Post on 20-Aug-2015
THE MANUFACTURING ECONOMIC UPDATE
Dr. Chad MoutrayChief Economist
National Association of Manufacturers
Updated January 17, 2013
Strengths in the Economy in 2012, Which are Expected to Continue Going into 2013
A Recovering Housing Market
Historically Low Interest Rates
Modest Growth in Consumer Spending
Growth in Exports, Albeit at a Slower Pace
Lower Energy Costs, Aided by Shale Exploration
Increased Signs of Reshoring, Improved Global Competitiveness
2005 2006 2007 2008 2009 2010 2011 2012 20130
500
1,000
1,500
2,000
2,500
0
10
20
30
40
50
60
70
80
Housing Market Situation
Housing Starts Housing PermitsNAHB Housing Market Index
NAHB Housing Market Index
Housing Starts, Permits (in thou-sands of units)
Source: U.S. Census Bureau, National Association of Home Builders
2
3
4
5
6
7
8
9Average 30-Year Fixed Mortgage
Rates
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Percent
Source: Freddie Mac
Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012 Q3:2012
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2.3
%
2.2
% 2.6
%
2.4
%
0.1
%
2.5
%
1.3
%
4.1
%
2.0
%
1.3
%
3.1
%
0.4
% 0.7
%
0.5
% 1.1
%
0.5
%
-0.2
%
0.4
% 1.0
%
0.9
%
0.0
%
0.7
%
0.8
%
0.0
% 0.4
% 0.7
%
0.7
%
-0.1
%
-0.1
%
0.3
%
0.3
%
0.1
%
0.2
%0.5
% 1.1
%
0.9
%
1.1
%
1.0
%
0.9
%
0.9
%
0.2
% 0.6
% 1.0
%
0.3
%
Percentage Growth in Real GDP andContributions to Real GDP of Goods and
Services
Real GDP Durable Goods Nondurable Goods Services
Source: Bureau of Economic Analysis
2010 2011 2012
-0.5
0
0.5
1
1.5
2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Personal Income and Spending
Personal Income Personal Spending Savings Rate
Personal Income/Spending (% Change)
Savings RatePercentage
Source: Bureau of Economic Analysis
Canada Mexico FTA Europe Asia South America
TOTAL0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
13.0%
20.1%
16.7% 17.2%
10.8%
23.8%
15.9%
4.6%
10.7%
7.4%
2.7% 3.0%
13.8%
6.6%
% Growth of Manufactured Goods Exports
Annual Change, 2011 vs. 2010 Year-to-Date, Q3:2012 vs. Q3:2011
Source: U.S. Department of Commerce
Canada Mexico China Japan United Kingdom
Germany Brazil Netherlands South Korea Hong Kong40.0
42.0
44.0
46.0
48.0
50.0
52.0
54.0
56.0
58.0
50.4
57.1
51.5
45.0
51.4
46.0
51.1
49.650.1
51.7
Purchasing Managers’ Indices for the Top 10 Export Markets for U.S. Manufactured
Goods(December 2012)
Note:Eurozone PMI: 46.1
Source: Markit
2007 2008 2009 2010 2011 2012 2013
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Real Gross Domestic Product(Chained 2005 Dollars)
Real GDP Forecast:↑ 2.0% (2011)↑ 2.0% (2012)
↑ 2.0% (2013)
Forecast
Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1:12 Q2:12 Q3:12 Q4:1240%
50%
60%
70%
80%
90%
100%
78.4%
52.8%
71.6%69.6%
89.1%
86.1%84.8%
74.0%
47.6% 46.3%
73.1%
78.5%
88.7%
83.1%
69.2%
51.8%
Manufacturing Business Outlook
Source: NAM/Industry Week Survey of ManufacturersNote: Percentage of respondents who characterized the current business outlook at somewhat or very positive. Percentages are annual averages. Q4:2010 and Q1:2011 data are imputed from comparable data using a regression model.
199819992000200120022003200420052006200720082009201020112012201375
80
85
90
95
100
105
Regressing NAM/IndustryWeek Datato Predict Future Industrial Production
Industrial Production Industrial Production (Predicted)
Prediction for Industrial Production Q2:2013
↑ 0.1 % Y-O-YBut ↓ 2.0% from Q4:2012
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1:12 Q2:12 Q3:12 Q4:12
-2
-1
0
1
2
3
4
5
6
Expected Growth of Manufacturing Sales, Investment, and Employment
Sales Investment Employment
Percent
Source: NAM/Industry Week Survey of ManufacturersNote: Expected growth rates are annual averages.
Avg. 12-Mo. Growth Rates:
Sales: ↑ 1.0%Investment: ↓ 0.6%
Employment: ↓ 0.4%
Source: NAM/Industry Week Survey of ManufacturersNote: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
Other
Challenges with access to capital or other forms of financing
Weaker global growth, slower export sales
Attracting and retaining a quality workforce
Rising energy and raw material costs for our products
Weaker domestic economy, sales for our products to U.S. customers
Unfavorable business climate (e.g., taxes, regulation, etc.)
Rising healthcare/insurance costs
Uncertainties related to the political climate (e.g., fiscal abyss, pending budget cuts, etc.)
2.5%
8.4%
33.9%
38.7%
39.6%
67.6%
74.7%
79.0%
84.2%
Primary Current Business Chal-lenges,
Fourth Quarter 2012
Source: NAM Survey for Member Focus (February 2013)Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
Uncertain
No changes in employment, business investment, or outlook
Reduce employment or stop hiring
Reduce or slow down business investment
Reduce your business outlook for 2013
13.4%
16.7%
39.0%
49.7%
62.5%
Special Question: “Has the inability of the nation to address the long-term budget issues caused
you to do any of the following?”
Source: NAM/Industry Week Survey of ManufacturersNote: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
Other
Expanding economic opportunities with more trade agreements
Addressing the "skills gap" facing manufacturers
Implementing a true "all-of-the-above" energy policy
Controlling rising health care costs
Passing comprehensive tax reform
Averting the fiscal abyss and budget sequestration
Reducing the regulatory burden on manufacturers and other businesses
Slowing the growth of entitlement spending
Finding a long-term federal budget deal that tackles the deficit/debt
4.5%
22.0%
30.4%
48.8%
67.6%
68.7%
75.5%
76.4%
82.1%
88.7%
Special Question: “What do you see as the most pressing priorities for the Obama Administration,
113th Congress?”
2005 2006 2007 2008 2009 2010 2011 201220
30
40
50
60
70
80
90
100
110
120
70
75
80
85
90
95
100
105
110
Monthly Business and Consumer Sentiment Surveys
University of Michigan Consumer Confidence Conference Board Consumer ConfidenceNFIB Small Business Optimism
Consumer Confidence Indices
NFIB Small Business Index
2005 2006 2007 2008 2009 2010 2011 2012$130
$150
$170
$190
$210
$230
$250
Manufactured Durable Goods(in Billions of Dollars)
New Orders Shipments
Source: U.S. Census Bureau
2005 2006 2007 2008 2009 2010 2011 201260
65
70
75
80
85
90
95
100
105Industrial Production
Industrial Production Capacity Utilization
Industrial Production/Capacity Utilization %
Source: Federal Reserve Board
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
% Changes in Manufacturing Production, 2012
Manufacturing Durable Goods Nondurable Goods
Percent
Source: Federal Reserve Board
2008 2009 2010 2011 201220.0
30.0
40.0
50.0
60.0
70.0
ISM Manufacturing Indices
Purchasing Managers Index New Orders Index Employment IndexInventories Index
Source: Institute for Supply Management
2011 2012 2013
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
80
82
84
86
88
90
92
94
96
98
100
Regional Federal Reserve Bank Manufacturing & Business Surveys
Dallas Kansas City New YorkPhiladelphia Richmond Chicago
Index for all but Chicago(Growth >0)
Chicago Index(2007=100)
Source: Regional Federal Reserve Banks
2010 2011 20120%
1%
2%
3%
4%
5%
6%
7%
8%
Producer Price IndexYear-Over-Year Percentage Changes
for Each Month
PPI - Finished Goods PPI - Finished Goods Less Food & Energy
Percent
Source: Bureau of Labor Statistics
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
-50
0
50
100
150
200
250
300275
259
143
6887
45
181
192
132
137161 155
52
30
42
10 13 718
-13 -16
7 525
Monthly Changes in Employment, 2012(Thousands of Employees)
Nonfarm Payrolls Manufacturing
Source: Bureau of Labor Statistics
2008 2009 2010 2011 20126
7
8
9
10
11
12
13
14
4%
5%
6%
7%
8%
9%
10%
11%Employment Situation
Durable Goods Nondurable Goods Unemployment Rate
Millionsof Workers
Unemployment Rate
Source: Bureau of Labor Statistics
Leather and Allied Products
Computer and Electronic Products
Computer and Peripheral Equipment
Chemicals
Petroleum and Coal Products
Food Manufacturing
Miscellaneous Manufacturing
Electrical Equipment and Appliances
Semiconductors and Electronic Components
Beverages and Tobacco Products
Plastics and Rubber Products
Primary Metals
Machinery
Motor Vehicles and Parts
Fabricated Metal Products
Transportation Equipment
1.9
2.1
5.2
5.5
6.0
8.6
11.7
15.4
19.2
21.0
42.7
58.3
129.7137.8
151.7
174.3
Manufacturing Sectors with the Largest Net Employment Gains YTD, in Thousands of
Employees(December 2009 to December 2012)
Source: Bureau of Labor Statistics
North Carolina
Oregon
Colorado
Pennsylvania
Georgia
Tennessee
Iowa
Washington
Ohio
Indiana
6.57.07.17.5
9.011.012.013.0
15.615.716.4
18.720.3
23.432.4
43.343.7
46.949.4
64.0
Top 20 States for Manufacturing Job Creation,
December 2009 to October 2012(in Thousands of Workers)
Source: Bureau of Labor Statistics
2008 2009 2010 2011 201275
80
85
90
95
100
105
Manufacturing Employment Growth(December 2007 = 100)
Nonfarm Payrolls ManufacturingDurable Goods Nondurable Goods
Source: Bureau of Labor Statistics
Source: Bureau of Labor Statistics
2007 2008 2009 2010 2011 201250
100
150
200
250
300
350
400
450
500
550
Manufacturing Job Hires & Sepa-rations
(January 2007 to November 2012)
Job Openings Hires Separations
1987 1990 1993 1996 1999 2002 2005 2008 201190
110
130
150
170
190
210
230
250
270
290
Growth in Output per Hour for Man-ufacturing & Nonfarm Businesses
(1987=100)
Manufacturing Durable GoodsNondurable Goods Nonfarm Business
Source: Bureau of Labor Statistics
Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012 Q3:2012
-12%
-7%
-2%
3%
8%
13%
4.8%
8.2%
1.5%
3.9%3.0%
-1.9%
5.5%
0.7%
5.5%
0.1%
-0.7%
7.8%
11.8%
5.5%
3.1%
6.8%
0.7%
5.2%5.5%
10.2%
1.2%
-0.7%
-8.8%
-3.6%
-0.3%
-1.5%
7.5%
-0.4%
-4.8%
-6.6%
1.1%
9.0%
3.2%
Percentage Changes in Manufactur-ing Productivity & Unit Labor Costs
Output Per Hour for All Persons Output Unit Labor Costs
Source: Bureau of Labor Statistics
1947 50 55 60 65 70 75 80 85 90 95 2000 05 10 1210%
12%
14%
16%
18%
20%
22%
24%
26%
28%
Federal Government Receipts & Expen-ditures as a % of Gross Domestic Prod-
uct, 1947 to Present
Federal Receipts as a % of GDP Federal Expenditures as a % of GDP
24.2%
17.2%
Source: Bureau of Economic Analysis
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
Federal Mandatory Spending, 2011-2022(in Trillions of Dollars)
Social Security Medicare, Net of ReceiptsTotal Mandatory Spending Medicaid
Source: Congressional Budget Office, November 2012
Questions?
Dr. Chad MoutrayChief Economist
National Association of Manufacturers
cmoutray@nam.org
(202) 637-3148
Other
Recent mergers or acquisitions
Increased international sales
Increased efficiencies in the production process
New product development
Stronger domestic economy, sales for our products
6.4%
10.6%
40.8%
48.6%
48.9%
61.9%
Primary Drivers of Future Growth, Fourth Quarter 2012
Source: NAM/Industry Week Survey of ManufacturersNote: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
2010 2011 2012
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Pricing Pressures
PPI - Manufactured Finished Goods PPI - Finished GoodsPPI - Finished Goods Less Food & Energy
Percent
Source: Bureau of Labor Statistics
Q1:2010
Q2:2010
Q3:2010
Q4:2010
Q1:2011
Q2:2011
Q3:2011
Q4:2011
Q1:2012
Q2:2012
Q3:2012
Q4:2012
-35
-25
-15
-5
5
15
25
35
5.57.1
8.8 10.5 10.5
16.4
21.8
5.9
-5.4
6.99.5
7.6
-3.7
0
9.17.1
1.9
13.5
7.86.2
-1.9
1.84.9
7.6
-25.5
-7.1
1.8
-7
28.1 27.3
20
-15.7
19.7
31
7.9
-6.2
-29.6
-9.3
-3.6
-21.4
5.6
9.6
5.8
-18.8
15.1
21.8
0
4.5
Lending Standard and Borrowing Demand
For Commercial & Industrial Loans
Easing of standards for large & medium-sized borrowers Easing of standards for small borrowers
Stronger demand from large & medium-sized borrowers Stronger demand from small borrowers
Net % of Re-spondents
Source: Federal Reserve Board of Governors
China
Brazil
India
Mexico
Spain
Italy
Germany
France
Canada
Republic of Korea
United Kingdom
Japan
United States
$13,266
$14,105
$28,051
$28,226
$51,576
$56,208
$60,842
$63,992
$71,529
$76,346
$84,565
$92,960
$118,419
Manufacturing Value-Added Per Worker
Source: United Nations, Bureau of Labor Statistics, International Labor Organization
Manufacturing67%
Information13%
Professional, Scien-tific & Technical
Services14%
Other Nonmanu-facturing Busi-
nesses6%
Manufacturing and Business R&D
Source: National Science Foundation
Utilities
Retail Trade
Professional and Business Services
Wholesale Trade
Finance, Insurance, Real Estate, Rental, and Leasing
Educational Services, Health Care, and Social Assistance
Other Services, Except Government
Government
Mining
Arts, Entertainment, Recreation, Accommodation, and Food Services
Information
Transportation and Warehousing
Construction
Agriculture, Forestry, Fishing, and Hunting
Manufacturing
$0.52
$0.55
$0.55
$0.58
$0.63
$0.66
$0.67
$0.74
$0.82
$0.84
$0.88
$0.95
$0.97
$1.20
$1.35
Manufacturing’s Multiplier EffectIndirect Economic Activity Generated
by $1 of Sector GDP
Source: Bureau of Economic Analysis, 2010 Annual Input-Output Tables
Agriculture
Mining
Utilities
Other Services
Transportation and warehousing
Arts, entertainment, recreation, accommodation, and food services
Construction
Information
Wholesale trade
Retail trade
Education and healthcare
Finance and insurance
Professional and business services
Real estate, rental, and leasing
Manufacturing
1.0%
1.4%
1.8%
2.6%
2.9%
3.8%
4.4%
4.5%
5.8%
6.6%
7.7%
7.9%
11.6%
12.5%
12.7%
Average Private Sector Value-Added Contributions to Real GDP, 1998-2011
Source: U.S. Department of Commerce
2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Global Manufacturing OutputU.S. Still Dominates Manufacturing
Worldwide, with China Close Behind
United States China (World Bank) Japan Germany Republic of Korea Italy
United Kingdom France India Mexico
Source: United Nations Statistics Division, with China data from the World Bank.
Unite
d St
ates
China
Japa
n
Germ
any
Fran
ce
Brazil
Unite
d King
dom
Italy
Russia
U.S. M
anuf
actu
ring
India
Canad
a
Austra
lia
Spain
Mex
ico$0.000000
$2.000000
$4.000000
$6.000000
$8.000000
$10.000000
$12.000000
$14.000000
$16.000000
U.S. Manufacturing Relative to GDP of the 15 Largest Nations
$1.8 Trillion
Source: Bureau of Economic Analysis, International Monetary Fund (2011 Data)
Manufacturing60%
Services30%
Agriculture6%
Other4%
Source: U.S. Department of Commerce (2007)
Distribution of U.S. Exports
Source: U.S. Department of Commerce
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-$600
-$500
-$400
-$300
-$200
-$100
$0
$100$8.87 $17.60 $14.61
$38.28
-$466.04
-$319.27
-$412.01-$441.94
Manufactured Goods Trade Balancefor FTA & FTA Countries, in Billions of Dol-
lars
FTA Countries Non-FTA Countries
Source: U.S. Department of Commerce
Examining Defense Sequestration Alone
Over 1 million private sector jobs, including 130,000 in manufacturing, will be lost in 2014.
GDP will be almost 1 percent lower by 2014.
Total job losses increase the unemployment rate by 0.7 percent.
The largest job losses will occur in:– California (↓ 148,400)– Virginia (↓ 114,900)– Texas (↓ 109,000)– Florida (↓ 56,600)
Source: “Defense Spending Cuts: The Impact on Economic Growth and Jobs” (June 2012)