Manufacturers Alliance/MAPI Archives - Shopfloor

Monday Economic Report – October 15, 2013

By | Economy, General | No Comments

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

Due to the federal government shutdown, several key data points were not released last week. This included the latest reports on international trade, job openings, producer prices, retail trade and wholesale trade. The vacuum in public data makes it more difficult to ascertain whether or not gains in many aspects of the domestic economy were continuing. This leaves us looking elsewhere for clues about current trends. Our perceptions about the present and future U.S. economic environment remain somewhat frozen as to where they were on September 30. For instance, the Manufacturers Alliance for Productivity and Innovation (MAPI) survey tended to echo the more upbeat tone from other similar surveys, with an accelerated pace for new orders, exports, utilization and domestic investment.

Yet, the budgetary impasse has reduced perceptions about the economy and heightened frustrations with the political process as a whole. Surveys released last week observed lower consumer and small business confidence levels, with each falling from higher levels during the summer. In the case of the University of Michigan’s consumer sentiment figure, the decline brought the index back to levels not seen since January, when we were still in the aftermath of the fiscal cliff deal. This shows that the fiscal crisis has zapped confidence and increased uncertainty. However, the National Federation of Independent Business (NFIB) survey, while edging slightly lower, still points to an upward trend for the year.

Interestingly, small business owners responding to the NFIB survey labeled government regulations as their most important problem. This was the second month in a row that “red tape” has topped the list, with taxes and poor sales following closely behind in second and third place.

Last week, President Obama nominated Janet Yellen to be the next Federal Reserve Board chair. This ends months of speculation about who would replace outgoing Chairman Ben Bernanke, whose term expires January 31, 2014. Notably, the President made his announcement on the day that the Federal Reserve released the minutes of the September 17–18 Federal Open Market Committee (FOMC) meeting. These minutes highlight the intense debate within the committee over when to start tapering its purchases of $85 billion in long-term and mortgage-backed securities. Financial markets expected this to begin at that meeting, but most FOMC participants wanted to see more data showing a rebound in the economy before acting. The impending budget battles were also a factor.

There continues to be speculation that the Federal Reserve will start to decelerate its quantitative easing program by year’s end, but in my view, the earliest that any taper would occur at this point would be at the FOMC’s December 17–18 meeting.

With the federal government shutdown now going into its third week, we are not expected to get consumer price index and housing starts data. In addition, the Federal Reserve has announced that it will be unable to produce industrial production data until the government reopens. It is also an open question about when the backlog of postponed data sources might be released after the budget issues are resolved, as the calendar could suddenly become quite busy in the coming weeks. Meanwhile, survey data from the New York and Philadelphia Federal Reserve Banks are still expected to be released this week, with the data more than likely reflecting the pickup that we saw prior to the shutdown. Other highlights include the Federal Reserve’s Beige Book and new data on homebuilder optimism, leading indicators and production sentiment in California.

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

monthly sentiment surveys - oct2013

MAPI: Soft Current Manufacturing Activity, But Cautious Optimism Ahead

By | Economy | No Comments

The Manufacturing Alliance for Productivity and Innovation (MAPI) said that its composite index of manufacturing activity edged slightly higher from 55 in the fourth quarter of 2012 to 56 in the first quarter of 2013. This is the third consecutive quarter where the index has been in the mid-50s, suggesting modest growth in the sector. Readings over 50 indicate an expansion, with sub-50 values suggesting contraction. The uptick in the index this quarter, though, does reverse 10 quarters of decline, which is a definitely a positive sign.

With that said, many of the subcomponents regarding the current economic environment suggest a high degree of weakness in the manufacturing marketplace. The index of current orders shifted from moderate growth in the fourth quarter (57) to a slight contraction in the first quarter (47). This decrease in demand also included exports, with the export orders index dropping from 49 to 45. In addition, just 20.7 percent of manufacturers responding to this survey said that they were operating above 85 percent of their capacity, down from 31.5 percent last quarter.

These data indicate that there is significant softness in the manufacturing sector. Other data points, such as the purchasing managers’ indices from the Institute for Supply Management or Markit, have shown the pace of new orders and exports decelerating, but the MAPI report says that these points are contracting. As such, the MAPI data tend to more closely align themselves with some of the regional sentiment surveys, such as the most recent one from the Kansas City Federal Reserve Bank.

Despite the weaker data on current conditions, manufacturers in the MAPI survey (and others) are cautiously optimistic about the future, helping to lift the overall composite measure. This is especially true for U.S. sales. The prospective U.S. shipments index for the second quarter is 61. While slightly lower than the 63 reading last time, it still indicates decent growth in shipments for the current quarter. Moreover, the non-U.S. prospective U.S. shipments index declined somewhat from 57 to 53, suggesting very modest growth in exports this quarter.

In addition to orders, manufacturers have relatively healthy plans for both capital investments and research and development spending. The indices for these items are all over 60, with the pace of U.S. and non-U.S. investments picking up from the last survey. This indicates that manufacturers are eager to make the right investments in the future that they need to make to succeed in the future – another positive sign.

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

Monday Economic Report – January 14, 2013

By | Economy | No Comments

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

This week, we will receive a number of reports on the health of the manufacturing sector in the United States. The highlight of these will come on Wednesday with the release of industrial production data for December. It is expected to show only modest growth at best, as manufacturers pulled back due to uncertainties related to the fiscal cliff and slowing sales. If the production numbers mirror the Purchasing Managers’ Index data for December, they might also show some progress for the month, with some of that related to Hurricane Sandy’s aftermath. These trends will likely also show up in regional manufacturing surveys from the New York and Philadelphia Federal Reserve Banks.

All data released last week tended to echo what we have observed for some time. While there have been improvements in some data, businesses and consumers ended 2012 with a high degree of uncertainty. The Manufacturers Alliance for Productivity and Innovation’s (MAPI) Manufacturers Survey found that the pace of expansion for the manufacturing community slowed somewhat, particularly with declining export sales. Even with this finding, respondents were cautiously optimistic about 2013. Meanwhile, small business owners remain worried about weaker sales and earnings, with taxes as their top problem—a nod to the fiscal cliff and the fact that they will face higher marginal tax rates.

On the trade front, goods imports rose substantially in November, widening the overall trade deficit. Growth in exports was slower, with numerous headwinds internationally impacting foreign sales. Lower petroleum costs, however, helped to improve November’s trade balance. At the same time, November’s employment growth was sluggish for the manufacturing sector, with job postings off slightly and hiring levels down. The larger non-farm economy was mostly unchanged in terms of hiring and job openings, even as the United States added a modest amount of workers for the month.

Other data points this week include information on consumer and producer prices, consumer sentiment, housing starts, retail sales and state employment. Market watchers will also closely follow the Federal Reserve’s Beige Book due out Wednesday, which summarizes the nation’s regional economies. It is likely to continue to show modest economic growth despite softness both globally and in some sectors, including manufacturing.

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

Circumnetting the Economy: Mixed Optimism

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Bloomberg, “Companies Accelerate Spending as U.S. Productivity Bypasses Jobs

March 28 (Bloomberg) — Cummins Inc. and Kohl’s Corp. are accelerating equipment purchases to boost productivity, reinforcing an unprecedented gap between capital spending and employment in the U.S. that’s restraining a labor-market rebound.

Corporate investment will rise 11 percent this year as sales pick up, following a 15 percent gain in 2010, according to “Man vs. Machine,” a Feb. 2 report from Bank of America Merrill Lynch. Employment will grow just 1.7 percent, after a 0.7 percent increase last year, the study projects….

Many employers are waiting to see how changes in health- care will affect them, said Joe Trauger, vice president of human-resources policy at the National Association of Manufacturers in Washington. These and other regulations are “pitfalls that businesses could unknowingly fall into,” and the uncertainty “creates difficulty for hiring,” he said.

CNBC, “US Economy Over the Worst: KPMG Executive Survey“:

In another sign the American economy is on the comeback trail, a new survey from KPMG shows optimism is improving among U.S. manufacturing and service industry executives. Executives in both key sectors say the worst is behind us.

The survey shows 68 percent of manufacturing executives believe business activity will be higher in the next 12 months. That’s up from 57 percent in October.

Philadelphia Inquirer, book review, “PhillyDeals: A bold call to bring American manufacturing back“:

Andrew Liveris, boss at Dow Chemical Co., is an immigrant engineer with a broad agenda: He wants the U.S. government to make American manufacturing strong again. Read More

A Political Delay Won’t Diminish Economic Damage of Ozone Rules

By | Economy, Energy, Regulations | 2 Comments

The Environmental Protection Agency in October postponed its announcement of new federal ozone limits, avoiding the politically damaging reports before Election Day. Yet another report about the EPA’s plans to crack down on economic activity would not have helped the Administration’s prospects.

The EPA’s proposed rule could drop the National Ambient Air Quality Standards for ozone from the 75 parts per billion limit established by the Bush Administration in March 2008 to as low as 60 ppb.

The economic impact of the EPA’s proposal is one of the most under-reported stories in the United States today. Thankfully, at least one newspaper, The Sarasota Herald-Tribune, has taken advantage of the EPA’s delay to examine what the rules could mean to the local economy.

We could quibble with the article, but at least the paper is trying to explain the impact of the EPA’s threat. From “Air rules could force changes here“:

New federal air quality rules, expected in the coming weeks, will likely trigger a wave of emission controls on industries in Southwest Florida, and the possibility of motor vehicle inspections….[snip]

Southwest Florida’s air quality barely meets current U.S. Environmental Protection Agency standards, and with those thresholds set to rise, the region will be forced to put better curbs on air pollution.

Or businesses could relocate to a region that doesn’t face the additional limits. Or move to another country all together.

The Herald-Tribune cites the joint National Association of Manufacturers and American Petroleum Industry’s study conducted by the Manufacturers/Alliance MAPI, “Economic Implications of EPA’s Proposed Ozone Standard (ER-707).” The study reported that reducing the ozone standard to 60 parts-per-billion could destroy 7.3 million U.S. jobs and reduce the Gross Domestic Product (GDP) by $687 billion in 2020. (More from API.)

And even more than the Bush Administration’s limits, the EPA’s latest proposal has thin scientific justification and could even be counterproductive when it comes improving the health of the U.S. populace.

The EPA’s jobs-killing plan is likely to be announced in January, perhaps during one of the slow news periods to avoid a sharp political backlash. In the meantime, other papers could follow the Herald-Tribune’s example and try to inform their readers about the impact of the ozone rules. The NAM stands ready to help with those explanations.

The EPA’s Ozone Rule, Regulating Against Seven Million Jobs

By | Energy, Regulations | One Comment

The Environmental Protection Agency’s drive to increase regulation of economy activity, starting with its proposed greenhouse gas regulations, is so expansive and so aggressive that much is what it’s doing is escaping real scrutiny. But the EPA’s agenda is a jobs-killer and the public needs to know about it.

Take the EPA’s latest move to lower ozone limits, regulations that a new economic analysis says could destroy more than seven million jobs.

Starting about four years ago, the EPA sought to reduce the national standards for ground-level ozone, a basic component of smog. In March 2008, the Bush Administration imposed a standard of 75 parts per billion, putting hundreds of counties out of compliance and adding billions of dollars of compliance costs to manufacturers, retailers, government and others.

Then, this January, even before those new, very strict and very expensive standards went into full effect, the EPA proposed even more stringent ozone regulations – with a huge impact on the economy and jobs.

The economists at the Manufacturers Alliance/MAPI have just released a study that quantifies that impact, and the results are shocking.

The new report, “Economic Implications of EPA’s Proposed Ozone Standard,” concludes that reaching the proposed level of 60 parts per billion would:

  • Impose annual compliance costs of $1 trillion between 2020 and 2030. One trillion dollars!
  • And total U.S. job losses attributable to a 60 ppb would be 7.3 million by 2020. That’s more than 4 percent of the labor force projected for 2020.
  • Big states with large manufacturing sectors would be the hardest hit. The ozone regs would cost Texas 1.7 million jobs, Louisiana, 983,000 jobs, California, 846,000 jobs, etc.

Unemployment right now is 9.6 percent, and yet the EPA is moving forward with regulations that will crush economic growth and hiring. The environmental arguments for the regulations are debatable, at best, but the agency pushes on.

The Obama Administration has made job creation a priority, the centerpiece of its economic proposals. But at the same time, the Administration’s EPA is proposing regulations that would destroy seven million jobs!

You cannot credibly claim to be for new jobs and then lead a regulatory campaign that eliminates existing ones.

Rockwell: Transform Factories With Smart, Safe, Sustainable Production

By | Economy, Energy, General, Innovation, Technology | No Comments

Rockwell Automation held a media briefing today at the National Press Club, with Keith Nosbusch, chairman and CEO, leading the call for a national strategy and federal support to keep the U.S. manufacturing sector at the forefront of global competitiveness. From the news release:

“U.S. manufacturers absolutely must have innovative energy-efficient and productivity-enhancing technology to be competitive,” Keith Nosbusch, Rockwell Automation, Inc. chairman and CEO, told a press briefing at the National Press Club.

This transformation to smarter, safer and more sustainable manufacturing provides an opportunity for the federal government to help develop and make innovations in American plants to keep them competitive and to promote a sustainable U.S. manufacturing employment base, the speakers said.

Nosbusch noted that federal support for applied research was about equal with federal funding for basic science, but it has now fallen to 30 percent lower — $10 billion worth.

Also participating in the news conference were Emily DeRocco, president of the Manufacturing Institute, R. Neal Elliot from the American Council for an Energy-Efficient Economy; Evan R. Gaddis, president of the National Electrical Manufacturers Association, Tom Duesterberg, president of the Manufacturers Alliance/MAPI. (Pictured, from left, DeRocco, Elliot, Nosbursch.)

U.S. industry is in a battle not just with countries with lower costs, but also with developed countries that are investing in new technology, said Emily DeRocco, president of the Manufacturing Institute and vice president of the National Association of Manufacturers.

“With high quality, inexpensive products flooding the market from every corner of the globe, competing on cost alone is a losing battle for most U.S.-based manufacturers,” DeRocco said.

Policy recommendations:

  • Ensure legislative priorities are in line with those of manufacturers and the general public.
  • Double federal funding for manufacturing innovation.
  • Establish a $2 billion public-private partnership program to research and develop a manufacturing “greenprint” for smart, safe and sustainable manufacturing.
  • Provide federal assistance for public-private partnerships to create demonstration projects that foster manufacturing innovation.
  • Expand federal tax credits to apply to investments in advanced technologies that automate and modernize factories.