August 2, 2010Five of last week's nine economic indicators either declined or slowed, providing more evidence that the recovery is hitting a soft patch. For the month of July overall, 68 percent of the indicators tracked by the Monday Economic Report worsened -- the poorest performance since March 2009.
A number of last week's regional manufacturing reports pointed to slowing industrial activity in July. At the same time, a report on consumer confidence showed increasing concerns about the recovery going forward. (To read all of last week's indicators, see the Latest Economic Reports section below.)
The big news last week was Friday's advanced report on U.S. economic growth (GDP) in the second quarter. Coming in line with expectations, the economy grew at a seasonally adjusted annual rate (SAAR) of 2.4 percent. Marking the fourth consecutive quarter of positive growth after four consecutive quarterly declines (see red and green bars in the chart above), the pace of growth in the second quarter was slower than the prior two quarters. As a result, the economy still remains more than 1 percentage point below the peak reached in the fourth quarter of 2007 (see the blue line in the chart).
The deceleration in the second quarter was due to several factors. Consumer spending was sluggish, which reflected, in part, the weakness in the labor market. In addition, inventory restocking moderated. While business spending on equipment and software rose by 22 percent (SAAR) -- the fastest pace in a dozen years -- much of this demand was supplied by imports, as imports of goods rose by 35 percent (SAAR). While the data for the second quarter are still incomplete, it appears that imports of capital goods surged faster than other types of imports.
As expected, the end of the homebuyer tax credit in April boosted residential investment, which rose by 28 percent in the second quarter. However, it is becoming clear that this temporary surge is already starting to reverse.
On a positive note, exports grew by a strong 10 percent in the second quarter, marking the fourth consecutive double-digit increase -- a first in more than two decades. This is very good news for manufacturers.
Continued export growth, particularly to South America and Asia, should help industry weather the slowdown in the domestic recovery.
With most of the growth provided by fiscal stimulus and inventory restocking now in the rear-view mirror, and with the labor market and consumer confidence in fragile states, a further slowdown in the recovery is likely in the third quarter.
Dave Huether
Dave Huether
Chief Economist
National Association of Manufacturers
UMA MEMBERS IN THE NEWS
TAHITIAN NONI INTERNATIONAL HONORED AS ONE OF THE “HEALTHIEST COMPANIES IN AMERIC”August 2, 2010 – UB Daily
Interactive Health Solutions published their list of the “Healthiest Companies in America” for 2010, choosing Morinda Holdings, Inc. (parent company of Tahitian Noni International) as one of 34 winners. Over 1,300 corporations in the United Sates ranging in size from as little as 100 to over 50,000 employees competed to be known as one of the “Healthiest Companies in America.
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FIRST WIND AWARDS SCHOLARSHIP TO UTAH STUDENT
First Wind, an independent U.S.-based wind energy company, today announced that Dalaki Livingston of Milford, UT has been awarded a scholarship as part of the 2010 First Wind Scholars program.
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MICHAEL DEAN SUCCEEDS DOUGLAS FAGGIOLI AS PRESIDENT AND CEO OF NATURE'S SUNSHINE PRODUCTS, INC.
August 2, 2010 - Business Wire
Nature's Sunshine Products, Inc., a manufacturer and marketer of nutritional supplements and complementary products, today confirmed that effective July 1, 2010, Michael Dean assumed his new role as President and CEO of Nature's Sunshine Products.
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MERIT MEDICAL REPORTS REVENUE GROWTH FOR 3RD CONSECUTIVE QUARTER
August 2, 2010 - Steven Oberbeck, The Salt Lake Tribune
Merit Medical Systems Inc. has reported another strong financial quarter.
The South Jordan-based maker of disposable medical products, used in diagnostic procedures in disciplines such as cardiology and gastroenterology, said its revenues grew 16 percent in 2010’s second quarter.
Revenue was $74.9 million compared with $64.8 million in the same period a year earlier.
“We’ve grown our sales 16 percent for the last three quarters in a row,” Kent Stanger, Merit’s chief financial officer, said earlier this week in a conference call with securities analysts and investors. “Yet our inventory actually declined over those same three quarters.”
Merit’s net income for the second quarter, though, was $5.7 million, or 20 cents per share. That was down from $5.8 million, or 21 cents per share, recorded in the second quarter of 2009.
CEO Fred Lampropoulos pointed out the decline primarily was the result of the hiring of additional sales and marketing staff, expenses related to the proposed BioSphere acquisition and increased research and development costs.
“There is a lot of momentum. [There are] a lot of stuff [new products] in the pipeline and a lot of tired people around here who have been working very hard to take advantage of the opportunities in the marketplace,” he said.
Securities analyst Jayson Bedford, of the St. Petersburg, Fla.-based Raymond James &
Associates, in a new research report, wrote that Merit is “executing well” in a challenging health-care environment plagued by revenue growth and pricing concerns.
“Given that Merit is the low-cost producer in most of its market segments, we believe the company is the beneficiary of a more cost-conscious hospital customer,” he wrote.
Bedford noted that additionally Merit is innovating, having introduced four products in the second quarter of this year. It also is increasing its research and development efforts that he said will enable the company to get additional market share.
For the six-month period ended June 30, Merit reported net income of $10.2 million, or 36 cents per share, compared with $11.4 million, or 40 cents per share, earned in 2009’s first half.
Lampropoulos said the company has received what is “essentially our incorporation” in China and anticipates it will be operational in that country within the next three weeks to a month.
“I believe that if we were to look forward a few years that it [China] is going to be a $100 million business,” he said. “There is a lot of opportunity.”
FIRE BURNS AT MICRON'S IDAHO PLANT
August 2, 2010 – LateWire from Manufacturing.net
BOISE, Idaho (AP) -- A fire burned through the heating and cooling system in a building on the Micron Technology Inc. campus near Boise, sending billows of black smoke into the clear blue morning sky.
The blaze at the semiconductor and solar-panel maker was reported early Monday morning, just after 7 a.m.
It took firefighters from Boise about a half an hour to put out the fire, which broke out in a building that helps support the company's development of solar panels.
Micron says that there were no injuries and that the company doesn't expect any disruptions to its ongoing businesses.
Officials said they were shutting down electricity to the site, to eliminate the potential for problems to spread to high-voltage lines in the area.
Some evacuations of Micron workers were done as a precaution; the cause of the fire is under investigation.
STUDY SETS COST TO SWITCH FROM COAL TO NATURAL GAS AT $700 B
August 2, 2010 – Utah Energy Users AssociationThe American Public Power Association released a study July 7 that examines the infrastructure and investment impediments to switching from coal-fired power plants to natural gas-fired plants. The study, "Implications of Greater Reliance on Natural Gas for Electricity Generation," assumes that natural gas demand will be much higher than many previous studies have estimated. That assumption was by design, lead author and Aspen Environmental Group senior associate Catherine Elder said at a July 7 news conference in Washington, D.C. "We're going into uncharted territory with natural gas demand," she said.
The study found that current demand for natural gas is about 23 Tcf, compared to 22 Tcf in 1972. But if existing coal-fired generation capacity were to be replaced with natural gas-fired capacity, the demand would increase to 36 Tcf.
“We're not suggesting that all coal will be replaced, but a significant number of coal plants will be affected by regulations that have nothing to do with CO2," APPA President and CEO Mark Crisson said at the conference. The study notes that regulations of a number of conventional pollutants, such as SO2, NOx, particulate matter, coal ash and mercury, are all pending from now until 2017.
Elder explained some of the barriers to meeting the increase in demand identified by the study.
In the study's scenario of complete transition from coal generation to gas generation, pipeline capacity would need to be in-creased to the point that it can handle 70 Bcf/d. Since 1990, the country has added 45 Bcf/d to pipeline capacity, Elder noted.
Additionally, storage capacity will need to increase by 1.4 Tcf at a cost of $12.5 billion, according to the study. Geology will limit the ability to add new storage facilities be-cause many coal plants are not located near suitable gas storage facilities.
"Adding storage turns out to be not as easy as adding new pipelines," Elder said.
ISM: MANUFACTURING GROWTH SLUGGISH IN JULY
August 2, 2010 – Today in Manufacturing.net
Institute for Supply Management says growth in the manufacturing sector weakened in July to the slowest pace this year ... continue
August 2, 2010 – National Association of Manufacturers
"The latest economic report on gross domestic product (GDP) shows that the pace of our nation's recovery has slowed to 2.4 percent from 3.7 percent in the first quarter. The slowdown is further evidence of the fragile state of the economy and the urgent need for policies that encourage job creation and competitiveness. The National Association of Manufacturers (NAM) today reiterated its call for Congress, candidates for office and opinion leaders to support and publicly endorse the NAM's comprehensive Manufacturing Strategy." Furthermore, the organization said, "Factors that contributed to the second-quarter slowdown included very modest growth in consumer spending and less support from inventories. The report also showed a surge in imports, highlighting the fierce competition that US manufacturers face in selling products overseas and in our domestic market." The Manufacturers' President John Engler added Congress should examine their "Manufacturing Strategy for Jobs and a Competitive America" to spur economic recovery.
Dave Huether, the Manufacturers' chief economist, posted on Shopfloor.org (7/30) that Friday's "report of second quarter GDP came in close to expectations, with growth decelerating to a 2.4 percent annualized rate in the second quarter, which is a slowdown from 3.7 percent growth in the first quarter and 5 percent growth in the fourth quarter of last year. While today's report is the first estimate of overall economic growth in the second quarter and will be revised as additional data arrive, it appears that the recovery is slowing - concerning news to manufacturers." Huether adds, "One sector important to manufacturing is residential investment and housing," noting that "housing activity will likely be a drag on growth in the third quarter." Nevertheless, "Manufacturers could find some good news in today's report. First was that exports, most of which are manufactured products, rose by 10.3 percent in the second quarter. This represents the fourth consecutive quarter of double-digit export growth."
AON CONSULTING'S HEALTH CARE REFORM WEEKLY BRIEFING
August 2, 2010 – Aon ConsultingLast Week in Washington
Interim Final Rule Gives Specifications for the Pre-Existing Condition Insurance Plan Program
Under an interim final rule issued on July 30, by the Department of Health and Human Services, implementing the temporary (until 2014) high-risk health insurance pool program required by the Patient Protection and Affordable Care Act (PPACA), health insurance coverage for people with pre-existing conditions will be available at the same monthly premium rate as it is for average healthy people. Provisions in the interim final rule will allow alternative formulas to be devised for the nine states that require insurers to issue policies to all applicants or that prohibit health status from being a factor in setting premiums. The rule describes the requirements for eligibility in the program, options for determining who has a pre-existing condition, how to appeal decisions, how Federal funding will be allocated, ways to prevent “dumping” people who have insurance into the program, and strategies for preventing fraud. It also lists benefits under the program. The interim final rule was published in the July 30 Federal Register and comments are due by September 28.
Guidance Issued Allowing Open Enrollment for Children’s Pre-Existing Condition Policies
On July 28, the Obama administration issued new guidance allowing open enrollment periods for children under 19. This was done in response to health insurers planning to discontinue children's coverage, as a result of new regulations requiring them to sell policies at all times for children with pre-existing conditions. The guidance clarifies that to “address concerns over adverse selection,” issuers in the individual health insurance market may use open enrollment periods if allowed under state law, whether the coverage is for family plans or for individual policies. Unless State laws require otherwise, issuers in the individual market may determine the number and length of open enrollment periods for children, families, and adults. The Questions and Answers document indicates there will be further guidance issued on open enrollment periods “if it appears that their use is limiting the access intended under the law.”
Guidance Issued on FLSA Lactation-Break Requirement
The U.S. Labor Department (DOL) has released a fact sheet on its views about the meaning of the federal Fair Labor Standards Act's new lactation-break requirement. The fact sheet confirms that this provision took effect when PPACA was signed into law on March 23, and that it does not apply to employees who are completely exempt from the FLSA's overtime requirement. The DOL does not specify any minimum number of, frequency of, or duration for these breaks, however, it states that the amount of time must be "reasonable" and that the breaks must be permitted "as frequently as needed." As per the text in PPACA, the fact sheet states that an employer must provide a place other than a bathroom as a location for the break and that the location must be functional as a space for expressing breast milk, shielded from view, and free from any intrusion by co-workers or the public. Although employers are not obligated to treat these breaks as compensable work time, an employer allowing paid breaks must compensate a nursing employee in the same way it does others if she uses such a break in order to express breast milk and the lactation break must be treated as time worked if the employee is not "completely relieved from duty" during the break.
In Case You Missed It:
Realizing Health Reform's Potential: Women and the Affordable Care Act of 2010, Commonwealth Fund, Sara R. Collins, Sheila D. Rustgi, and Michelle M. Doty, 07/30/2010
Health-Care Overhaul: Long-Term-Care Benefits Are a Long Way Off, Washington Post, Michelle Andrews, 07/27/2010
Implementing Health Reform: Preventive Services, Health Affairs Blog, Timothy Jost, 07/15/2010
EPA DENIES PETITIONS TO RECONSIDER GHG FINDINGS
August 2, 2010 – Utah Energy Users AssociationOn July 30th ten petitions to reconsider the U.S. Environ-mental Protection Agency's "endangerment finding" were denied by the agency.
The EPA said that after months of consideration, climate science is credible, compelling and growing stronger. The agency cited a report from the National Academy of Sciences, "America's Climate Choices," and the "State of the Climate" report from the U.S. National Oceanic and Atmospheric Administration among the evidence that supports the conclusion that climate change is real and poses significant risk to human and natural systems.
Petitioners had said the science underlying the EPA's determination is flawed and questioned the review process.
“The endangerment finding is based on years of science from the U.S. and around the world.
These petitions — based as they are on selectively edited, out-of-context data and a manufactured controversy — provide no evidence to undermine our determination. Excess green-house gases are a threat to our health and welfare," EPA Administrator Lisa Jackson said in a news release July 29. "Defenders of the status quo will try to slow our efforts to get America running on clean energy. A better solution would be to join the vast majority of the American people who want to see more green jobs, more clean energy innovation and an end to the oil addiction that pollutes our planet and jeopardizes our national security."
The petitions were filed by the Coalition for Responsible Regulation, the commonwealth of Virginia, the Competitive Enterprise Institute, the Ohio Coal Association, the Pacific Legal Foundation, Peabody Energy Corp., the Southeastern Legal Foundation, the state of Texas, the U.S. Chamber of Commerce and one private citizen.
Paul Phillips, a partner with Holland & Hart LLP who represents the Coalition for Responsible Regulation, said it is "disappointing that the EPA denied the petitions and didn't even initiate a reconsideration. I think they've ignored any signs that are contrary to their predetermined conclusion that they started out with, and I think and hope that the court will ultimately dig into the science and the detail that it requires to reverse the EPA."
The Coalition for Responsible Regulation and other parties have filed a petition for a review with the U.S. Court of Appeals for the District of Columbia Circuit. The coalition is waiting for the
court to issue a briefing schedule and procedural organization of the case, Phillips said.
The Chamber of Commerce said in a statement that it intends to appeal the EPA's decision.
Virginia Attorney General Ken Cuccinelli said in a statement: "The reviewing court is likely to find the decisions fatally flawed procedurally because the agency has reviewed and weighed new information without notice or comment from the public."
Jackson said in December 2009 that the science "overwhelmingly" shows that carbon dioxide and other greenhouse gases threaten public health and the environment. Noting that the U.S. Supreme Court ruled in 2007 that the Clean Air Act "is written to include greenhouse gas pollution," Jackson said "there are no more excuses for delay."
Efforts have been made in Congress to delay federal regulation of greenhouse gas emissions. Sen. Lisa Murkowski, R-Alaska, the ranking Republican on the Senate Energy and Natural Resources Committee, has questioned the interpretation of the Clean Air Act and pro-posed a resolution of disapproval of EPA's endangerment finding on greenhouse gases.
The resolution was defeated by a vote of 53-47 on June 10.
“There has been some concern about the economic impacts of EPA regulations of greenhouse gases will have when they're put in place by the agency next year. Senator Murkowski remains committed to making sure that they don't take effect," said Robert Dillon, a spokesman for Senate energy committee Republicans.
DATA CONFIRMS “FAKE WORK” COSTS MILLIONS OF JOBS
August 2, 2010 – UB DailyThe Work Itself Group, a Salt Lake City-based consulting firm helping companies identify and eliminate “Fake Work,” released aggregate data which confirms that companies are losing revenue each year through a lack of connection and understanding of strategy. Additionally, data suggests 87 percent of employees polled are not satisfied with results on a week-to-week basis and cite inconsequential work as the reason. Too many employees have no understanding of business strategy—which is putting businesses at risk.
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According to the Wall Street Journal quoting the China Federation of Logistics and Purchasing and the National Bureau of Statistics China's official purchasing managers' index was down to 51.2 in July. This represents a slight decrease from June's figure of 52.1, and represents the third monthly decline in a row.
The HSBC China Manufacturing Purchasing Index was also released Monday, with Chinese activity dropping to 49.4 in July, down from 50.4. This figure is significant, as a figure above 50 represents expansion, thus signaling that Chinese manufacturing activity contracted last month. Economists believe that these figures indicate that China will probably not raise interest rates in the second half of the year.
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