May 8, 2012

Economic indicators released last week were mixed. Manufacturing continues to advance, boosting output and overall job creation. The Institute for Supply Management (ISM) released its latest Purchasing Managers’ Index (PMI), which showed new orders, production and employment growing at a faster pace than previous months. One encouraging sign was the improvement in new export sales, which should help to propel new activity moving forward. Likewise, the Bureau of Labor Statistics (BLS) reported sharply higher labor productivity for manufacturers in the first quarter, up 5.9 percent, led by stronger output.

The productivity figures suggest that manufacturers should continue hiring. Indeed, manufacturing employment continued to expand—albeit at a lower rate—in April, adding 16,000 new jobs. Most of the additional employment came from durable goods sectors, continuing a trend throughout the recovery to date. During the past five months, the sector has added 167,000 new jobs, making it a bright spot in an otherwise disappointing labor report.

Most economic news lately has pointed to a spring slowdown. Factory orders in March fell 1.5 percent. While nondefense aircraft contributed to most of the change, new orders excluding transportation were flat, reflecting larger weaknesses. Data from ISM-Chicago and the Dallas Federal Reserve Bank echoed the easing of manufacturing activity, with new orders and overall perceptions about growth contracting. Yet, future expectations for production are cautiously optimistic, and activity is projected to pick up in the coming months. I anticipate industrial production rising 4 percent this year. Seasonal factors can explain at least part of the slowdown, and these should dissipate as future data are released.

One of the driving factors for economic growth has been the consumer. The most recent GDP figures found that nearly 1.5 percentage points of the 2.2 percent growth in the first quarter stemmed from personal consumption. This has helped lift manufacturing activity. Personal spending rose a more modest 0.3 percent in March, its slowest pace of the year. This is perhaps reflective of anxieties earlier in the year, with higher energy prices dampening consumer sentiment. Even with this easing, though, consumers still spent 4 percent more than a year ago.

Later today, we will get a sense of how consumer spending is being financed with the release of new consumer credit data from the Federal Reserve. Past releases have pointed to rising debt levels, and the Bureau of Economic Analysis now says that the savings rate has fallen to 3.8 percent. Other key data points to watch this week are job openings data tomorrow, international trade figures on Thursday and the latest producer price information on Friday.

Chad Moutray
Chief Economist
National Association of Manufacturers

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NAM RECOGNIZES ORRIN HATCH FOR SUPPORT OF MANUFACTURERS

(In a letter to Utah’s Senior Senator Orrin Hatch dated May 3, 2012, Senior Vice President for Policy and Government Relations, Aric Newhouse recognized and praised Hatch’s efforts on behalf of manufacturers. The letter to Hatch follows:)

May 3, 2012

The Honorable Orrin G. Hatch

United States Senate

104 Hart Senate Office Building

Washington, DC 20510-4402

Dear Senator Hatch:

On behalf of the National Association of Manufacturers (NAM), thank you for your support of the manufacturing economy. Your leadership on tax, trade and healthcare policy has made U.S. manufacturers more competitive, protected manufacturing jobs and encouraged job growth.

As you know, U.S. manufacturers face significant challenges including a 20 percent cost disadvantage compared to their competitors in our major trading partners. With that in mind, your support for pro-growth and pro-jobs tax policies has been critical for the competitiveness of the manufacturing community.

Manufacturers support job-creating free trade policies to allow access to 95 percent of the world's consumers who live outside of our borders. Your consistent support for free trade and leadership on Trade Promotion Authority has been repeatedly recognized by manufacturers and is sincerely appreciated.

Additionally, over 95 percent of NAM members provide health insurance to their employees and the rising cost of coverage has been devastating. Your efforts to rein in health care costs and support commonsense reforms have been appreciated throughout our membership.

Since the National Association of Manufacturers began scoring key manufacturing votes in the 105^th Congress, you have achieved an outstanding 97 percent favorable voting record. Thank you for your leadership and work on behalf of manufacturers and their employees.

Sincerely,

Aric Newhouse

Senior Vice President

Policy and Government Relations