Plus: Factory Orders Remain Stable in November, Unemployment Rate Remains Unchanged, Consumer Confidence Falls, and Manufacturers Voice Disappointment at Lapsed Tariff Bill.
Factory Orders Steady in November
New orders for United States manufactured goods were relatively unchanged in November, following a 0.8 percent increase in October, as lower demand for non-durable goods mostly negated the modest gains in other categories, according to the U.S. Department of Commerce. The value of new orders inched up $0.2 billion to a total of $477.6 billion for the month. Excluding the often volatile transportation, new orders rose 0.2 percent.
Demand for manufactured durable goods increased 0.8 percent to $220.9 billion, the sixth gain in the last seven months. Machinery orders, up for three consecutive months, posted the largest increase, climbing 3 percent to $31.9 billion. Meanwhile, primary metals orders rose 2.5 percent to $29.4 billion and electrical equipment orders increased 1.6 percent to $10.1 billion. However, much of these gains were offset by a 0.6 percent decline in demand for non-durable goods.
“Manufacturing, the pillar of the recovery from the 2007-09 recession, has lost momentum in recent months as fears of the ‘fiscal cliff’ and slowing global demand slammed the economy,” Reuters reports. “However, there was little sign in the factory report that worries over planned austerity measures were leading businesses to cut back on investment plans.”
On a more positive note, orders for core capital goods (excluding aircraft and defense equipment), which serve as an indicator of future business investment, rose 2.6 percent in November after rising 3 percent in October, suggesting companies may be more willing to spend in 2013.
“Sustained gains in employment offer additional evidence that companies are willing to invest and expand as global growth stabilizes and American consumers keep spending on goods such as automobiles even as lawmakers battled over the budget in late 2012,” Bloomberg News explains. “Further pickup in production may depend on a stronger rebound in the global economy and a boost in exports.”
Electric Vehicles Sales to Hit Nearly 4 Million a Year
While electric vehicle sales fell short of automakers’ expectations last year, new forecasts project a stronger market through the rest of the decade, with global sales reaching 3.8 million units a year by 2020.
Electric vehicle sales are expected to grow at a compound annual rate of nearly 40 percent through the remainder of the decade due to competitive pricing and rising demand for alternatives to internal combustion engines at a time when fuel prices are high, whereas the auto market will expand by 2 percent a year, according to a report by Pike Research.
Plug-in electric vehicles (PEVs) have become more widely available in the Asia-Pacific region, North America, and Western Europe, partly because of the release of the Nissan Leaf and Chevrolet Volt in 2010. Hybrid electric vehicles are also performing well in those areas.
The report indicates that regional differences will be a factor in the types of EVs sold. Plug-in hybrid electric vehicle (PHEV) sales are expected to be lower than battery electric vehicle (BEV) sales in most regions, with key contributing factors including a larger supply of BEVs available, costly petroleum fuels, and dense urban areas requiring relatively short traveling distances. Sales of PHEVs will remain strong in North America and Latin America because of the vehicles’ longer driving range.
Pike reports that Japan will be the largest market for hybrids in 2020, while the U.S. will have the largest market for PEVs that year. Europe is expected to have the highest concentrations of PEVs due to high gas prices and supportive government policies.
Unemployment Rate Remains Unchanged, Manufacturing Adds Jobs
Although the U.S. labor market added 155,000 non-farm jobs in December, the national unemployment rate remained unchanged at 7.8 percent, indicating that the year-end fiscal cliff crisis did relatively little damage to hiring conditions, according to the U.S. Department of Labor.
The pace of hiring in December was roughly in line with job growth over the last two years, as the U.S. added an average of 153,000 jobs per month in 2011 and 2012.
“Companies are hiring enough workers to keep up with growth in the labor force and slowly whittle down the unemployment rate, although millions of people are still struggling to find full-time work,” MarketWatch notes. “The still-high unemployment rate, for its part, will keep in place the Federal Reserve’s strategy of buying billions in bonds for the indefinite future. The Fed wants the jobless rate to fall below 6.5 percent before it eases up on its controversial bond-buying plan. The goal is to lower interest rates to make it cheaper for businesses and consumers to borrow, spend and invest.”
The largest employment gains last month were in the healthcare industry, which added 45,000 jobs. Meanwhile, construction added 30,000 jobs and the manufacturing sector added 25,000 jobs. For 2012 as a whole, manufacturing gained 180,000 new jobs, with most of the growth occurring in the first quarter.
“There remains a deep hole left by the financial crisis and millions are still out of work. The number of long-term unemployed stayed essentially unchanged at 4.8 million, or 39.1 percent of the jobless,” CNN Money reports. “One positive note is that there was a notable rise in the number of unemployed re-entering the market…The figure jumped nearly 8 percent in December, possibly signaling a renewed sense of optimism among the jobless.”
Consumer Confidence Plunges
The Conference Board’s Consumer Confidence Index fell 6 percentage points to 65.1 in December, a four-month low, as public concerns over the budget debate eroded short-term consumer expectations for the U.S. economy.
The percentage of consumers expecting business conditions to improve in the next six months fell to 17.6 percent from 21.3 percent, while those expecting business conditions to worsen increased to 21.5 percent from 15.8 percent in November. Although the findings reflected widespread doubts about future business activity, the sudden dip in confidence was likely a temporary shift rather than a longer term trend.
“The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff. A similar decline in expectations was experienced in August of 2011 during the debt ceiling discussions,” Lynn Franco, director of economic indicators at the Conference Board, said. “While consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions.”
Consumers’ opinions about current business conditions actually improved in December, with those stating business conditions are “good” climbing to 17.1 percent from 14.6 percent and those claiming conditions are “bad” decreasing to 27.3 percent from 31.2 percent.
Legislators Fail to Renew Tariff Bill
Manufacturing groups have expressed disappointment at Congress’s failure to renew tariff suspensions on a wide range of materials and goods key to U.S. manufacturers.
Congress did not renew the Miscellaneous Tariff Bill (MTB), a 30 year-old duty suspension on over 600 products, by the December 31st, 2012 deadline. Products covered by the MTB included “noncontroversial” imports, including “those that don’t face any domestic competition and that don’t cost the customs service more than $500,000.”
“Congress’s failure to pass the MTB has resulted in a tax increase on manufacturers in the United States, hurting their global competitiveness and putting jobs at risk,” according to Linda Dempsey, vice president of international economic affairs at the National Association of Manufacturers (NAM). “It is currently 20 percent more expensive to manufacture in the United States compared to our largest trading partners, and the lack of an MTB will only widen that gap.”
The 113th Congress, sworn in last week, will later review the renewal of the MTB as part of over 2,000 provisions passed to them from the previous Congress.