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Manufacturing Economic Update
1. THE MANUFACTURING
ECONOMIC UPDATE
Dr. Chad Moutray
Chief Economist
National Association of Manufacturers
Updated January 17, 2013
2. 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
3. Housing Starts, Permits NAHB Housing
(in thousands of units) Housing Market Situation Market Index
2,500 80
70
2,000
60
1,500 50
40
1,000 30
20
500
10
0 0
2011
2005
2006
2007
2008
2009
2010
2012
2013
Housing Starts Housing Permits NAHB Housing Market Index
Source: U.S. Census Bureau, National Association of Home Builders
5. Percentage Growth in Real GDP and
Contributions to Real GDP of Goods and Services
5.0%
4.0%
4.1%
3.0%
3.1%
2.6%
2.5%
2.4%
2.3%
2.0%
2.2%
2.0%
1.3%
1.3%
1.0%
1.1%
1.1%
1.1%
1.0%
1.0%
1.0%
0.9%
0.9%
0.9%
0.9%
-0.1%
-0.1%
-0.2%
0.8%
0.4%
0.5%
0.7%
0.0%
0.5%
0.4%
0.7%
0.1%
0.5%
0.7%
0.4%
0.3%
0.2%
0.3%
0.6%
0.1%
0.7%
0.2%
0.3%
0.0%
0.0%
Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012 Q3:2012
-1.0%
Real GDP Durable Goods Nondurable Goods Services
Source: Bureau of Economic Analysis
6. Personal Income/
Savings Rate
Spending (% Change) Personal Income and Spending Percentage
2 6.0
5.0
1.5
4.0
1
3.0
0.5
2.0
0
1.0
-0.5 0.0
Personal Income Personal Spending Savings Rate
Source: Bureau of Economic Analysis
7. % Growth of Manufactured Goods Exports
25.0% 23.8%
20.1%
20.0%
17.2%
16.7%
15.9%
15.0% 13.8%
13.0%
10.7% 10.8%
10.0%
7.4%
6.6%
5.0% 4.6%
2.7% 3.0%
0.0%
Canada Mexico FTA Europe Asia South TOTAL
America
Annual Change, 2011 vs. 2010 Year-to-Date, Q3:2012 vs. Q3:2011
Source: U.S. Department of Commerce
8. Purchasing Managers’ Indices for the Top 10 Export
Markets for U.S. Manufactured Goods
(December 2012)
60.0
57.1
Note:
Eurozone PMI: 46.1
55.0
51.5 51.4 51.7
51.1
50.4 50.1
50.0 49.6
46.0
45.0
45.0
40.0
Canada Mexico China Japan United Germany Brazil Netherlands South Korea Hong Kong
Kingdom
Source: Markit
9. Real Gross Domestic Product
(Chained 2005 Dollars)
6%
Forecast
4%
2%
0%
-2%
-4% Real GDP Forecast:
↑ 2.0% (2011)
-6% ↑ 2.0% (2012)
-8% ↑ 2.0% (2013)
-10%
Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model
10. Manufacturing Business Outlook
100%
89.1% 88.7%
90%
86.1%
84.8% 83.1%
78.4% 78.5%
80%
74.0% 73.1%
71.6%
69.6% 69.2%
70%
60%
52.8% 51.8%
47.6% 46.3%
50%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1:12 Q2:12 Q3:12 Q4:12
Source: NAM/Industry Week Survey of Manufacturers
Note: 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.
11. Regressing NAM/IndustryWeek Data
to Predict Future Industrial Production
105
100
95
90
85
80
75
Industrial Production Industrial Production (Predicted)
Prediction for Industrial Production Q2:2013
↑ 0.1 % Y-O-Y
But ↓ 2.0% from Q4:2012
13. Primary Current Business Challenges,
Fourth Quarter 2012
Uncertainties related to the political climate (e.g., fiscal
abyss, pending budget cuts, etc.)
84.2%
Rising healthcare/insurance costs 79.0%
Unfavorable business climate (e.g., taxes, regulation, etc.) 74.7%
Weaker domestic economy, sales for our products to U.S.
customers
67.6%
Rising energy and raw material costs for our products 39.6%
Attracting and retaining a quality workforce 38.7%
Weaker global growth, slower export sales 33.9%
Challenges with access to capital or other forms of financing 8.4%
Other 2.5%
Source: NAM/Industry Week Survey of Manufacturers
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
14. Special Question: “Has the inability of the nation to
address the long-term budget issues caused you to do
any of the following?”
Reduce your business outlook for 2013 62.5%
Reduce or slow down business investment 49.7%
Reduce employment or stop hiring 39.0%
No changes in employment, business investment, or outlook 16.7%
Uncertain 13.4%
Source: NAM Survey for Member Focus (February 2013)
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
15. Special Question: “What do you see as the most pressing
priorities for the Obama Administration, 113th Congress?”
Finding a long-term federal budget deal that tackles the deficit/debt 88.7%
Slowing the growth of entitlement spending 82.1%
Reducing the regulatory burden on manufacturers and other
businesses
76.4%
Averting the fiscal abyss and budget sequestration 75.5%
Passing comprehensive tax reform 68.7%
Controlling rising health care costs 67.6%
Implementing a true "all-of-the-above" energy policy 48.8%
Addressing the "skills gap" facing manufacturers 30.4%
Expanding economic opportunities with more trade agreements 22.0%
Other 4.5%
Source: NAM/Industry Week Survey of Manufacturers
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
16. Monthly Business and Consumer
Consumer NFIB Small
Confidence Indices Sentiment Surveys Business Index
120 110
110 105
100
100
90
80 95
70 90
60 85
50
80
40
30 75
20 70
2012
2005
2006
2007
2008
2009
2010
2011
University of Michigan Consumer Confidence Conference Board Consumer Confidence
NFIB Small Business Optimism
17. Manufactured Durable Goods
(in Billions of Dollars)
$250
$230
$210
$190
$170
$150
$130
2011
2005
2006
2007
2008
2009
2010
2012
New Orders Shipments
Source: U.S. Census Bureau
19. Percent % Changes in Manufacturing Production, 2012
2.5
2
1.5
1
0.5
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-0.5
-1
-1.5
Manufacturing Durable Goods Nondurable Goods
Source: Federal Reserve Board
20. ISM Manufacturing Indices
70.0
60.0
50.0
40.0
30.0
20.0
Purchasing Managers Index New Orders Index
Employment Index Inventories Index
Source: Institute for Supply Management
21. Index for all but Regional Federal Reserve Bank
Chicago
(Growth >0) Manufacturing & Business Surveys Chicago Index
(2007=100)
40.0 100
98
30.0
96
20.0 94
10.0
92
90
0.0
88
-10.0 86
84
-20.0
82
-30.0 80
Dallas Kansas City New York Philadelphia Richmond Chicago
Source: Regional Federal Reserve Banks
22. Producer Price Index
Percent Year-Over-Year Percentage Changes for Each Month
8%
7%
6%
5%
4%
3%
2%
1%
0%
2011
2010
2012
PPI - Finished Goods PPI - Finished Goods Less Food & Energy
Source: Bureau of Labor Statistics
23. Monthly Changes in Employment, 2012
(Thousands of Employees)
300
275
259
250
192
200 181
161
143 137 155
150 132
100 87
68
52 42 45
50 30
18 25
10 13
7 7 5
-13 -16
0
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
-50
Nonfarm Payrolls Manufacturing
Source: Bureau of Labor Statistics
24. Millions
of Workers
Employment Situation Unemployment
Rate
14 11%
13 10%
12
9%
11
8%
10
7%
9
6%
8
7 5%
6 4%
Durable Goods Nondurable Goods Unemployment Rate
Source: Bureau of Labor Statistics
25. Manufacturing Sectors with the Largest Net
Employment Gains YTD, in Thousands of Employees
(December 2009 to December 2012)
Transportation Equipment 174.3
Fabricated Metal Products 151.7
Motor Vehicles and Parts 137.8
Machinery 129.7
Primary Metals 58.3
Plastics and Rubber Products 42.7
Beverages and Tobacco Products 21.0
Semiconductors and Electronic Components 19.2
Electrical Equipment and Appliances 15.4
Miscellaneous Manufacturing 11.7
Food Manufacturing 8.6
Petroleum and Coal Products 6.0
Chemicals 5.5
Computer and Peripheral Equipment 5.2
Computer and Electronic Products 2.1
Leather and Allied Products 1.9
Source: Bureau of Labor Statistics
26. Top 20 States for Manufacturing Job Creation,
December 2009 to October 2012
(in Thousands of Workers)
Michigan 64.0
Indiana 49.4
Texas 46.9
Ohio 43.7
Illinois 43.3
Washington 32.4
Wisconsin 23.4
Iowa 20.3
South Carolina 18.7
Tennessee 16.4
Oklahoma 15.7
Georgia 15.6
Minnesota 13.0
Pennsylvania 12.0
Kentucky 11.0
Colorado 9.0
Utah 7.5
Oregon 7.1
Kansas 7.0
North Carolina 6.5
Source: Bureau of Labor Statistics
28. Manufacturing Job Hires & Separations
(January 2007 to November 2012)
550
500
450
400
350
300
250
200
150
100
50
2011
2007
2008
2009
2010
2012
Job Openings Hires Separations
Source: Bureau of Labor Statistics
29. Growth in Output per Hour for
Manufacturing & Nonfarm Businesses
(1987=100)
290
270
250
230
210
190
170
150
130
110
90
2011
1990
1987
1993
1996
1999
2002
2005
2008
Manufacturing Durable Goods Nondurable Goods Nonfarm Business
Source: Bureau of Labor Statistics
30. Percentage Changes in Manufacturing
Productivity & Unit Labor Costs
13% 11.8%
10.2%
9.0%
7.8% 8.2% 7.5%
8%
6.8%
5.5% 5.5% 5.2% 5.5% 5.5%
4.8%
3.9%
3.1% 3.0% 3.2%
3% 1.5% 1.1% 1.2%
0.7% -0.4% 0.7%
0.1% -0.7% -0.7%
Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012 Q3:2012
-2%
-0.3% -1.5% -1.9%
-3.6%
-4.8%
-7%
-6.6%
-8.8%
-12%
Output Per Hour for All Persons Output Unit Labor Costs
Source: Bureau of Labor Statistics
31. Federal Government Receipts & Expenditures as a %
of Gross Domestic Product, 1947 to Present
28%
26%
24.2%
24%
22%
20%
18%
16%
14%
17.2%
12%
10%
1947 80
Federal Receipts as a % of GDP Federal Expenditures as a % of GDP
Source: Bureau of Economic Analysis
32. Federal Mandatory Spending, 2011-2022
(in Trillions of Dollars)
$4.5
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Social Security Medicare, Net of Receipts Total Mandatory Spending Medicaid
Source: Congressional Budget Office, November 2012
33. Questions?
Dr. Chad Moutray
Chief Economist
National Association of Manufacturers
cmoutray@nam.org
(202) 637-3148
34. Primary Drivers of Future Growth,
Fourth Quarter 2012
Stronger domestic economy, sales for our products 61.9%
New product development 48.9%
Increased efficiencies in the production process 48.6%
Increased international sales 40.8%
Recent mergers or acquisitions 10.6%
Other 6.4%
Source: NAM/Industry Week Survey of Manufacturers
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
35. Percent Pricing Pressures
2.5
2.0
1.5
1.0
0.5
0.0
2010
2012
2011
-0.5
-1.0
-1.5
PPI - Manufactured Finished Goods PPI - Finished Goods
PPI - Finished Goods Less Food & Energy
Source: Bureau of Labor Statistics
36. Net % of Lending Standard and Borrowing Demand
Respondents
For Commercial & Industrial Loans
35
31
28.1 27.3
25 21.8
21.8
20 19.7
16.4
13.5 15.1
15 10.5 10.5
8.8 9.1 9.6 9.5
7.1 7.8 6.9 7.9 7.6 7.6
5.5 7.1 5.9 6.2
5.6 5.8 4.9 4.5
5 1.8 1.9 1.8
0 0
-5 Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012 Q3:2012 Q4:2012
-1.9
-3.7 -3.6 -5.4 -6.2
-7.1 -7
-9.3
-15
-15.7
-18.8
-21.4
-25
-25.5
-29.6
-35
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
Source: Federal Reserve Board of Governors
37. Manufacturing Value-Added Per Worker
United States $118,419
Japan $92,960
United Kingdom $84,565
Republic of Korea $76,346
Canada $71,529
France $63,992
Germany $60,842
Italy $56,208
Spain $51,576
Mexico $28,226
India $28,051
Brazil $14,105
China $13,266
Source: United Nations, Bureau of Labor Statistics, International Labor Organization
38. Manufacturing and Business R&D
Information
13%
Professional, Scientifi
c & Technical
Services
14%
Manufacturing
67%
Other
Nonmanufacturing
Businesses
6%
Source: National Science Foundation
39. Manufacturing’s Multiplier Effect
Indirect Economic Activity Generated by $1 of Sector GDP
Manufacturing $1.35
Agriculture, Forestry, Fishing, and Hunting $1.20
Construction $0.97
Transportation and Warehousing $0.95
Information $0.88
Arts, Entertainment, Recreation, Accommodation, and Food… $0.84
Mining $0.82
Government $0.74
Other Services, Except Government $0.67
Educational Services, Health Care, and Social Assistance $0.66
Finance, Insurance, Real Estate, Rental, and Leasing $0.63
Wholesale Trade $0.58
Professional and Business Services $0.55
Retail Trade $0.55
Utilities $0.52
Source: Bureau of Economic Analysis, 2010 Annual Input-Output Tables
40. Average Private Sector Value-Added
Contributions to Real GDP, 1998-2011
Manufacturing 12.7%
Real estate, rental, and leasing 12.5%
Professional and business services 11.6%
Finance and insurance 7.9%
Education and healthcare 7.7%
Retail trade 6.6%
Wholesale trade 5.8%
Information 4.5%
Construction 4.4%
Arts, entertainment, recreation, accommodation… 3.8%
Transportation and warehousing 2.9%
Other Services 2.6%
Utilities 1.8%
Mining 1.4%
Agriculture 1.0%
Source: U.S. Department of Commerce
41. Global Manufacturing Output
U.S. Still Dominates Manufacturing Worldwide, with China Close Behind
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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.
42. U.S. Manufacturing Relative to GDP
of the 15 Largest Nations
$16.000000
$14.000000
$12.000000
$10.000000
$8.000000
$6.000000
$4.000000 $1.8 Trillion
$2.000000
$0.000000
Source: Bureau of Economic Analysis, International Monetary Fund (2011 Data)
43. Distribution of U.S. Exports
Services
30%
Agriculture
6%
Manufacturing
60% Other
4%
Source: U.S. Department of Commerce
Source: U.S. Department of Commerce (2007)
44. Manufactured Goods Trade Balance
for FTA & FTA Countries, in Billions of Dollars
$100
$38.28
$8.87 $17.60 $14.61
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-$100
-$200
-$300
-$319.27
-$400
-$412.01
-$441.94
-$500 -$466.04
-$600
FTA Countries Non-FTA Countries
Source: U.S. Department of Commerce
45. 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)