October 24, 2011

October 24, 2011


While challenges persist, much of the economic news last week was hopeful. The Federal Reserve Board's Beige Book, which was released last Wednesday, cited improving conditions for manufacturers across various regions, with some exceptions for specific sectors. Nonetheless, it went on to say that "many Districts described the pace of growth as `modest' or `slight' and contacts generally noted weaker or less certain outlooks for business conditions." Given that recent statements from the Fed have focused on the weaker-than-expected economic conditions, it is nice to be able to discuss growth for a change.

Other data seemed to back this up. The Conference Board's Index of Leading Indicators rose for the fifth straight month, and manufacturing production rose 0.4 percent in September. Third-quarter industrial production in the sector was impressive, with much of this growth in the durable goods sector, especially for motor vehicles, aerospace, machinery and electronics. As a sign of this growth, overall capacity utilization is nearly 15 percent higher today than it was in June 2009, which was the official end of the recession. Sentiment surveys have begun to show a changed psyche, as well. The closely-watched Philadelphia Federal Reserve Bank's manufacturing survey shifted from a decidedly downbeat contraction in activity in August and September to modest growth in October. Likewise, the respondents to this survey remain (cautiously) optimistic for the next six months.

Even among persistent worries, there are glimmers of potential optimism. In New York, the Empire State Manufacturing Survey showed that its businesses remain anxious about current conditions, with its general business index showing contracting activity overall. Yet the respondents to this survey indicated higher levels of new orders, shipments and employment – an encouraging sign that these numbers might turn around in coming months. Likewise, the housing sector continues to be a drag on economic activity, with falling existing home sales and still-depressed measures overall. Nonetheless, housing starts jumped significantly from 572,000 in August to 658,000 new homes in September (at annual rates), largely on an uptick in multi-family construction.

Pricing pressures, which have been a problem for manufacturers for much of the past year, refuse to go away. Both the Consumer Price Index and the Producer Price Index rose in September, largely on higher energy and food costs. Manufacturing costs have risen almost 9 percent year-over-year, and while some "easing" has taken place in recent months, these prices remain highly elevated. Core inflation, which excludes food and energy prices, currently stands at 2.5 percent. This has been slowly rising since the beginning of 2011, yet it remains modest overall.

This week, we will receive the advanced estimate on third-quarter growth in the economy. Real GDP is expected to have grown around 2 percent--an improvement over the 0.4 percent and 1.3 percent growth rates from the first two quarters of the year, but still sluggish. Higher industrial production numbers should provide a positive contribution to this number. In addition, we will learn about manufacturing activity in Kansas City and Richmond, and new numbers for personal income and consumer confidence will be released. In short, the economy will once again be a major focus this week.

Chad Moutray
Chief Economist
National Association of Manufacturers


OCCUPATIONAL INJURIES, ILLNESSES DECLINE OVERALL IN 2010 BUT INCREASE IN MANUFACTURING SECTOR

Quick Manufacturing News
While Secretary of Labor Hilda Solis said she was 'encouraged' by the decline of nonfatal occupational injuries and illnesses reported in 2010, she stressed that the 3.1 million recorded cases remains too high, particularly as reflected in the health care and social assistance industries. The manufacturing sector was the only industry to record an increase in injury and illness rates in 2010. Click to continue

RE: WHAT'S THE ROLE OF TECHNOLOGY IN CONTINUOUS IMPROVEMENT?
Industry Week Forum – Quick Manufacturing News
"Yes, Continuous Improvement does not involve expensive technology, but it does involve cheap technology..." Click to continue

REBATE PROGRAM FOR SOLAR & WIND ENERGY SYSTEMS EXPANDED
Utah Business
In the first 55 days since the Utah Office of Energy Development (OED) launched the Utah Renewable Energy Rebate Program (URER) on Aug. 22 more than $830,000 have been allocated, leveraging $4.6 million dollars of economic activity through 139 projects in communities from Logan to St.

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UMA PRESIDENT MEETS TODAY TO PRESENT OPTIMIZING AND STREAMLINING COUNCIL REPORT TO GOVERNOR HERBERT
This evening the Optimizing and Streamlining Commission will meet with Governor Herbert to officially present the results of the five-month study and review.

On March 22, 2011, Governor Gary R. Herbert signed into law House Bill 280, State Agency Realignment (Harper) and established the Advisory Council on Optimizing and Streamlining State Government. The Council consisted of nineteen stake holders, legislators, and business community members. Its task was to consider ways to reduce administrative costs, incorporate best business models, and streamline services to improve the efficiency and reduce the cost of state government. This report contains 25 recommendations and observations the Council considers to be of the highest potential impact.

Members of the Council include:

Val Oveson, Chair

Tom Bingham, Co-Chair

Jenny Wilson, Co-Chair

David Hart, Co-Chair

Rep. Patrice Arent

Brad Bertoch

Kristen Cox

Brent Gardner

Clark Harms

Randy Harmsen

Rep. Wayne Harper

Carlos Linares

Tammie Lucero

Michelle McOmber

Taylor Oldroyd

Randy Parker

Tyler Ploeger, CPA

Sen. Stuart Reid

Lincoln Shurtz

The report and its 26 key recommendations were presented to the Government Operations Interim Committee of the Legislature last week with Tom Bingham and Jenny Wilson presenting.

Bingham told the Legislative committee that “This is just the beginning of what is a very worthwhile effort to make State Government more efficient.” He suggested that “There is much more that can be done to further this effort through the implementation of continuous improvement principles, like that being done by Workforce Services, DEQ and the Labor Commission, if the legislature and the Governor’s office focuses on these and other recommendations with the various State agencies.”

OBAMA SIGNS 3 TRADE DEALS, BIGGEST SINCE NAFTA
Today in Manufacturing
The deals with South Korea, Colombia, and Panama could be worth billions to American exporters ... continue

FEATURE: EDUCATING TOMORROW'S SUPPLY CHAIN LEADERS
Today in Manufacturing
There is a surge of interest among college students in what used to not even be a curriculum offering at many institutions -- supply chain management ... continue

SURVEY: ECONOMISTS MORE BLEAK ABOUT ECONOMY
Today in Manufacturing
Nearly 85 percent of economic experts surveyed expect the economy to grow at a meager 2 percent or less over the next 12 months ... continue

MANUFACTURING BECOMING YOUNGER, MORE SKILLED
St. Cloud Times
According to the St. Cloud Times, "Manufacturers face an aging workforce, the trades increasingly require higher education and many young people also have relatively weak interest in manufacturing jobs." Also, manufacturing "battles a reputation for low-paying work involving dull and repetitive tasks. Altering that image could be the main hurdle to US companies competing in the world market." The Times noted, "According to the National Association of Manufacturers, average compensation for a manufacturing job in Minnesota in 2009 was above the state's average for nonfarm work."

CANADA'S OIL SANDS AT HEART OF KEYSTONE DEBATE
Omaha-World Herald
"Critics say the environmental costs of stripping away the fragile forestlands and the extensive processing needed to turn oil sands into bitumen ... are too high," new technologies are being developed that could reduce the environmental impact of oil sands extraction. "At the end of the day, oil and gas will be a big part of our energy future. At least in our lifetimes," said Travis Davies of the Canadian Association of Petroleum Producers, who defended the need to bring Canada's oil sands to the US via the pipeline.

JAPAN EXPORTS RISE FOR SECOND MONTH
Today in Manufacturing
Exports rose for second straight month, showing recovery is underway from the tsunami disaster even as manufacturers face a strong yen and weak global economy ... continue

FEATURE: GETTING TECHNICAL
Today in Manufacturing
As product lines continue to expand, companies are working hard to train their workforce to be able to provide increasingly technical know-how ... continue