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THE MANUFACTURING ECONOMIC UPDATE
Dr. Chad MoutrayChief Economist
National Association of Manufacturers
Updated July 27, 2012
2007 2008 2009 2010 2011 2012 2013
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Real Gross Domestic Product(Chained 2005 Dollars)
Real GDP Forecast:↑ 1.7% (2011)↑ 2.0% (2012)↑ 2.0% (2013)
Forecast
Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model
Q1:20
10
Q2:20
10
Q3:20
10
Q4:20
10
Q1:20
11
Q2:20
11
Q3:20
11
Q4:20
11
Q1:20
12
Q2:20
12-1.0%
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
%
1.5
%
0.4
% 0.7
%
0.5
% 1.1
%
0.5
%
-0.2
%
0.4
% 1.0
%
0.9
%
-0.1
%
0.8
%
0.0
%
0.4
% 0.7
%
0.7
%
-0.1
%
-0.1
%
0.3
%
0.3
%
0.3
%
0.5
% 1.1
%
0.9
%
1.1
%
1.0
%
0.9
%
0.9
%
0.2
% 0.6
%
0.9
%
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
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Personal Income and Spending
Personal Income Personal Spending Savings Rate
Personal Income/Spending (% Change)
Savings RatePercentage
Source: Bureau of Economic Analysis
2005 2006 2007 2008 2009 2010 2011 2012$120
$140
$160
$180
$200
$220
$240
$260
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
2009 2010 2011 2012
-19
-14
-9
-4
1
6
11
16
-5%
-3%
-1%
1%
3%
5%
Manufacturing Production
Number of Mfg Industries Increasing Number of Mfg Industries DecreasingPercent Change in Mfg Production
# of Mfg. Industries (19) 1 month IP change (%)
Source: Federal Reserve Board
Jan-11
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-12
Feb Mar Apr May Jun
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
% Changes in Manufacturing Pro-duction,
2011-2012
Manufacturing Durable Goods Nondurable Goods
Percent
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
2010 2011 2012
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
70
75
80
85
90
95
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
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
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
-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
6.9
-3.7
0
9.17.1
1.9
13.5
7.86.2
-1.9
1.8
-25.5
-7.1
1.8
-7
28.1 27.3
20
-15.7
19.7
31
-29.6
-9.3
-3.6
-21.4
5.6
9.6
5.8
-18.8
15.1
21.8
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
Jan-11
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 12-Jan
Feb Mar Apr May Jun
-50
0
50
100
150
200
250
300
110
220
246 251
54
8496
85
202
112
157
223
275 259
143
68 77 80
52 3726 28
8 1230
3
-3
9 328
52
30
42
10 9 11
Monthly Changes in Employment(Thousands of Employees)
Nonfarm Payrolls Manufacturing
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
Petroleum and Coal Products
Leather and Allied Products
Chemicals
Computer and Peripheral Equipment
Food Manufacturing
Miscellaneous Manufacturing
Beverages and Tobacco Products
Computer and Electronic Products
Electrical Equipment and Appliances
Semiconductors and Electronic Components
Plastics and Rubber Products
Primary Metals
Motor Vehicles and Parts
Machinery
Transportation Equipment
Fabricated Metal Products
1.3
2.0
3.8
6.6
7.8
13.9
14.2
16.8
20.1
24.8
33.7
63.2
122.6132.6
148.9
149.7
Manufacturing Sectors with the Largest Net Employment Gains YTD, in Thousands of
Employees(December 2009 to June 2012)
Source: Bureau of Labor Statistics
North Carolina
Oregon
Utah
Georgia
Pennsylvania
Tennessee
Minnesota
Wisconsin
Illinois
Indiana
Michigan
5.36.66.66.9
8.58.99.1
12.012.1
15.116.917.718.4
21.026.4
28.142.9
45.748.449.2
64.0
Top 20 States for Manufacturing Job Creation,
December 2009 to June 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 April 2012)
Job Openings Hires Separations
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
90110130150170190210230250270290
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
-12%
-7%
-2%
3%
8%
13%
4.8%5.7%
1.6%
4.7% 4.0%
-2.0%
5.2%
0.6%
5.2%
7.8% 9.2%
5.6%
3.8%
7.8%
0.6%
4.9%5.4%
10.0%
-7.1%
-1.3%
-0.5%
-2.5%-0.2%
0.0%
-1.9%
-4.2% -4.9%
Percentage Changes in Manufactur-ing Productivity & Unit Labor Costs
Output Per Hour for All Persons OutputUnit Labor Costs
Source: Bureau of Labor Statistics
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
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
2001 2002 2003 2004 2005 2006 2007 2008 20090.0%
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.
Manufacturing60%
Services30%
Agriculture6%
Other4%
Source: U.S. Department of Commerce (2007)
Distribution of U.S. Exports
Source: U.S. Department of Commerce
Canada Mexico FTA Europe Asia South America
TOTAL0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
12.1%
19.6%
16.2%14.5%
11.2%
23.7%
15.1%
8.2%
17.2%
13.0%11.8%
5.2%
16.4%
11.5%
% Growth of Manufactured Goods Exports
Annual Change, 2011 vs. 2010 Year-to-Date, Q1:2012 vs. Q1:2011
Source: U.S. Department of Commerce
2005 2006 2007 2008 2009 2010 2011 20120
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
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
24.0%
17.5%
Source: Bureau of Economic Analysis
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Q1:11
Q2:11
Q3:11
Q4:11
Q1:12
Q2:12
40%
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% 81.9%
86.4%
65.4%
80.2%
88.7%
83.1%
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.
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201275
80
85
90
95
100
105
Regressing NAM/IndustryWeek Datato Predict Future Industrial Production
Industrial Production Industrial Production (Predicted)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Q1:12
Q2:12
-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: ↑ 4.3%Investment: ↑ 2.5%
Employment: ↑ 1.9%
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
Increased international competition
Rising insurance costs
Attracting and retaining a quality workforce
Weaker domestic economy, sales for our products
Rising energy and raw material costs for our products
Unfavorable business climate (e.g., taxes, regulation, etc.)
7.5%
7.8%
23.5%
43.1%
45.6%
46.1%
46.4%
64.0%
Primary Current Business Chal-lenges,
Second Quarter 2012
Other
Recent mergers or acquisitions
Increased international sales
Increased efficiencies in the production process
New product development
Stronger domestic economy, sales for our products
5.9%
12.5%
39.5%
52.5%
55.5%
67.5%
Primary Drivers of Future Growth, Second Quarter 2012
Source: NAM/Industry Week Survey of ManufacturersNote: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.
Questions?
Dr. Chad MoutrayChief Economist
National Association of Manufacturers
(202) 637-3148