Dr. Chad Moutray, Chief Economist at the National Association of Manufacturers, provide the CEO’s of US Manufacturing Trade Associations a snapshot of what’s happening in manufacturing and the US economy.

1. THE MANUFACTURING
ECONOMIC UPDATE
Dr. Chad Moutray
Chief Economist
National Association of Manufacturers
Updated July 27, 2012

2. Real Gross Domestic Product
(Chained 2005 Dollars)
6%
Forecast
4%
2%
0%
-2%
-4% Real GDP Forecast:
↑ 1.7% (2011)
-6% ↑ 2.0% (2012)
↑ 2.0% (2013)
-8%
Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model

3. Percentage Growth in Real GDP and
Contributions to Real GDP of Goods and Services
5.0%
4.0%
4.1%
3.0%
2.6%
2.5%
2.4%
2.3%
2.0%
2.2%
2.0%
1.5%
1.3%
1.0% 1.1%
1.1%
1.1%
1.0%
1.0%
0.9%
0.9%
0.9%
0.9%
0.9%
-0.1%
-0.1%
-0.1%
-0.2%
0.8%
0.7%
0.4%
0.5%
0.0%
0.5%
0.4%
0.7%
0.1%
0.5%
0.7%
0.4%
0.3%
0.2%
0.3%
0.6%
0.3%
0.0%
Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012
-1.0%
Real GDP Durable Goods Nondurable Goods Services
Source: Bureau of Economic Analysis

4. Personal Income/
Savings Rate
Spending (% Change) Personal Income and Spending Percentage
1.4 7.0
1.2
6.0
1
5.0
0.8
0.6 4.0
0.4 3.0
0.2
2.0
0 2011
2010
2012
1.0
-0.2
-0.4 0.0
Personal Income Personal Spending Savings Rate
Source: Bureau of Economic Analysis

5. Manufactured Durable Goods
(in Billions of Dollars)
$260
$240
$220
$200
$180
$160
$140
$120
2011
2005
2006
2007
2008
2009
2010
2012
New Orders Shipments
Source: U.S. Census Bureau

6. Industrial Production/
Capacity Utilization % Industrial Production
105
100
95
90
85
80
75
70
65
60
2005
2006
2007
2008
2009
2010
2012
2011
Industrial Production Capacity Utilization
Source: Federal Reserve Board

7. # of Mfg. Industries (19) Manufacturing Production 1 month IP change (%)
5%
16
11 3%
6
1%
1
-4 -1%
-9
-3%
-14
-19 -5%
Number of Mfg Industries Increasing Number of Mfg Industries Decreasing
Percent Change in Mfg Production
Source: Federal Reserve Board

8. Percent % Changes in Manufacturing Production,
2011-2012
2
1.5
1
0.5
0
-0.5
-1
-1.5
Manufacturing Durable Goods Nondurable Goods

9. 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

10. Index for all but Regional Federal Reserve Bank
Chicago
(Growth >0) Manufacturing & Business Surveys Chicago Index
(2007=100)
50.0 100
40.0
95
30.0
90
20.0
10.0 85
0.0
80
2011
2010
2012
-10.0
75
-20.0
-30.0 70
Dallas Kansas City New York Philadelphia Richmond Chicago
Source: Regional Federal Reserve Banks

11. 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
2005
2006
2007
2008
2009
2010
2012
2011
University of Michigan Consumer Confidence Conference Board Consumer Confidence
NFIB Small Business Optimism

12. 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

13. 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
7.1 7.1 7.8 6.9
5.5 5.9 6.2
5.6 5.8
5 1.8 1.9 1.8
0
-5 Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012
-1.9 Q2:2012
-3.7 -3.6 -5.4
-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

14. Monthly Changes in Employment
(Thousands of Employees)
300
275 259
246 251
250
223
220
202
200
157
150 143
110 112
96
100 84 85 80
77
68
52 54 52 42
37
50 30
26 28 28 30
8 12 9 10 9 11
3 -3 3
0
-50
Nonfarm Payrolls Manufacturing

15. 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

16. Manufacturing Sectors with the Largest Net
Employment Gains YTD, in Thousands of Employees
(December 2009 to June 2012)
Fabricated Metal Products 149.7
Transportation Equipment 148.9
Machinery 132.6
Motor Vehicles and Parts 122.6
Primary Metals 63.2
Plastics and Rubber Products 33.7
Semiconductors and Electronic Components 24.8
Electrical Equipment and Appliances 20.1
Computer and Electronic Products 16.8
Beverages and Tobacco Products 14.2
Miscellaneous Manufacturing 13.9
Food Manufacturing 7.8
Computer and Peripheral Equipment 6.6
Chemicals 3.8
Leather and Allied Products 2.0
Petroleum and Coal Products 1.3
Source: Bureau of Labor Statistics

17. Top 20 States for Manufacturing Job Creation,
December 2009 to June 2012
(in Thousands of Workers)
Michigan 64.0
Ohio 49.2
Indiana 48.4
Texas 45.7
Illinois 42.9
Washington 28.1
Wisconsin 26.4
Iowa 21.0
Minnesota 18.4
South Carolina 17.7
Tennessee 16.9
Oklahoma 15.1
Pennsylvania 12.1
Kentucky 12.0
Georgia 9.1
Missouri 8.9
Utah 8.5
Kansas 6.9
Oregon 6.6
Colorado 6.6
North Carolina 5.3
Source: Bureau of Labor Statistics

18. Manufacturing Employment Growth
(December 2007 = 100)
105
100
95
90
85
80
75
Nonfarm Payrolls Manufacturing Durable Goods Nondurable Goods
Source: Bureau of Labor Statistics

19. Manufacturing Job Hires & Separations
(January 2007 to April 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

20. Growth in Output per Hour for
Manufacturing & Nonfarm Businesses
(1987=100)
290
270
250
230
210
190
170
150
130
110
90
1990
1987
1993
1996
1999
2002
2005
2008
2011
Manufacturing Durable Goods Nondurable Goods Nonfarm Business
Source: Bureau of Labor Statistics

21. Percentage Changes in Manufacturing
Productivity & Unit Labor Costs
13%
10.0%
7.8% 9.2% 7.8%
8%
5.7% 5.6% 5.4% 5.2%
4.8% 4.7% 5.2%4.9%
3.8% 4.0%
3% 1.6%
-0.2% 0.6% 0.0% 0.6%
-2% Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012
-1.3% -0.5% -2.0% -1.9%
-2.5%
-4.2%
-4.9%
-7% -7.1%
-12%
Output Per Hour for All Persons Output Unit Labor Costs
Source: Bureau of Labor Statistics

22. 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

23. 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

24. Manufacturing and Business R&D
Information
13%
Professional, Scientifi
c & Technical
Services
14%
Manufacturing
67%
Other
Nonmanufacturing
Businesses
6%
Source: National Science Foundation

25. 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

26. 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
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.

27. 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)

28. % Growth of Manufactured Goods Exports
25.0% 23.7%
19.6%
20.0%
17.2%
16.2% 16.4%
14.5% 15.1%
15.0%
13.0%
12.1% 11.8%
11.2% 11.5%
10.0%
8.2%
5.2%
5.0%
0.0%
Canada Mexico FTA Europe Asia South TOTAL
America
Annual Change, 2011 vs. 2010 Year-to-Date, Q1:2012 vs. Q1:2011
Source: U.S. Department of Commerce

29. 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
2006
2005
2007
2008
2009
2010
2012
Housing Starts Housing Permits NAHB Housing Market Index
Source: U.S. Census Bureau, National Association of Home Builders

30. Federal Government Receipts & Expenditures as a %
of Gross Domestic Product, 1947 to Present
28%
26%
24.0%
24%
22%
20%
18%
16%
14%
17.5%
12%
10%
1947 80
Federal Receipts as a % of GDP Federal Expenditures as a % of GDP
Source: Bureau of Economic Analysis

31. Manufacturing Business Outlook
100%
89.1% 88.7%
90% 86.4%
86.1%
84.8% 83.1%
81.9% 80.2%
78.4% 78.5%
80%
74.0% 73.1%
71.6%
69.6%
70%
65.4%
60%
52.8%
47.6% 46.3%
50%
40%
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.

32. Regressing NAM/IndustryWeek Data
to Predict Future Industrial Production
105
100
95
90
85
80
75
Industrial Production Industrial Production (Predicted)

33. Expected Growth of Manufacturing
Percent Sales, Investment, and Employment
6
5
4
3
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1:12 Q2:12
-1
-2
Sales Investment Employment
Avg. 12-Mo. Growth Rates:
Source: NAM/Industry Week Survey of Manufacturers Sales: ↑ 4.3%
Note: Expected growth rates are annual averages. Investment: ↑ 2.5%
Employment: ↑ 1.9%

34. Primary Current Business Challenges,
Second Quarter 2012
Unfavorable business climate
64.0%
(e.g., taxes, regulation, etc.)
Rising energy and raw material costs for our products 46.4%
Weaker domestic economy, sales for our products 46.1%
Attracting and retaining a quality workforce 45.6%
Rising insurance costs 43.1%
Increased international competition 23.5%
Challenges with access to capital or other forms of
7.8%
financing
Other 7.5%
Source: NAM/Industry Week Survey of Manufacturers
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.

35. Primary Drivers of Future Growth,
Second Quarter 2012
Stronger domestic economy, sales for our products 67.5%
New product development 55.5%
Increased efficiencies in the production process 52.5%
Increased international sales 39.5%
Recent mergers or acquisitions 12.5%
Other 5.9%
Source: NAM/Industry Week Survey of Manufacturers
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.

36. Questions?
Dr. Chad Moutray
Chief Economist
National Association of Manufacturers
cmoutray@nam.org
(202) 637-3148