3rd Quarter Manufacturing Economic Update

370 views

Published on

NAM’s Chief Economist, Dr. Chad Moutray, and his renowned ability to break-down complex data into straightforward, usable nuggets of information goes through the latest numbers for you. His in-depth insight will provides a comprehensive look at manufacturing industry trends and the current state of the manufacturing economy in America.

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

3rd Quarter Manufacturing Economic Update

  1. 1. THE MANUFACTURING ECONOMIC UPDATE Dr. Chad Moutray Chief Economist National Association of Manufacturers Updated October 10, 2012
  2. 2. Real Gross Domestic Product (Chained 2005 Dollars) 6% 6% Forecast 4% 4% 2% 2% 0% 0% -2% -2% -4% Real GDP Forecast: -4% ↑ 1.8% (2011) -6% ↑ 1.9% (2012) -6% -8% ↑ 2.1% (2013) – No Fiscal Cliff -8% ↓ 0.5% (2013) – Fiscal Cliff -10% -10%Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model
  3. 3. Assuming There Is a Fiscal Cliff  There will be a recession in 2013, with negative real GDP in the first half of the year.  The unemployment rate will increase to over 9 percent by mid-2013.  Industrial production will slow to a near-standstill in 2013.  Manufacturing employment will decline by at least 300,000 in 2013.Source: NAM calculations using Moody’s Analytics simulation model
  4. 4. 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)
  5. 5. 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% 69.2% 70% 65.4% 60% 52.8% 47.6% 46.3% 50% 40% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1:11 Q2:11 Q3:11 Q4:11 Q1:12 Q2:12 Q3:12Source: NAM/Industry Week Survey of ManufacturersNote: Percentage of respondents who characterized the current business outlook at somewhat or very positive. Percentagesare annual averages. Q4:2010 and Q1:2011 data are imputed from comparable data using a regression model.
  6. 6. Regressing NAM/IndustryWeek Data to Predict Future Industrial Production105100 95 90 85 80 75 Industrial Production Industrial Production (Predicted) Prediction for Industrial Production Q1:2013 ↑ 4.1 % Y-O-Y But ↓ 1.2% from Q3:2012
  7. 7. 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 Q3:12 -1 -2 Sales Investment Employment Avg. 12-Mo. Growth Rates:Source: NAM/Industry Week Survey of Manufacturers Sales: ↑ 2.5%Note: Expected growth rates are annual averages. Investment: ↑ 1.2% Employment: ↑ 0.7%
  8. 8. Primary Current Business Challenges, Third Quarter 2012 Uncertainties related to the political climate (e.g., fiscal abyss, pending budget cuts, etc.) 78.7% Rising healthcare/insurance costs 69.4% Unfavorable business climate (e.g., taxes, regulation, etc.) 62.4% Weaker domestic economy, sales for our products to U.S. customers 60.7% Rising energy and raw material costs for our products 39.9% Attracting and retaining a quality workforce 39.5% Weaker global growth, slower export sales 33.7% Challenges with access to capital or other forms of financing 7.0% Other 3.9%Source: NAM/Industry Week Survey of ManufacturersNote: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
  9. 9. Primary Drivers of Future Growth, Third Quarter 2012 Stronger domestic economy, sales for our products 60.6% New product development 56.1% Increased efficiencies in the production process 51.3% Increased international sales 42.5% Recent mergers or acquisitions 11.8% Other 8.0%Source: NAM/Industry Week Survey of ManufacturersNote: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
  10. 10. Monthly Business and ConsumerConsumer NFIB SmallConfidence Indices Sentiment Surveys Business Index120 110110 105100 100 90 80 95 70 90 60 85 50 80 40 30 75 20 70 2010 2005 2006 2007 2008 2009 2012 2011 University of Michigan Consumer Confidence Conference Board Consumer Confidence NFIB Small Business Optimism
  11. 11. 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% 1.3% 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% 0.7% 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% 0.1% 0.0% 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 ServicesSource: Bureau of Economic Analysis
  12. 12. 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 2011 2010 2012 -0.5 0.0 Personal Income Personal Spending Savings RateSource: Bureau of Economic Analysis
  13. 13. 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 ShipmentsSource: U.S. Census Bureau
  14. 14. 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 UtilizationSource: Federal Reserve Board
  15. 15. % Changes in Manufacturing Production, Percent 2011-2012 2 1.5 1 0.5 0 -0.5 -1 -1.5 Manufacturing Durable Goods Nondurable GoodsSource: Federal Reserve Board
  16. 16. ISM Manufacturing Indices 70.0 60.0 50.0 40.0 30.0 20.0 Purchasing Managers Index New Orders Index Employment Index Inventories IndexSource: Institute for Supply Management
  17. 17. Index for all but Regional Federal Reserve Bank Chicago (Growth >0) Manufacturing & Business Surveys Chicago Index (2007=100) 50.0 105 40.0 100 30.0 95 20.0 90 10.0 85 0.0 80 2011 2010 2012 -10.0 75 -20.0 70 -30.0 65 Dallas Kansas City New York Philadelphia Richmond ChicagoSource: Regional Federal Reserve Banks
  18. 18. 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 & EnergySource: Bureau of Labor Statistics
  19. 19. Monthly Changes in Employment (Thousands of Employees) 300 275 259 246 251 250 223 220 202 200 181 157 150 143 142 110 112 114 96 100 84 85 87 68 52 54 52 42 37 45 50 26 28 30 28 30 12 13 7 18 8 3 9 3 10 -3 -22 -16 0 -50 Nonfarm Payrolls ManufacturingSource: Bureau of Labor Statistics
  20. 20. 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 RateSource: Bureau of Labor Statistics
  21. 21. Manufacturing Sectors with the Largest Net Employment Gains YTD, in Thousands of Employees (December 2009 to September 2012) Transportation Equipment 155.2 Fabricated Metal Products 149.8 Machinery 129.4 Motor Vehicles and Parts 124.7 Primary Metals 57.8 Plastics and Rubber Products 37.3 Semiconductors and Electronic Components 22.3 Electrical Equipment and Appliances 17.1 Beverages and Tobacco Products 16.4 Food Manufacturing 15.7 Miscellaneous Manufacturing 9.9 Chemicals 5.5 Computer and Peripheral Equipment 5.3 Computer and Electronic Products 4.7 Petroleum and Coal Products 2.3 Leather and Allied Products 1.4Source: Bureau of Labor Statistics
  22. 22. Top 20 States for Manufacturing Job Creation, December 2009 to August 2012 (in Thousands of Workers) Michigan 65.2 Ohio 52.1 Indiana 47.6 Texas 45.9 Illinois 44.9 Washington 31.2 Wisconsin 22.5 Iowa 19.6 Minnesota 16.9 Tennessee 15.9 Oklahoma 15.9 South Carolina 15.7 Pennsylvania 13.5 Missouri 13.3 Kentucky 12.9 Georgia 11.4 Oregon 8.7 Colorado 8.1 Utah 7.3 Kansas 6.9Source: Bureau of Labor Statistics
  23. 23. Manufacturing Employment Growth (December 2007 = 100) 105 100 95 90 85 80 75 Nonfarm Payrolls Manufacturing Durable Goods Nondurable GoodsSource: Bureau of Labor Statistics
  24. 24. Manufacturing Job Hires & Separations (January 2007 to August 2012) 550 500 450 400 350 300 250 200 150 100 50 2011 2007 2008 2009 2010 2012 Job Openings Hires SeparationsSource: Bureau of Labor Statistics
  25. 25. 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 BusinessSource: Bureau of Labor Statistics
  26. 26. Percentage Changes in Manufacturing Productivity & Unit Labor Costs 13% 11.8% 10.1% 7.8% 8.2% 8% 6.8% 5.5% 5.5% 5.2% 5.5% 5.5% 4.8% 7.5% 3.9% 3.1% 3.0% 3% 1.5% 1.5% 1.2% 0.7% 0.7% 0.8% 0.1% -0.4% Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012 -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 CostsSource: Bureau of Labor Statistics
  27. 27. % Growth of Manufactured Goods Exports 25.0% 23.8% 20.1% 20.0% 16.7% 17.2% 15.9% 15.0% 14.2% 13.0% 12.7% 10.8% 9.5% 10.0% 9.0% 6.3% 6.2% 5.7% 5.0% 0.0% Canada Mexico FTA Europe Asia South TOTAL America Annual Change, 2011 vs. 2010 Year-to-Date, Q2:2012 vs. Q2:2011Source: U.S. Department of Commerce
  28. 28. 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 2012 2005 2006 2007 2008 2009 2010 Housing Starts Housing Permits NAHB Housing Market IndexSource: U.S. Census Bureau, National Association of Home Builders
  29. 29. 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 GDPSource: Bureau of Economic Analysis
  30. 30. Questions? Dr. Chad Moutray Chief EconomistNational Association of Manufacturers cmoutray@nam.org (202) 637-3148
  31. 31. # 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 ProductionSource: Federal Reserve Board
  32. 32. 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 5.5 7.1 5.9 6.2 5.6 5.8 4.9 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 -1.9 Q2:2012 Q3:2012 -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 borrowersSource: Federal Reserve Board of Governors
  33. 33. 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 $13,266Source: United Nations, Bureau of Labor Statistics, International Labor Organization
  34. 34. Manufacturing and Business R&D Information 13% Professional, Scientifi c & Technical Services 14% Manufacturing 67% Other Nonmanufacturing Businesses 6%Source: National Science Foundation
  35. 35. 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 $0.52Source: Bureau of Economic Analysis, 2010 Annual Input-Output Tables
  36. 36. 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
  37. 37. 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 MexicoSource: United Nations Statistics Division, with China data from the World Bank.
  38. 38. U.S. Manufacturing Relative to GDP of the 15 Largest Nations $16 $14 $12 $10 $8 $6 $4 $1.8 Trillion $2 $0Source: Bureau of Economic Analysis, International Monetary Fund (2011 Data)
  39. 39. 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)
  40. 40. 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 CountriesSource: U.S. Department of Commerce

×