new year, particularly regarding consumer and business spending. But, you also get a sense that other weaknesses loomed large as well, dampening new housing activity and decreasing export sales growth. It’s a disappointment, as manufacturers ended 2013 with a lot of momentum, driven by strong demand and increased output.

Overall, these data show just how fragile the U.S. economy can be. While manufacturers remain mostly upbeat about the coming months, policymakers need to implement pro-growth measures to ensure that such optimism is well placed. That is especially true given today’s weak numbers.

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

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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.

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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.

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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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