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Manufacturing & The Economy

Michael Wessel & Dan Slane to U.S. Manufacturers: 'The Chinese Don't Want You Any More'

In a recent op-ed for Manufacturing & Technology News, Michael Wessel and Dan Slane warn about what some U.S. firms have already discovered. Namely, that China is becoming more hostile to foreign manufacturers. Now that they have acquired a sufficient amount of IP and marketing from us, Wessel and Slane write, a series of sweeping new Chinese anti-trust laws have been used to selectively target foreign companies.

"The law is being used to selectively control prices of foreign-made products and services and to demand outrageous concessions before approving mergers."

Texas Manufacturing Activity Remains Flat

Texas factory activity posted a second month of no growth in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained near zero (0.7) and indicated output was essentially unchanged from January levels.

Other measures of current manufacturing activity reflected contraction in February. The new orders index pushed further into negative territory, coming in at -12.2, its lowest reading since June 2009. The shipments index fell to -3.3, also reaching a low not seen since 2009. The capacity utilization index turned negative as well, dropping from 5.1 to -4.9.

Perceptions of broader business conditions remained rather pessimistic this month. The general business activity index moved further negative to -11.2, posting its lowest reading in nearly two years. The company outlook index remained slightly negative and edged down from -3.8 to -4.4. 

Markit Flash PMI Survey for U.S. Rises to 54.3 in February

February data indicated a sustained improvement in U.S. manufacturing business conditions. At 54.3, up from 53.9 in January, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) has now registered above the 50.0 no-change value for almost five and-a-half years. The latest reading was the highest since last November, but still weaker than the average for 2014 as a whole (55.9). Slower rates of new business and employment growth were the main factors weighing on the headline index in February.

Manufacturing companies indicated a robust and accelerated expansion of production volumes during February. The latest increase in output was the most marked since October 2014, with survey respondents noting that improving economic conditions and rising client spending continued to boost production schedules.

Trade Deficit with China Costing U.S. Thousands of Manufacturing Jobs

U.S. exports of manufactures in the fourth quarter 2014, compared with 2013 were up by 4%, imports were up by 7%, and the trade deficit surged by $19 billion, or 14%, to $157 billion. This $19 billion deficit increase equates to a net loss of about 130,000 American manufacturing jobs for the quarter, according to the MAPI Foundation. In the other direction, Chinese manufactured exports in the fourth quarter were up by 9%, imports rose by 5%, and the surplus surged by $35 billion to $294 billion, or also by 14%.

Chinese exports for the year were $2,228 billion, or 88% larger than the $1,188 billion of U.S. exports, and were more than double U.S. exports in the fourth quarter. This doubling will continue to widen in 2015 as Chinese exports continue to grow faster than U.S. exports. Imports, in contrast, rose 6% for the United States compared with a slower 4% growth for China.

NAM Monday Economic Report – February 23, 2015

In the minutes of its January 27–28 meeting, the Federal Open Market Committee (FOMC) provided a nuanced view of the economic outlook. Participants noted that “economic activity had been expanding at a solid pace,” and they were mostly optimistic about the “prospects for further improvement in 2015.” Yet, the FOMC also pointed to some significant headwinds in the U.S. economy, including sluggish global growth, a stronger U.S. dollar, federal government sequestration and reduced crude oil prices. Regarding the latter, the Federal Reserve said that it was concerned that “persistently low energy prices might prompt a larger retrenchment of employment [and capital investment] in these industries.”


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