The Manufacturing Economic Update provides insights into trends and projections for the U.S. manufacturing sector through 2013, highlighting anticipated growth in sales, investment, and employment despite ongoing challenges such as rising costs and financing issues. It notes improvements in areas like housing, consumer spending, and global competitiveness largely attributed to the shale gas revolution. The report emphasizes the necessity for a comprehensive plan to enhance the U.S. manufacturing environment to ensure economic growth and attract foreign investment.

1. THE MANUFACTURING
ECONOMIC UPDATE
Dr. Chad Moutray
Chief Economist
National Association of Manufacturers
Updated April 8, 2013

2. 69.5%
73.9%
74.5% 74.9%
82.8%
86.4%
65.4%
80.2%
88.7%
83.1%
69.2%
51.8%
70.1%
40%
50%
60%
70%
80%
90%
100%
2010:1 2010:2 2010:3 2010:4 2011:1 2011:2 2011:3 2011:4 2012:1 2012:2 2012:3 2012:4 2013:1
Manufacturing Business Outlook
By Quarter, 2010-2013
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.

3. -2
-1
0
1
2
3
4
5
6
2005 2006 2007 2008 2009 2010 2011 2012 Q1:12 Q2:12 Q3:12 Q4:12 Q1:13
Expected Growth of Manufacturing
Sales, Investment, and Employment
Sales Investment Employment
Percent
Source: NAM/Industry Week Survey of Manufacturers
Note: Expected growth rates are annual averages.
Avg. 12-Mo. Growth Rates:
Sales: ↑ 2.3%
Investment: ↑ 0.9%
Employment: ↑ 0.7%

4. 75
80
85
90
95
100
105
Regressing NAM/IndustryWeek Data
to Predict Future Industrial Production
Industrial Production Industrial Production (Predicted)
Prediction for Industrial Production Q3:2013
↑ 0.4 % Y-O-Y
Or, ↑ 1.5 % from Q1:2013

5. Source: NAM/Industry Week Survey of Manufacturers
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
4.7%
27.9%
37.3%
41.1%
49.9%
67.7%
72.1%
74.0%
Challenges with access to capital or other forms of financing
Weaker global growth and slower export sales
Rising energy and raw material costs for our products
Attracting and retaining a quality workforce
Weaker domestic economy and sales for our products to U.S.
customers
Unfavorable business climate (e.g., taxes, regulation)
Uncertainties related to the political climate (e.g., debt/deficit
debate, pending budget cuts)
Rising health care/insurance costs
Primary Current Business Challenges,
First Quarter 2013

6. -10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Real Gross Domestic Product
(Chained 2005 Dollars)
Real GDP Forecast:
↑ 1.8% (2011)
↑ 2.2% (2012)
↑ 2.4% (2013)
Forecast
Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model

7. 2.3%
2.2%
2.6%
2.4%
0.1%
2.5%
1.3%
4.1%
2.0%
1.3%
3.1%
0.4%
0.4%
0.7%
0.5%
1.1%
0.5%
-0.2%
0.4%
1.0%
0.9%
0.0%
0.7%
1.0%
0.8%
0.0%
0.4%
0.7%
0.7%
-0.1%
-0.1%
0.3%
0.3%
0.1%
0.2%
0.0%
0.5%
1.1%
0.9%
1.1%
1.0%
0.9%
0.9%
0.2%
0.6%
1.0%
0.3%
0.3%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012 Q3:2012 Q4:2012
Percentage Growth in Real GDP and
Contributions to Real GDP of Goods and Services
Real GDP Durable Goods Nondurable Goods Services
Source: Bureau of Economic Analysis

8. $130
$150
$170
$190
$210
$230
$250
2005
2006
2007
2008
2009
2010
2011
2012
2013
Manufactured Durable Goods
(in Billions of Dollars)
New Orders Shipments
Source: U.S. Census Bureau

9. 65
70
75
80
85
90
95
100
105
2007
2008
2009
2010
2011
2012
2013
Industrial Production
Industrial Production Capacity Utilization
Industrial Production/
Capacity Utilization %
Source: Federal Reserve Board

10. -1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
Jan-12 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 13-Jan Feb
% Changes in Manufacturing Production, 2012-2013
Manufacturing Durable Goods Nondurable Goods
Percent
Source: Federal Reserve Board

11. 20.0
30.0
40.0
50.0
60.0
70.0
ISM Manufacturing Indices
Purchasing Managers Index New Orders Index
Employment Index Inventories Index
Source: Institute for Supply Management

12. 80
82
84
86
88
90
92
94
96
98
100
-30
-20
-10
0
10
20
30
40
Regional Federal Reserve Bank
Manufacturing & Business Surveys
Dallas Kansas City New York Philadelphia Richmond Chicago
Index for all but
Chicago
(Growth >0)
Chicago Index
(2007=100)
Source: Regional Federal Reserve Banks

13. 311
271
205
112
125
87
153
165
138
160
247
219
148
268
88
44
29
40
10 6 9
22
-14 -18 6 7 13 14 19
-3
-50
0
50
100
150
200
250
300
350
12-Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 13-Jan Feb Mar
Monthly Changes in Employment, 2012-2013
(Thousands of Employees)
Nonfarm Payrolls Manufacturing
Source: Bureau of Labor Statistics

14. 4%
5%
6%
7%
8%
9%
10%
11%
6
7
8
9
10
11
12
13
14
Employment Situation
Durable Goods Nondurable Goods Unemployment Rate
Millions
of Workers
Unemployment
Rate
Source: Bureau of Labor Statistics

15. 4.3
7.1
10.3
11.7
21.1
44.9
52.2
130.7
167.8
176.6
Petroleum and coal products
Miscellaneous durable goods manufacturing
Electrical equipment and appliances
Miscellaneous nondurable goods manufacturing
Food manufacturing
Plastics and rubber products
Primary metals
Machinery
Transportation equipment
Fabricated metal products
Manufacturing Sectors with the Largest Net
Employment Gains YTD, in Thousands of Employees
(December 2009 to March 2013)
Source: Bureau of Labor Statistics

16. 6.9
7.6
8.1
9.3
11.2
11.7
13.5
15.1
16.5
18.0
18.0
22.1
22.8
27.5
29.8
34.9
50.1
54.1
58.7
88.3
Kansas
Florida
Colorado
Utah
Oregon
Georgia
Pennsylvania
North Carolina
South Carolina
Iowa
Minnesota
Tennessee
Kentucky
Illinois
Washington
Wisconsin
Ohio
Indiana
Texas
Michigan
Top 20 States for Manufacturing Job Creation,
December 2009 to February 2013
(in Thousands of Workers)
Source: Bureau of Labor Statistics

17. 75
80
85
90
95
100
105
Manufacturing Employment Growth
(December 2007 = 100)
Nonfarm Payrolls Manufacturing Durable Goods Nondurable Goods
Source: Bureau of Labor Statistics

18. Source: Bureau of Labor Statistics
50
100
150
200
250
300
350
400
450
500
550
Manufacturing Job Hires & Separations
(January 2007 to February 2013)
Job Openings Hires Separations

19. 90
110
130
150
170
190
210
230
250
270
290
1987
1990
1993
1996
1999
2002
2005
2008
2011
Growth in Output per Hour for
Manufacturing & Nonfarm Businesses
(1987=100)
Manufacturing Durable Goods Nondurable Goods Nonfarm Business
Source: Bureau of Labor Statistics

20. 5.7%
8.1%
1.5%
3.1%
4.3%
-2.1%
5.5%
0.5%
6.1%
0.1%
-0.9%
2.1%
7.8%
11.8%
5.5%
3.1%
6.8%
0.7%
5.2%
5.5%
10.2%
1.3%
-0.5%
2.5%
-8.8%
-3.6%
-0.3% -1.6%
7.5%
-0.4%
-4.8%
-6.6%
1.1%
9.0%
1.4%
-1.9%
-12%
-7%
-2%
3%
8%
13%
Q1:2010 Q2:2010 Q3:2010 Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012 Q3:2012 Q4:2012
Percentage Changes in Manufacturing
Productivity & Unit Labor Costs
Output Per Hour for All Persons Output Unit Labor Costs
Source: Bureau of Labor Statistics

21. Some Ongoing Strengths in the Economy
 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

22. 0
10
20
30
40
50
60
70
80
0
500
1,000
1,500
2,000
2,500
2005
2006
2007
2008
2009
2010
2011
2012
2013
Housing Market Situation
Housing Starts Housing Permits NAHB Housing Market Index
NAHB Housing
Market Index
Housing Starts, Permits
(in thousands of units)
Source: U.S. Census Bureau, National Association of Home Builders

23. 2
3
4
5
6
7
8
9
Average 30-Year Fixed Mortgage Rates
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Percent
Source: Freddie Mac

24. $20
$30
$40
$50
$60
$70
2005
2006
2007
2008
2009
2010
2011
2012
2013
New Manufacturing Construction Spending
(Value of Private Construction Put in Place, in Billions of Dollars)
Source: U.S. Census Bureau

25. -10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
-5
-4
-3
-2
-1
0
1
2
3 2010
2011
2012
2013
Personal Income and Spending
Personal Income Personal Spending Savings Rate
Personal Income/
Spending (% Change)
Savings Rate
Percentage
Source: Bureau of Economic Analysis

26. 70
75
80
85
90
95
100
105
110
20
30
40
50
60
70
80
90
100
110
120
2005
2006
2007
2008
2009
2010
2011
2012
2013
Monthly Business and Consumer
Sentiment Surveys
University of Michigan Consumer Confidence Conference Board Consumer Confidence
NFIB Small Business Optimism
Consumer
Confidence Indices
NFIB Small
Business Index

27. 8
10
12
14
16
18
20
22
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total Vehicle Sales
(in Millions of Units)
Source: U.S. Bureau of Economic Analysis

28. 13.0%
20.1%
16.9%
10.8%
17.2%
23.8%
15.9%
4.1%
10.1%
6.8%
2.6%
0.3%
13.3%
5.5%
0%
5%
10%
15%
20%
25%
Canada Mexico FTA Asia Europe South
America
TOTAL
% Growth of Manufactured Goods Exports, 2011-2012
2011 2012
Source: U.S. Department of Commerce

29. 13.0%
20.1%
11.1%
7.8%
17.0%
1.8%
20.1%
18.6%
8.6%
40.9%
4.1%
10.1%
3.3%
11.4%
-2.8% -1.7%
4.1%
-2.7%
1.3%
2.3%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Canada Mexico China Japan United
Kingdom
Germany Brazil Netherlands South Korea Hong Kong
Changes in Manufacturing Exports for the Top 10
U.S.-Manufactured Goods Export Markets, 2011-2012
2011 2012
Source: U.S. Department of Commerce

30. 49.3
52.2
51.6
50.4
48.3
48.9
51.8
48.0
52.0
50.5
45.0
50.0
55.0
Canada Mexico China Japan United
Kingdom
Germany Brazil Netherlands South Korea Hong Kong
Purchasing Managers’ Indices for the Top 10 Export
Markets for U.S. Manufactured Goods
(March 2013)
Notes:
Eurozone PMI: 46.8
Global PMI: 51.2
Source: Markit

31. Tremendous Promise of Shale Gas
– PwC (December 2011) with the NAM:
 U.S. manufacturing companies could employ approximately one million more
workers by 2025 due to the benefits of affordable energy and demand for
products used to extract the gas.
 This same study found that, because of increased shale exploration, lower
feedstock and energy costs could help U.S. manufacturers reduce natural gas
expenses by as much as $11.6 billion annually through 2025.
– We have already seen how the shale gas revolution has transformed
communities, helped to lift employment, and provide tremendous
potential moving forward.
– Energy costs are a competitive advantage for U.S. manufacturers right
now.

32. 0%
1%
2%
3%
4%
5%
6%
7%
8%
2010
2011
2012
2013
Producer Price Index
Year-Over-Year Percentage Changes for Each Month
PPI - Finished Goods PPI - Finished Goods Less Food & Energy
Percent
Source: Bureau of Labor Statistics

33. 10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
1947 80
Federal Government Receipts & Expenditures as a %
of Gross Domestic Product, 1947 to Present
Federal Receipts as a % of GDP Federal Expenditures as a % of GDP
23.8%
16.9%
Source: Bureau of Economic Analysis

34. $0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Federal Mandatory Spending, 2012-2023
(in Trillions of Dollars)
Social Security Medicare, Net of Receipts Total Mandatory Spending Medicaid
Source: Congressional Budget Office, February 2013

35. The United States needs a comprehensive
plan for economic growth and
competitiveness.

36. GOAL 1
The United States will be the best place in the world to manufacture and
attract foreign direct investment.
Manufacturers have an array of attractive options around the world when deciding
where to invest, conduct research, build new facilities and create jobs.
 Create a pro-manufacturing tax policy.
 Embrace an “all-of-the above” approach to energy production.
 Modernize and invest in infrastructure.
 Ensure that the benefits of regulations justify their costs to manufacturers in the
United States.
 Implement common-sense, fair legal reform.
 Reduce health care costs for both patients and providers.

37. Manufacturers in the United States will be the world’s leading innovators.
Innovation propelled the United States to its global leadership position in manufacturing.
But other nations are eager to take our place and are establishing more attractive R&D
incentives than those offered by the United States.
 Provide a strong, permanent and competitive R&D incentive.
 Support federal research agencies and public- and private-sector research.
 Recognize IP as the basis of America’s innovative economy.
 Develop appropriate general and industry-specific best practices for improved
cybersecurity.
 Support the growth of a healthy information and communication technology
ecosystem.
GOAL 2

38. The United States will expand access to global markets to enable
manufacturers to reach the 95 percent of consumers who live outside our
borders.
 Promote a global trade policy that opens international markets, enhances
competitiveness and reduces regulatory and tariff barriers.
 Reduce trading costs, domestic export barriers and unnecessary red tape.
 Boost exports through improved export promotion programs and export credit
assistance for both small and large manufacturers.
 Ensure a level playing field for manufacturers by enforcing trade laws and
international agreements.
GOAL 3

39. Manufacturers in the United States will have access to the
workforce that the 21st–century economy demands.
 Address regulations and mandates that undermine employer
flexibility and ultimately discourage the hiring of new
employees.
 Develop a more productive workforce and encourage
innovation through education reforms and improvements.
 Enact comprehensive immigration reform.
 Attract the best and brightest to the United States.
GOAL 4

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