U.S. manufacturing slowdown may affect living standards
PMA sees near-term upswing in business conditions
Durable goods orders increase in December

U.S. manufacturing slowdown may affect living standards
Downward trends in U.S. manufacturing innovation pose a serious threat to America's long-term economic growth and living standards, according to a new report released today by the Council of Manufacturing Associations (CMA) and The Manufacturing Institute of the National Association of Manufacturers (NAM).

"The manufacturing economy generates a large share of American prosperity," said NAM president John Engler. "America's continuing leadership in innovation and the production of high-value manufactured goods is essential to our nation's long-term economic growth, productivity gains and standard of living. By itself, U.S. manufacturing would be the eighth largest economy in the world, and our nation's manufacturing output is at an all-time high. But America's economic leadership will be at risk if current trends continue. The NAM is advancing pro-growth policies to promote innovation, investment and productivity and ensure a healthy manufacturing economy in the future."

According to the new report, five clear warning signs show that America's innovation process is at risk.

• Manufacturing capacity remains underutilized, slowing investment in new plants and equipment. Since the last recession, total plant and equipment investment has risen at half the pace averaged in recoveries of the past half-century. Manufacturing capacity has grown at less than 1 percent annually, compared with 5 percent in the 1990s.

• The U.S. share of global trade in manufactured products has diminished, falling from 13 percent in the 1990s to 10 percent in 2004. The U.S. now runs a trade deficit in advanced technology products, and the U.S. share of global trade in some of the highest value-added export industries such as machinery and equipment is falling.

• U.S. manufacturing offers rewarding and desirable careers for highly skilled workers. Yet the widespread perception that manufacturing employment is unstable and lacks job opportunities discourages new worker entry. While manufacturing continues to pay better than other industries, the sector is experiencing a broadening shortage of skilled workers.

• America's long-standing leadership in R&D is being challenged. While the U.S. continues to spend more than any other country on R&D investment, U.S. growth in R&D has averaged only about 1 percent per year in real terms since 2000.

"If the innovation process goes offshore, America will lose much of its capacity to generate wealth and a decline in long-term economic growth is assured," said the report's author, economist Joel Popkin.

The new report, U.S. Manufacturing Innovation at Risk," by Joel Popkin is available at www.nam.org/Popkinreport.

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PMA sees near-term upswing in business conditions
Metalforming companies are expecting a modest upswing in near-term business conditions, according to the Jan. 1 Precision Metalforming Association (PMA) Business Conditions Report.

Some 47 percent of responding companies anticipating increased orders over the next three months.

When asked what they expect the trend in general economic activity to be over the next three months, 36 percent of participants reported that business conditions will improve, up from 27 percent in December. Fifty percent believe conditions will remain the same, compared to 49 percent the previous month, and only 14 percent anticipate economic activity will decrease, compared to 24 percent in December.

Metalforming companies also expect an increase in incoming orders over the next three months. Forty-seven percent of respondents predict an increase in orders, compared to 37 percent in December. Thirty-three percent anticipate no change, down from 36 percent last month, and 20 percent forecast a decrease in orders, down from 27 percent in December.

On the downside, current average daily shipping levels were expected to be slightly lower in January. Only 23 percent of companies reported that shipping levels are above levels of three months ago, compared to 29 percent the previous month. Forty-six percent reported no change, up from 41 percent in December, and 31 percent reported January shipping levels are below levels of three months ago, compared to 30 percent in December.

The number of metalforming companies with a portion of their workforce on short time or layoff remained steady in January at 11 percent, the same percentage reported in December. This is the lowest level since May 2004, when only 9 percent of respondents reported that they had workers on short time or layoff.

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Durable goods orders increase in December
New orders for manufactured durable goods in December increased $2.8 billion, or 1.3 percent, to $228.1 billion, according to the Commerce Department. This was at the highest level since the NAICS series began in 1992.

The December increase followed a 5.4 percent November increase.

Excluding transportation, new orders increased 0.9 percent. Excluding defense, new orders increased 0.8 percent.

Machinery, up five consecutive months, had the largest increase, $1.9 billion, or 6.5 percent, to $30.5 billion. This was at the highest level since the series began.

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