Plus: Factory Production Increases, Durable Goods Orders Fall, WTO Supports China Tire Tariff, Sweeping Food-Safety Bill Clears Hurdles and Visa Barriers Hurt Sales at U.S. Trade Shows.

CEOs Forecast Higher Sales in First Half of 2011
Chief executives of leading United States companies expect to increase sales, capital expenditures and employment over the next six months, according to the results of Business Roundtable’s fourth quarter 2010 CEO Economic Outlook Survey.

Completed between Nov. 8 and Dec. 3, 2010, Business Roundtable’s latest quarterly CEO Economic Outlook Survey provides a forward-looking view of the economy by the association of CEOs, whose U.S. companies report nearly $6 trillion in annual revenues and have more than 12 million employees.

Among the survey’s key findings from Q4 2010:

• 80 percent expect sales to increase in the next six months;
• 59 percent expect to increase capital spending in the next six months;
• 45 percent expect to bring on new employees in the next six months; and
• Materials (29 percent), health care (24 percent) and labor costs (23 percent) were identified as the greatest cost pressures.

“Demand is returning as evidenced by anticipated sales increases, and that is good news. When demand increases, capital expenditures and employment follow — which is what we expect to see in the next six months,” Verizon Communications CEO and Business Roundtable Chairman Ivan Seidenberg said in a statement. “However, our CEOs expect GDP to grow at [a] rate of only 2.5 percent in 2011, so there is still more work that needs to be done to get the economy back on the path toward strong, sustainable growth.”

U.S. Factory Operating Rate at Highest Level in Two Years
Total output from U.S. factories, mines and utilities rose 0.4 percent in November, boosted by strong gains in manufacturing and higher demand for heating due to more seasonal temperatures, the U.S. Federal Reserve reported last month.

Following a revised 0.2 percent decline in October, industrial production resumed growth in November thanks largely to a 0.3 percent increase in manufacturing of both durable and non-durable goods. Excluding motor vehicles and parts, overall factory output rose 0.7 percent in November. Utilities output climbed 1.9 percent the same month, while mining fell 0.1 percent.

“Assembly lines are speeding up as business investment and exports grow and consumer spending accelerates, helping to buoy an expansion that Fed policy makers said … isn’t strong enough to reduce a jobless rate hovering near 10 percent,” Bloomberg News reports.

The capacity utilization rate, a measure of how much the industrial sector’s production capabilities are being used, rose to 75.2 percent in November, the highest level since October 2008. However, this was still below the 80.6 percent capacity utilization average from 1972 to 2009.

“Production of computers, industrial equipment, appliances and electronic goods all rose,” according to the Associated Press. “That’s evidence that companies and consumers are spending more, economists said.”

Durable Goods Demand Falls
Orders for durable goods in the U.S. dropped modestly in November, mostly due to plummeting transportation equipment orders, which offset strong gains in most key goods categories, according to the U.S. Department of Commerce in December.

New orders for manufactured durable goods declined by 1.3 percent to a total of $193.7 billion, marking the third decline in the past four months. Transportation equipment had the steepest losses, dropping by 11.9 percent to $45.5 billion in November. Excluding the often-volatile transportation sector, new orders were up 2.4 percent, the largest increase in eight months.

“The widespread gain outside of transportation was an encouraging sign that factories will be ramping up production and hiring more workers in coming months,” the Associated Press explains. “Manufacturing has been one of the standout performers so far in this recovery. U.S. businesses are getting a boost from strong foreign demand. The rise in exports has been helped by a falling dollar, which makes U.S. goods cheaper in other countries.”

Demand for non-defense capital goods (excluding aircraft), which is seen as an indicator of business spending, rose 2.6 percent in November after falling 3.6 percent the prior month. Orders for computers and related products rose 9.4 percent, while communications equipment increased 5.1 percent and primary metals, such as steel, rose 3 percent.

WTO Rules Against China in Tire Imports Dispute
The World Trade Organization (WTO) recently upheld the U.S. government’s decision to impose tariffs on Chinese tire imports, rejecting a complaint from China that the restrictions violated international trade rules and strengthening the position of U.S. customs enforcement policies.

In mid-December, a three-member WTO panel issued a report in favor of President Barack Obama’s September 2009 decision to impose new tariffs of up to 35 percent on imported Chinese tire products. The panel last month found that Chinese tire shipments to the U.S. nearly tripled between 2004 and 2008, rising to $1.8 billion, and that U.S. tariffs “did not fail to comply with its obligations” for existing international trade agreements.

“This is a major victory for the United States and particularly for American workers and businesses,” U.S. Trade Representative Ron Kirk said in a response to the ruling. “We have said all along that our imposition of duties on Chinese tires was fully consistent with our WTO obligations. It is significant that the WTO panel has agreed with us, on all grounds.”

The introduction of the tire tariffs spurred a new round of punitive trade measures between the U.S. and China through 2010, resulting in a tense climate for economic negotiations.

“Mr. Obama’s move, made under a rarely used safeguard provision to protect against import surges, provoked one of the biggest trade spats between the two countries in recent years,” the Wall Street Journal reports. “In addition to taking the case to the WTO, China had retaliated by announcing a series of duties on U.S. chicken, nylon and other exports.”

According to China’s official press agency Xinhua, the Chinese government strongly disagrees with the WTO ruling, claiming the U.S. measures are protectionist, not in line with WTO regulations and based on inaccurate economic findings. Both parties will have 60 days to dispute the ruling.

Food-Safety Bill Awaits President’s Signature
The House of Representatives last month passed a widely supported measure that seeks to modernize the nation’s food-safety laws. The measure, expected to be signed by President Obama, would give the U.S. Food and Drug Administration (FDA) greater authority over the nation’s food production in an effort to help prevent tainted food from entering the supply chain, harming consumers and forcing massive recalls.

“Under the legislation, food manufacturers will be required to examine their processing systems to identify possible ways that food products can become contaminated and to develop detailed plans to keep that from happening. Companies must share those plans with the FDA, and provide the agency with records, including product test results, showing how effectively they carry them out,” the New York Times explains. “The agency, which has sometimes been criticized for its failure to check up on risky food producers, will be required to conduct more frequent inspections in the United States and abroad.”

The bill would give the FDA “new power to demand recalls and require importers to certify the safety of what they’re bringing into this country,” the Los Angeles Times says.

The House passed the measure by a 215-144 margin soon after the Senate passed the sweeping bill, sending the legislation to the president to sign into law. “The vote marked the final hurdle for a bill that cleared an unusual number of obstacles, despite enjoying bipartisan support and backing from a wide array of groups across the political spectrum, from the Consumers Union to the Chamber of Commerce,” according to the Washington Post.

Visa Barriers Result in Lost Sales at U.S. Trade Shows
Current U.S. visa procedures deter many qualified international buyers from doing business at U.S.-based trade shows, according to a new Center for Exhibition Industry Research (CEIR) study that examines the effect of U.S. visa issues on the American economy.

The CEIR study, sponsored by the Association of Equipment Manufacturers (AEM), concluded that without visa barriers, business sales to U.S. companies would increase $2.4 billion. The additional sales could also sustain more than 17,500 jobs directly and 43,000 jobs overall, as well as generating three-quarters of a billion dollars in state and federal taxes.

“The visa process is slow, overly complicated and can seem very arbitrary,” AEM President Dennis Slater said in an announcement of the findings. “While we understand and support the need for adequate U.S. security procedures, these are established business people. American companies are losing customers because, in many instances, these international buyers become frustrated and go elsewhere.”