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

The World Bank released a report yesterday that said the global economy appears to be transitioning toward a period of more stable, but slower growth. Some of the worldwide financial risks that existed a year or so ago—namely stemming from Europe—have lessened. Yet, more stability does not necessarily mean rapid growth. The World Bank forecasts global GDP growth of 2.2 percent in 2013, with faster growth of 3.0 percent and 3.3 percent in 2014 and 2015, respectively. These figures represent a modest pullback from earlier predictions, reacting to recent weaknesses in the marketplace. The United States is predicted to grow 2.0 percent this year, with 7.7 percent real GDP growth in China and the Euro area shrinking by 0.6 percent.

The latest data support this analysis. The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) was somewhat higher, up from 50.4 in April to 50.6 in May. This suggests that the global economy is growing very slowly. The Eurozone showed some improvements, even as the continent remains mired in a recession and its PMI values have stayed below 50 for 22 consecutive months. The Canadian economy also rebounded, with its PMI data shifting from a slight contraction in March to modest growth in May. With Canada as our largest trading partner, increased activity north of the U.S. border will be important for reviving exports. Meanwhile, the Chinese economy, which had seen some progress since October in its production figures, began to slow down, with its PMI declining from 50.4 to 49.2. Several other industrial indicators also reflected some deceleration in activity in China.

Beyond economic indicators, there have been a number of headlines recently about volatility in the global equity markets. Traders appear to be reacting to the expected “tapering” of quantitative easing in the United States, and foreign exchange markets have also moved on interest rate and policy changes worldwide. Illustrating this point, the Dow Jones Industrial Average has shifted by over 122 points on average each day (both up and down) since Memorial Day, with wide swings in other markets, as well. (continue reading…)

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit widened from $37.13 billion in March to $40.29 billion in April. The figure for March was revised from its earlier estimate of $38.83 billion, with the newer number making it the lowest level since January 2010. The higher trade deficit in April stemmed primarily from a larger goods trade deficit. Goods exports increased from $129.26 billion to $131.09 billion, and goods imports went from $184.66 billion to $189.71 billion.

The wider trade deficit also stemmed from mostly non-petroleum factors, with the petroleum trade balance narrowing from $20.46 billion to $19.72 billion. The non-petroleum trade balance, meanwhile, widened from $33.71 billion to $37.81 billion. The small improvement in the petroleum balance came from a marginal decline in petroleum imports, down from $30.09 billion to $29.57 billion. The petroleum changes mirrored a very modest decrease in the cost of petroleum, with the price of West Texas intermediate crude falling from averages of $95.31 per gallon in February to $92.94 in March to $92.02 in April.

Looking more specifically at the sectors with export growth, the largest increases were in the consumer goods (up $1.96 billion), non-automotive capital goods (up $885 million), and automotive vehicles (up $586 million). Unfortunately, these were also the same sectors with higher imports, producing a net negative in each case. The change in goods imports for those sectors in April were: consumer goods (up $2.98 billion), non-automotive capital goods (up $1.04 billion), and automobiles (up $1.28 billion). At the same time, exports and imports were lower in the foods, feeds, and beverages and industrial supplies and materials industries.

The net result is continued very slow growth in manufactured goods exports. In the first four months of 2013, manufactured goods exports equaled $384.89 billion (not seasonally adjusted), or 0.9 percent higher than the $381.45 billion. This suggests that manufacturers continue to struggle to grow their overseas sales, with slower economic growth worldwide hampering exports. The recession in Europe and weakness in other key markets has had an impact on new orders.

In 2012, manufactured goods exports increased 5.5 percent over the prior year, and it will be hard for us to match that pace if export growth does not pick up. Of course, we would need to see a 15 percent growth rate or higher for us to achieve the goal of doubling exports by 2015.

As expected, goods exports to Europe are off from where they were last year. Using non-seasonally adjusted data, year-to-date exports to the European Union have fallen from $91.18 billion in the first four months of 2013 to $84.39 billion in the same time period in 2012. The good news is that we do see slight increases to our largest trading partners, Canada (up from 96.46 billion to $98.50 billion) and Mexico (up from $70.20 billion to $73.49 billion). In addition, goods exports to China, our third largest trading partner, rose from $35.42 billion to $37.12 billion. However, the data remain mixed overall, with goods exports higher to South America (up from $58.51 billion to $59.68 billion) but lower to Pacific Rim nations (down from $124.79 billion to $122.42 billion).

The report for April indicates that exports of manufactured goods remain challenged. Yesterday, we learned that the manufacturing sector is in contraction again for the first time since November, and slowing sales were a large factor in this finding. Manufacturers need a stronger global economy for the sector to more fully recover, and while I am still optimistic that the pace of exports will strengthen as we move through the rest of 2013, the year is not off to a great start start on the trade front.

Chad Moutray is chief economist, National Association of Manufacturers.

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

The global economy has seen some progress since last fall, but growth remains modest at best. There is also a “two steps forward, one step back” feel to some of the latest data. Six of the top 10 markets for U.S.-manufactured goods expanded in March, according to Markit. This is down from seven last month, but up from four last October. Canada, our largest trading partner, saw its manufacturing activity decline, with weaknesses in new orders, exports and hiring. Softness in the United States and Europe were cited as factors.

The other three markets with contracting sales, output and employment levels were in Europe, with its economic downturn widening. The Markit Eurozone Manufacturing Purchasing Managers’ Index (PMI) fell from 47.9 in February to 46.8 in March. This index has now contracted for 20 straight months, with little hope of improving anytime soon. While many of the recent headlines have surrounded the failure of the banks in Cyprus or the inconclusive Italian elections, the challenges are ones that confront the entire continent. The unemployment rate has risen to 12 percent, with more than one-quarter of the working population in Greece and Spain out of work, and real GDP is expected to contract throughout the year. This morning, we should learn even more about the manufacturing sector in Europe when new data on industrial production will be released. The data are expected to show a slight decline. (continue reading…)

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

While we have seen some modest improvements in manufacturing activity so far in 2013, these gains have not yet translated into significant increases in hiring. Employment numbers for March were disappointing overall, with only 88,000 nonfarm payroll workers added on net. This was well below the expected increase of 200,000 employees and suggests that the U.S. economy still shows signs of uncertainty. Higher payroll taxes and across-the-board federal spending cuts have eaten away at retail sales and slowed employment growth in some key sectors.

Manufacturers lost 3,000 workers on net in March. As we have seen for much of the past year, hiring in the sector continues to be soft. Over the past 12 months, manufacturing has contributed just 4 percent of the net new jobs in the economy. This is a reversal of the outsized role from the two years before that and something that can be reversed with pro-growth policies like those laid out in the NAM’s Growth Agenda and changed perceptions about the economic and political landscape. In the short term, however, the Society for Human Resource Management’s (SHRM) survey of hiring intentions in April suggests that the net percentage of new hiring among manufacturers decelerated over the course of the past month and since this time last year. This contrasts with service sector employment growth, which has picked up of late.

The Purchasing Managers’ Index (PMI) from the Institute for Supply Management (ISM) was also discouraging last week. Manufacturers responding to the survey suggested a slower pace of growth for new orders in March, dampening enthusiasm with a lower-than-expected PMI reading. The ISM PMI fell from 54.2 in February to 51.3 in March. In contrast, two other releases out last week were more encouraging. Factory orders rose a healthy 3.0 percent in February largely on strong demand for aircraft, and construction spending among manufacturers was higher, continuing a steady upward trend and reversing the slight pullback in the second half of last year. However, ideally, both of these gains could be more broad-based, as these gains are highly mixed across the sectors.

One piece of good news in the ISM report was new export orders were rising. With so many manufacturers exploring growth through trade, the higher export numbers were encouraging. The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit narrowed in February, with goods exports up to their second-highest level ever. The bulk of that increase stemmed from a narrowing of the petroleum trade balance, with petroleum imports down and exports higher for the month. Outside of petroleum, manufactured goods exports have grown very slowly in the first two months of 2013, up just 2.5 percent. To make the President’s goal of doubling exports by 2015, this pace will need to pick up significantly. In January and February, total exports to Europe and Japan were down, but exports to our three largest trading partners (Canada, Mexico and China) were higher.

This week is a quieter one on the economic front. The retail sales and consumer confidence figures due out on Friday will be closely watched for clues regarding how the payroll tax increase and sequestration might have impacted spending and overall sentiment. Likewise, the National Federation of Independent Business (NFIB) and the Manufacturers Alliance for Productivity and Innovation (MAPI) will discuss how small businesses and manufacturers are faring in their latest surveys. Data on business and consumer sentiment were largely mixed in March. Aside from those indicators, the other highlights include new data on job openings and producer prices.

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

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit grew to $44.4 billion in January from a revised $38.1 billion in December. December’s deficit was the lowest level since January 2010, so it might have been expected that the deficit in January would stabilize somewhat.

The consensus estimate was for a deficit of $42.6 billion, making the actual number slightly higher than what was expected. Goods exports dropped from $132.8 billion to $130.8 billion and goods imports rose from $188.9 billion to $192.5 billion.

Much of the shift in the goods trade was the result of changes in petroleum costs. The non-petroleum trade balance was not significantly different in January ($41.3 billion) than it was in December ($41.5 billion). Meanwhile, the price of West Texas intermediate crude was $88.25 a barrel in December, rising to $94.69 in January (and $95.32 in February). The result was an increased cost in petroleum imports, up from $14.9 billion to $16.0 billion. At the same time, petroleum exports dropped from $6.5 billion to $5.4 billion. This caused the petroleum trade balance to increase from $8.3 billion to $10.6 billion. Note that this brings it back to where it was in November, making December’s petroleum balance a bit of an anomaly.

The largest decline in goods exports stemmed from industrial supplies and materials, which declined by $2.6 billion in January. Separating out crude oil, fuel oil, and petroleum products from the industrial supplies numbers, this would have declined by $700 million. Similarly, imports of industrial supplies and materials rose $4.0 billion, with almost $3.7 million of that figure stemming from petroleum.

Given the extent to which the trade balance fell in December, the change in January is more dramatic than it is in reality. As noted above, the bulk of the shift was due to higher petroleum costs. Non-petroleum exports and imports were not dramatically different than they were in December.

We have begun to see some signs of improvement in many of our largest trading partners, with the major exception of the Eurozone as a whole. We need to see higher manufactured goods exports in 2013 than the reported 5.5 percent growth experienced in 2012.

Exports are critically important to creating manufacturing jobs. In January we failed to make progress on the goal of growing exports. Manufacturers are looking to policymakers in Washington move forward with a robust trade agenda that will help open more markets to U.S. manufactured goods exports. If we continue the rest of the year with slow export growth similar to January we won’t reach the goal of doubling exports.

Chad Moutray is chief economist, National Association of Manufacturers.

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.

The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit was $44.2 billion in August, an increase from the $42.5 billion observed in July. The widening of the overall deficit was mostly attributable to a drop in goods exports that was larger than the decline in goods imports.

Goods exports decreased from $130.7 billion to $128.5 billion; meanwhile, goods imports fell from $188.5 billion to $187.8 billion. The bottom line is that slowing global growth is sapping trade activity, both for exports and imports.

A fair share of the credit for the widening of the trade deficit can be given to the petroleum sector, most likely due to higher per barrel costs. The petroleum trade balance grew from $21.0 billion in July to $23.5 billion in August. Petroleum exports decreased by $840 million in August and petroleum imports rose by $1.6 billion. The non-petroleum trade balance actually narrowed from $36.3 billion to $35.3 billion with both lower export and import activity. In other words, the widening of the overall trade deficit was the result of trade shifts in the petroleum market.

Looking specifically at major categories, total goods exports were lower for the month. The largest declines were seen in industrial supplies and materials (down $1.2 billion); foods, feeds, and beverages (down $1.1 billion); consumer goods (down $422 million); and automotive vehicles and parts (down $87 million). In contrast, non-automotive capital goods exports rose $382 billion. (continue reading…)

The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit narrowed from $52.6 billion in March to $50.1 billion in April. Both exports and imports declined, with imports falling by more. The longer-term trend for exports and imports are higher, with April’s levels for both higher than what was observed in February.

This same trend can be found among goods exports, with the March figures a bit of an outlier. The goods trade balanced narrowed to -$64.8 billion in April, down from -$67.5 billion. Some areas of strength for the month were found in foods, feeds and beverages (up $700 million), automobiles and parts (up $424 million) and consumer goods (up $210 million). These were offset, however, by declines in industrial supplies and materials (down $1 billion) and capital goods, excluding autos (down $1.45 billion). Petroleum exports rose from $10.3 billion to $10.5 billion, helping to reduce the petroleum trade deficit to $28.0 billion.

Of course, one of the ongoing storylines has been the economic challenges in Europe and a slowing of global growth overall. This can clearly be seen in these figures. Looking at data which is not seasonally adjusted, the declines in goods exports appear to be widespread. Goods exports to Europe, for instance, declined from $31.6 billion in March to $27.5 billion in April. This time last year, that figure was $36.9 billion, reflecting a significant slowing in activity. Export decreases were also observed in China, North America and South America, but not to such a great extent. The monthly trade deficit with China widened to $24.5 billion, up from $21.7 billion the previous month, as a result of increased imports and fewer exports.

Manufactured goods exports decreased in April, mirroring the larger trends. With that said, exports from manufacturers have generally drifted higher when you look at a longer time horizon. Year-to-date manufactured goods exports are $336.6 billion (not seasonally adjusted), up from $311.1 billion year-to-date in 2011. The primary drivers of this growth have been industrial supplies and materials and capital goods, with positive contributions from motor vehicles and consumer goods.

With that said, slowing international sales are a concern for many manufacturers. Anxieties about the future of Europe and an easing of growth in Asia and South America present challenges for export growth moving forward. Given the importance of trade to manufacturers’ growth strategies, it will be important for us to get the global economy moving again.

Chad Moutray is chief economist, National Association of Manufacturers.

The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit grew from $50.4 billion in December to $52.6 billion in January. Americans imported $233.4 billion in goods and services for the month (up from $228.7 billion the previous month) and exported $180.8 billion (up from $178.2 billion). This was the third consecutive month of a widening trade deficit, and the highest that it has been since October 2008.

A widening of the deficit for petroleum was the largest factor behind this month’s higher overall deficit. Exports of petroleum dropped from $10.6 billion to $9.4 billion; at the same time, imports grew from $37.8 billion to $39.1 billion.

The trade deficit for goods widened in the month, while there was a modest improvement in the services sector. The value of U.S. manufactured goods exported in January was $77.2 billion, down from $83.0 in December. Despite the decline, exports are still up overall from the $70.8 billion registered in January 2011.

Among goods exports, areas of strength included capital goods excluding automotive (up $1.3 billion), automotive vehicles and parts (up $1.05 billion) and foods, feeds and beverages (up $97 million). Declining exports were found among industrial supplies (down $295 million), consumer goods (down $215 million) and other goods (down $548 million). Meanwhile, the largest increases among goods imports were found in automotive vehicles (up $2.4 billion), industrial supplies (up $1.1 billion) and foods, feeds and beverages (up $437 million).

One of the things that definitely stands out with these numbers is the impact of slowing global growth. This is clear with both Europe (with exports falling from $27.2 billion to $24.5 billion) and China (down from $10.1 billion to $8.1 billion). Europe is currently in a recession, and China just announced slower growth targets for this year.

Overall, these figures show that exports have slowed recently due to weaknesses in the global economy. With import growth outstripping export growth, our trade balance has widened. For manufacturers – which contribute 60 percent of our total exports – it will be important for us to regain our footing by selling more of our goods overseas.

This, of course, will hinge on faster growth around the world, but it will also depend heavily on adding new markets and exploring new opportunities abroad. For this, policymakers can be helpful. Among their top priorities: getting the Export-Import Bank reauthorized. Beyond that, Washington should work to expand the number of trade agreements for greater access to new markets.

Chad Moutray is chief economist, National Association of Manufacturers.

The full-year 2011 trade figures released today by the Commerce Department showed that the overall deficit in Goods and Services trade grew to $558 billion, up $58 billion from 2010.  The manufactured goods deficit was $450 billion.  Petroleum trade was also in deficit, by $150 billion.  These deficits were partially offset by surpluses in services trade and agriculture.

As has been the case for the past three years, manufactured goods trade was remarkably different with U.S. Free Trade Agreement (FTA) partners and non-partners.  Manufacturers in the U.S. racked up a $50 billion trade surplus with FTA partners – more than doubling the 2010 surplus of $21 billion.

Manufactured goods trade with non-partners, unfortunately was in deficit by $500 billion.  Over the past three years, the manufactured goods surplus with FTA partners cumulated to $100 billion.  During that same three year period, the manufactured goods trade deficit with non-partners totaled to $1.3 trillion.

Manufactured goods exports to the world reached $1.26 trillion in 2011, up 15 percent over 2010.  FTA partners were the highlight, with exports to them growing one-fourth faster than to non-partners.

The rate of growth for the whole year was on the 15 percent annual growth track needed to double in five years, but a troublesome sign was that the growth fell to an annual rate of 12.5 percent in the fourth quarter – the first quarter to be below the needed path.  An important part of the reason was that manufactured goods export growth to the important European Union market (second only to NAFTA) slipped dramatically, to only 6.6 percent in the fourth quarter.  This shows that the European economic difficulties are already impacting the United States. (continue reading…)