Plus: Trade Deficit Shrinks, Jobless Claims Increase, Material-Handling Equipment Manufacturing to Rise and MORE.
Obama’s New Task Force Highlights Importance of Natural Gas
The White House last week announced the formation of a high-level working group to coordinate the government’s oversight of “safe and responsible” drilling for natural gas. In an executive order, President Obama said his administration would encourage greater use of natural gas in transportation, support research and set “sensible, cost-effective” public health and environmental standards.
“President Obama’s executive order is a step toward national recognition that shale is a game changer. As the consumers of one-third of our nation’s energy supply, manufacturers know that shale gas is a critical part in formulating an ‘all of the above’ energy policy,” the National Association of Manufacturers said in a statement. “We welcome a ‘one-stop shop’ for research and information to promote the development of this badly needed resource and are pleased that there will be discussion and input on regulatory policy across agencies. Manufacturers also appreciate that the executive order recognizes that the states, who know the shale gas issue best, are the primary regulators of these policies.”
The president, echoing supporting statements from industry organizations, said it is vital that the nation take full advantage of its natural gas resources, while ensuring that public health and safety – including air and water quality – are not compromised.
The New York Times last week reported that “the rapid development of shale gas technology has helped reduce energy imports and, in some cases, encouraged companies producing petrochemicals, steel, fertilizers and other products to return to the United States after relocating overseas.” Although “the growing commitment to natural gas faces some headwinds” due to concerns over the safety of fracking, the Times notes, “natural gas is expanding its reach in manufacturing.”
A late-2011 PricewaterhouseCoopers (PwC) report suggested that high rates of shale gas recovery could result in a million new manufacturing jobs by 2025. Robert McCutcheon, U.S. industrial products leader at PwC, said the revived natural gas industry “has the potential to spark a manufacturing renaissance in the U.S., including billions in cost savings, a significant number of new jobs and a greater investment in U.S. plants,” the Times reports.
Trade Gap Shrinks in February
The U.S. trade deficit narrowed to $46 billion in February, a 12.4 percent decrease from the revised $52.5 billion total in January, as exports surged due to rising demand for U.S. goods in Europe and China, according to the U.S. Department of Commerce last week. February exports rose to a record high of $181.2 billion, while imports fell 2.7 percent to $227.2 billion, the steepest monthly drop in three years.
The goods deficit for February shrank to $61.4 billion, a $6 billion decrease from January, while the services surplus increased $0.5 billion to a total of $15.4 billion. Although goods exports fell by $0.6 billion in February, services exports rose $0.8 billion, leading to a net increase. Goods imports fell by $6.5 billion to $189.4 billion, led by declining imports of consumer goods, industrial supplies and materials and automotive vehicles, engines and parts.
“The narrower deficit could lead economists to upward revise their growth estimates for the January-March quarter,” the Associated Press reports. “A narrower trade deficit will weigh less on growth because it means businesses sold more American-made goods overseas while U.S. consumers bought fewer foreign-made products.”
The politically sensitive trade deficit with China fell 25.6 percent to $19.4 billion in February, the lowest level since March 2011, as exports rose from $8.4 billion to $8.8 billion and imports from China shrank from $34.4 billion to $28.1 billion.
U.S. Manufacturing Expected to Continue Expanding
The industrial sector is projected to continue growing through the second quarter of 2012, albeit at a more moderate pace than in recent months, according to the Manufacturers Alliance for Productivity and Innovation’s (MAPI) latest quarterly survey on the business outlook.
The trade association’s composite index – a key indicator for the manufacturing sector – inched downward to 65 in March from 66 in December, marking the seventh consecutive decline since hitting a record high of 81 in June 2010. Readings above 50 indicate overall expansion.
“The composite index slipped once again, but not by much,” Donald A. Norman, MAPI senior economist and survey coordinator, said. “Further, most of the individual indexes increased over their December levels, providing support for the view that expansion will continue, even if at a more modest pace.”
MAPI’s export orders index climbed to 79 in the first quarter of 2012, up from 71 in December; the current orders index increased to 77 in March from 70 in December; the backlog orders index improved to 71 from 67; and the capacity utilization index rose to 40 percent in March from 38.1 percent in December. However, the profit margin index slipped to 69 in March from 70 in December, and the inventory index decreased to 67 from 73 over the same period.
Jobless Claims Increase Unexpectedly
New initial jobless claims increased in the latest week reported, following a steady series of drops over the past several months. According to the U.S. Department of Labor, seasonally adjusted unemployment claims for the week ending April 7 rose by 13,000 to a total of 380,000, up from the previous week’s revised total of 367,000. The four-week moving average, which smoothes out short-term volatility, increased by 4,250 to 368,500.
The increase in unemployment claims came as a surprise, as economists polled by MarketWatch had forecast claims would continue dropping, falling to a total of 359,000 for the week. However, much of the upswing may have been due to temporary seasonal factors.
“While economists cautioned against reading too much into the report, saying problems adjusting the data for seasonal fluctuations around Easter may have pushed last week’s figure higher, they said it nonetheless provided a worrying signal,” Reuters notes. “Economists noted that initial claims tend to be volatile at this time of year due to shifts in the timing of Easter and school spring breaks, making it difficult for the Labor Department to adjust the data for seasonal variations.”
Jobless claims have generally been on a declining trend since last fall, but have recently leveled off, with the four-week moving average remaining relatively unchanged for the past two months. The latest figures come shortly after a disappointing employment situation report that showed the U.S. economy added only 120,000 new jobs in March, roughly half the average pace of the preceding three months.
Material-Handling Equipment Manufacturing Forecast to Rise
After rising 16.3 percent in 2011, material-handling equipment orders are forecast to increase between 8 percent and 9 percent in 2012 and up to 12 percent in 2013, according to the Material Handling Industry of America (MHIA) last week.
In its latest quarterly forecast, the MHIA also projects material-handling equipment shipments to grow 9 percent this year and 11 percent in 2013. Overall shipments rose approximately 17.7 percent in 2011. Domestic demand alone – shipments plus imports less exports – jumped more than 19.2 percent last year and is expected to “mirror shipment growth in 2012, 2013 and 2014,” the MHIA said in a statement.
“Overall, initial evidence for 2012 is still mostly encouraging, although we do expect the GDP growth rate to slip to 1.9 percent in the first quarter, from 3 percent in the fourth, as inventory rebuilding slows,” MHIA executive consultant Hal Vandiver told Material Handling & Logistics. “The labor market has been doing better than most indicators of aggregate demand, consistent with slower productivity growth and slower growth in corporate earnings. Rising oil prices mean that gasoline prices are climbing again and will squeeze consumers’ spending power this spring, although the improved labor market is giving consumer incomes a cushion.”