October 17, 2011

October 17, 2011

This morning, the Federal Reserve Board will release new figures on industrial production. We will also get a sense this week of whether or not manufacturing activity has improved in various regions across the country, from the Beige Book on Wednesday and the announcement of new data in the New York and Philadelphia Federal Reserve Bank regions. Recent indicators have suggested greater strength in the Midwest and Western regions, with the mid-Atlantic area struggling. It will be interesting to see if East Coast facilities are starting to rebound from the weaknesses of the past two months.

In addition to production, we will also learn about inflationary pressures in the economy with the release of data on the producer price index on Tuesday and the consumer price index on Wednesday. Manufacturers continue to struggle with elevated prices, particularly for raw materials, even as they have benefited from more recent easing of energy costs. Producer prices for manufacturers were up nearly 9 percent over the 12 months from August 2010 to August 2011, and many sentiment surveys suggest that the industry anticipates a continuation of these pricing pressures over the coming months.

The data released last week provided a combination of both good and not-so-good news. The Manufacturers Alliance/MAPI survey of manufacturers provided a mostly upbeat assessment of the current and future environment for the industry. While the data were virtually unchanged from the previous quarter, they indicated relatively strong growth for manufacturers on a number of fronts. This survey is more optimistic than many others, but it does highlight some deterioration over the course of the past year.

Sentiment surveys of consumers and small businesses, on the other hand, show that these groups continue to have a high degree of economic anxiety. This has undoubtedly impacted economic activity, providing a headwind for growth. Real exports declined somewhat in August, and while retail sales were up in September (largely on strong automotive sales), other indicators have suggested that at least part of the increase in spending recently has been accomplished by digging into savings. Americans are concerned about high unemployment, stagnant income growth and diminished home and equity values. In addition, they are cautiously watching the events in Europe and the wrangling over possible tax and spending cuts in Washington.

It is against this backdrop that the NAM released "A Manufacturing Renaissance: Four Goals to Economic Growth" last week. It focuses on policy solutions that will help U.S. manufacturers better compete in a global marketplace. Given the importance of manufacturing over the past two years in contributing to the economy and to net employment, these goals should be well-timed to garner significant attention and discussion.

Chad

Chief Economist

National Association of Manufacturers

MANAGING COMMON OUTSOURCING TRANSITION PITFALLS

Quick Manufacturing News
According to a 2011 survey by HfS Research and the London School of Economics Outsourcing Unit, 78% of enterprises cited the disruption to business as an important factor when making the decision not to outsource. Click to continue

WHY ARE U.S. MANUFACTURERS PAYING 20% MORE IN COSTS THAN REST OF THE WORLD?

Quick Manufacturing News

MAPI, Manufacturing Institute study shows that health care and corporate taxes are to blame. Click to continue

FACTORY OUTPUT CONTINUES TO RISE

Today in Manufacturing

Federal Reserve said factory output rose for a third straight month in September, a sign the U.S. economy is growing slowly ... continue

RIO TINTO SELLING 13 ALUMINUM UNITS

Today in Manufacturing

Rio Tinto will sell 13 of its aluminum units including refineries and smelters as the world's second biggest miner seeks to streamline its Alcan business ... continue

DEMOCRATIC AMENDMENTS TO EPA BILL REJECTED BY THE HOUSE

The Hill

The Hill’s "Floor Action Action" blog posted this report: "the House on Friday afternoon rejected five Democratic amendments to a bill giving states the right to set up coal ash regulations and implement those regulations on their own." The Hill said the bill is aimed at overruling pending EPA "rules on coal ash that Republicans say would impose drastic compliance costs." According to the Republicans, "their bill is needed because the EPA's pending rules treat coal ash as a hazardous substance, despite past findings to the contrary."