Plus: Durable Goods Orders Down, Exports Surge Could Generate Millions of Jobs, Jobless Claims Drop and Manufacturers Voice Economic Concerns.
Durable Goods Orders Plunge in August
New orders for manufactured durable goods fell 13.2 percent in August, following a 3.3 percent gain in July and marking the largest single-month decrease in durable goods demand since January 2009, according to a report from the United States Department of Commerce. Much of the loss was due to plummeting orders for non-defense aircraft and parts, which dropped 101.8 percent. Excluding the often volatile transportation category, new orders declined 1.6 percent.
The overall value of durable goods orders in August dropped to $30.1 billion to a total of $198.5 billion, the first decline after three consecutive months of growth. The drop was largely driven by transportation equipment, which saw new orders fall 34.9 percent in August, following four consecutive monthly increases. Meanwhile, machinery orders decreased 4.7 percent, computers and electronic products dropped 3.4 percent and primary metals demand fell 1.7 percent.
“Orders for durable goods, or items expected to last at least three years, provide a good idea of how fast the economy is growing. Orders surge when growth accelerates and droop when the economy falters,” MarketWatch reports. “The weaker level of orders since the end of spring reflects a global economic slowdown — U.S. exports to Europe and China have softened — and fresh worries about the U.S. government going off a so-called “fiscal cliff” in 2013.”
On a more positive note, orders for core capital goods, which serve as a key gauge of business investment plans, increased 1.1 percent in August, ending two straight months of steep declines.
According to a separate report from the Commerce Department, U.S. gross domestic product (GDP) grew at an annual rate of 1.3 percent in the second quarter, a downward revision from the initial estimate of 1.7 percent growth. This represented a slowdown from the 2 percent growth rate in the first quarter.
Factories Prepare for First Annual National Manufacturing Day
Manufacturers across the U.S. are preparing to commemorate the first ever national Manufacturing Day this Friday, Oct. 5. The day – co-produced by the Fabricators and Manufacturers Association, International; the Hollings Manufacturing Extension Partnership (MEP); Wisconsin MEP; and the Illinois Manufacturing Extension Center – is intended to increase awareness of manufacturing’s role in the economy and improve public awareness of the industry.
“Manufacturing Day will be the ‘coming out party’ for U.S. manufacturers all across the nation,” Ed Youdell, president and CEO of the FMA, said in an announcement. “October 5th is dedicated to celebrating the great work and innovation of the 12 million men and women who make the United States the world’s largest manufacturing economy. FMA and MEP centers are encouraging their members and manufacturers to open their doors to their local school kids, community college students, press and job seekers so that they can see firsthand the safe, high-tech and innovative work environments that await the best and brightest who pursue careers in manufacturing.”
More than 150 manufacturing companies and educational institutions are planning to participate in Manufacturing Day events, hosting open houses, public tours, career workshops and other opportunities to illustrate the role of U.S. manufacturing to as many people as possible.
For a full listing of Manufacturing Day participants and events across the U.S., as well as details and guidelines for companies interested in registering, check HERE.
Meanwhile, the Information Technology and Innovation Foundation recently published a new study presenting 50 federal-level policy recommendations to help boost U.S. competitiveness, including the creation of 25 manufacturing and engineering institutes, the foundation of 20 U.S. “manufacturing universities,” greater funding for the MEP and the establishment of a nationwide manufacturing skills standards initiative.
Exports Surge Could Create 5 Million Industry Jobs
Increased factory productivity due to reshoring and dropping natural gas prices are set to cause U.S. exports to surge and may generate as many as 5 million manufacturing jobs by 2020, a new analysis from Boston Consulting Group found.
The costs of labor, natural gas and electricity will fall, allowing the U.S. to achieve an export cost advantage of 5 to 25 percent over Germany, Italy, France, the U.K. and Japan in various industries. This advantage could result in $90 billion to $130 billion in additional U.S. exports per year. The biggest gains are forecast to be in machinery, transportation equipment, electrical equipment and appliances and chemicals exports, BCG predicts.
“The export manufacturing sector has been the unsung hero of the U.S. economy for the past few years. But this is only the beginning,” Harold L. Sirkin, a BCG senior partner and coauthor of the report, noted. “The U.S. is becoming one of the lowest-cost producers of the developed world, and companies in Europe and Japan are taking notice.”
However, some economists point to continuing challenges that may keep U.S. export growth muted. Alan Tonelson, research fellow at the U.S. Business and Industry Council, pointed to Chinese companies that receive incentives from the Chinese government: “Countries such as China are unlikely to sit on their hands and do nothing if the U.S. does improve manufacturing,” Tonelson told the Financial Times.
Weekly Jobless Claims Plummet
New initial jobless claims fell in the latest week reported, indicating that labor market conditions may be stabilizing after struggling in recent months, according to the U.S. Department of Labor. Seasonally adjusted unemployment insurance claims for the week ending September 22 dropped to 359,000, a decrease of 26,000 from the previous week’s total.
In addition, the four-week moving average, which provides a more accurate long-term picture of the employment situation, fell by 4,500 to 374,000 for the week.
The latest weekly improvement exceeded expectations, as economists polled by MarketWatch had forecast jobless claims only to fall to 375,000. The current rate of claims is consistent with a modest rate of new job creation. The economy has added an average of 94,000 jobs per month since March.
“A turnaround in claims, which have been on the rise since July, indicates companies in the U.S. may be growing more confident that sales will pick up,” Bloomberg News notes. “At the same time, the jobless rate may be slow to fall after exceeding 8 percent for 43 months without a pick-up in the pace of hiring.”
Manufacturers Cite Uncertainty for Lack of Growth
Manufacturers and small business owners have serious concerns about the short-term economic future, with most manufacturing professionals (67 percent) claiming that an uncertain market is preventing business growth, according to a joint report from the National Association of Manufacturers (NAM) and the National Federation of Independent Business (NFIB).
Based on responses from 800 manufacturing executives, the findings showed that 55 percent would not start a business today based on what they know about the current environment. Furthermore, as businesses focus on bringing manufacturing jobs back to the U.S. to revitalize the economy, most survey respondents (54 percent) claim that other countries, including China and India, are more supportive of their small businesses and manufacturers than the U.S. — an obstacle to the resurgence of American industry.
The poll also sheds light on how current policies have influenced business operations, with 69 percent of small business owners claiming “President Obama’s executive branch and regulatory policies have hurt American small businesses and manufacturers.”
“The findings of this survey show that manufacturers and other small businesses have a starkly negative outlook for their future — with good reason,” NAM President and CEO Jay Timmons said in an announcement of the findings. “There is far too much uncertainty, too many burdensome regulations and too few policymakers willing to put aside their egos and fulfill their responsibilities to the American people.”
Timmons emphasized the need for pro-growth tax and regulatory policies to help U.S. businesses remain at a competitive advantage.