U.S. Leading Economic Indicators Increased

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.6% in April to 95.0, following a 0.2% decline in March, and a 0.4% increase in February.

Ataman Ozyildirim, economist at The Conference Board: “After a slight decline in March, the U.S. LEI rebounded in April, led by housing permits and the interest rate spread. Labor market conditions also contributed, although consumers’ outlook on the economy remains weak. In general, the LEI points to a continuing economic expansion with some upside potential. Meanwhile, the CEI, a measure of current conditions, has returned to a slow growth path, despite declining industrial production in April.”

Ken Goldstein, economist at The Conference Board: “The index is 3.5% higher (annualized) than six months ago, suggesting expansion. However, the biggest risk right now is the adverse impact of cuts in federal spending. The biggest positive factor is the potential for improvement in the recovering housing and labor markets. The biggest unknown is the resiliency in confidence, both consumer and business.”

ISM: April Manufacturing Activity Grows at Slowest Pace this Year

Economic activity in the manufacturing sector expanded in April for the fifth consecutive month, and the overall economy grew for the 47th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report on Business.

"The PMI registered 50.7 percent, a decrease of 0.6 percentage point from March's reading of 51.3 percent, indicating expansion in manufacturing for the fifth consecutive month, but at the lowest rate of the year. The New Orders Index increased in April by 0.9 percentage point to 52.3 percent, and the Production Index increased by 1.3 percentage points to 53.5 percent. The Employment Index registered 50.2 percent, a decrease of 4 percentage points compared to March's reading of 54.2 percent. The Prices Index registered 50 percent, decreasing 4.5 percentage points from March, indicating that overall raw materials prices remained unchanged from last month. Comments from the panel indicate a range of strong/steady growth, to flat/declining volumes, depending upon the particular industry," said Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.

Of the 18 manufacturing industries, 14 are reporting growth in April.

Vast Majority of New Manufacturing Jobs Still Going to Men

On Wednesday Sen. Amy Klobuchar (D-MN), Vice Chair of the Joint Economic Committee (JEC), held a hearing examining the role of women in American manufacturing. The hearing comes on the heels of a report Klobuchar released Tuesday, which found that the U.S. manufacturing industry grew by 530,000 jobs between February 2010 and April 2013, creating new opportunities for women in the field. Klobuchar called for an increased focus on science, technology, engineering and math (STEM) and workforce training to help more women break into the growing industry.

According to the report Klobuchar released, women currently make up 27% of the manufacturing workforce, indicating there is room for more women to take advantage of the career opportunities and high-wage jobs the industry provides.

Klobuchar has called for an increased focus on ensuring students gain valuable skills in science, technology, engineering and math at an early age. She has introduced legislation to double the number of STEM schools in America and added an amendment to the immigration bill in the Senate that would fund STEM education by increasing visa fees. Klobuchar has also promoted policies that strengthen manufacturing, including incentivizing research and development and simplifying the tax code to give businesses clarity and consistency.

Growth in Texas Manufacturing Activity Stalls

Texas factory activity was flat in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 9.9 to -0.5. The near-zero reading indicates output was little changed from March levels.

Ebbing growth in manufacturing activity was reflected in other survey measures as well. The capacity utilization index came in at 2.7, down from 5.5, and the shipments index fell to zero after rising to 10.6 in March. The new orders index fell nearly 14 points to -4.9, posting its first negative reading this year.

Perceptions of broader business conditions worsened in April. The general business activity index plummeted from 7.4 to -15.6, reaching its lowest level since July 2012. The company outlook index turned negative as well, declining from 9.6 to -2.2.

Labor market indicators remained mixed. The employment index has been in positive territory so far in 2013 and moved up to 6.3 in April. Twenty percent of firms reported hiring new workers compared with 14 percent reporting layoffs. The hours worked index pushed further negative, from -2.4 to -6.5.

Fed: Factory Output Fell 0.4% in April

Industrial production decreased 0.5% in April after having increased 0.3% in March and 0.9% in February. Manufacturing output moved down 0.4% in April after a decline of 0.3% in March. The index for utilities decreased 3.7% in April, as heating demand fell back to a more typical seasonal level after having been elevated in March because of unusually cold weather. The output of mines increased 0.9% in April. At 98.7% of its 2007 average, total industrial production was 1.9% above its year-earlier level. The rate of capacity utilization for total industry decreased 0.5% to 77.8%, a rate 0.1% above its level of a year earlier but 2.4% below its long-run (1972--2012) average.

After having declined 0.3% in March, manufacturing output decreased 0.4% in April; the index was 1.3% above its level of a year earlier. The factory operating rate moved down 0.4% to 75.9%, a rate 2.8% below its long-run average.

The production of durable goods moved down 0.6% in April. Output decreased for all major categories of durable goods except computer and electronic products. The largest drop was in the output of nonmetallic mineral products, which fell 1.7%. The production of motor vehicles and parts decreased 1.3%, and the indexes for the other major categories recorded smaller losses. Capacity utilization for durable manufacturing fell 0.7% to 75.7%, a rate 1.3% below its long-run average.

First Quarter GDP Growth Falls Short of Expectations

Real gross domestic product (GDP) increased at an annual rate of 2.5% in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. Economists were predicting GDP growth north of 3%. Also, in the fourth quarter, real GDP increased 0.4%.

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, residential investment, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Survey: Global Manufacturers Lack Supply Chain Visibility Beyond Tier 1

Global manufacturers are putting their supply chains at the center of their business strategies to serve as the foundation for operational efficiency and collaborative innovation, according to KPMG's 4th annual Global Manufacturing Outlook — Competitive Advantage - Enhancing Supply Chain Networks for Efficiency and Innovation — which surveyed 335 C-level executives globally, including 95 in the U.S.

Ironically though, many manufacturing executives (49% globally; 54% U.S.) admit that their companies currently do not have visibility of their supply chain beyond Tier 1 suppliers. Moreover, only 9% of the 335 global respondents of the 2013 KPMG 2013 survey say they have complete visibility of their supply chains. That number is even lower among U.S. executives, with only 7% claiming complete supplier visibility.

"Obtaining real-time visibility across all tiers in the supply chain can significantly increase speed to market, reduce capital expenditures and manage risk," said Jeff Dobbs, Global Sector Chair, Diversified Industrials and a partner with KPMG in the U.S. "Moving toward a demand-driven supply chain is probably the single most important step a global manufacturer can take today."

Conference Board: CEO Confidence Continues to Improve

The Conference Board Measure of CEO Confidence, which had increased in the fourth quarter of 2012, improved again in the first quarter of 2013. The Measure now reads 54, up from 46 in the previous quarter (a reading of more than 50 points reflects more positive than negative responses).

CEOs’ assessment of current economic conditions has grown more positive, with 36% claiming conditions are better compared to six months ago, up from 15% last quarter. About 29% of business leaders say conditions in their own industries have improved, compared with approximately 13% in the fourth quarter of 2012.

CEOs’ short-term outlook is also more optimistic. Currently, 32% of business leaders expect economic conditions to improve over the next six months, up from 23% last quarter. Expectations for their own industries are also more upbeat, with 33% of CEOs anticipating an improvement in conditions in the months ahead, up from 19% in the fourth quarter.

March U.S. Manufacturing Technology Orders See 30% Monthly Gain

March U.S. manufacturing technology orders totaled $507.91 million according to The Association for Manufacturing Technology (AMT). This total, as reported by companies participating in the USMTO program, was up 30.4% from February and up 3.2% when compared with the total of $491.96 million reported for March 2012. With a year-to-date total of $1,278.05 million, 2013 is down 5.0% compared with 2012.

These numbers and all data in this report are based on the totals of actual data reported by companies participating in the USMTO program.

“When making a year-over-year comparison with these figures, it’s important to take into account just how strong 2012 was for our industry. Our members are doing much better than analysts projected in January,” said Douglas K. Woods, AMT President. “With vehicle sales and housing starts on the upswing, we can anticipate that gains in the consumer economy will also mean buoyancy for the industrial economy, and manufacturing will remain steady for the foreseeable future.”

Markit: Manufacturing PMI at Six-Month Low

The Markit Flash U.S. Manufacturing PMI fell to its lowest reading in six months during April. At 52.0, the flash PMI index, which is based on around 85% of usual monthly replies, was down from 54.6 in March and indicated a moderate improvement in overall manufacturing business conditions.

Manufacturers recorded higher production levels in April, but the rate of output growth slowed further from February’s near one-year peak. Overall, the latest increase in output was moderate and the weakest since last November.

The slower expansion in manufacturing production partly reflected the weakest rise in new orders for six months. Total new work intakes rose modestly in April and at a much slower pace than the 32-month high recorded in January. However, the weakness in new orders was largely confined to the domestic market, as new export work grew at a stronger rate than one month previously.

Manufacturing employment continued to rise in April, with a number of firms linking job creation to greater workloads. Although the overall increase in employee numbers was solid, it was nonetheless the weakest monthly rise since last November.

Obama Administration Announces New Manufacturing Institutes

The Obama Administration is launching competitions to create three new manufacturing innovation institutes with a Federal commitment of $200 million across five Federal agencies – Defense, Energy, Commerce, NASA, and the National Science Foundation. To build off the initial success of a pilot institute headquartered in Youngstown, Ohio, the President announced in the State of the Union that his Administration would move forward and launch three new manufacturing innovation institutes this year. The President will continue to call on Congress to act on his proposal for a one-time $1 billion investment to create a network of 15 manufacturing innovation institutes across the country.

All three institutes will be selected through an open, competitive process, led by the Departments of Energy and Defense, with review from a multi-agency team of technical experts. Winning teams will be selected and announced later this year. Federal funds will be matched by industry co-investment, support from state and local governments, and other sources. Like the pilot institute, these Institutes are expected to become financially self-sustaining, and the plan to achieve this objective will be a critical evaluation criterion in the selection process. DOD and DOE are opening the competition for the three new institutes immediately. For more information:

Department of Defense – “Digital Manufacturing and Design Innovation”

Department of Defense – “Lightweight and Modern Metals Manufacturing”

Department of Energy – “Next Generation Power Electronics Manufacturing”

Orders for Durable Goods Down 5.7% in March

New orders for manufactured durable goods in March decreased $13.1 billion or 5.7% to $216.3 billion the U.S. Census Bureau announced today, nearly twice what economists had predicted. This decrease, down two of the last three months, followed a 4.3% February increase. Excluding transportation, new orders decreased 1.4%. Excluding defense, new orders decreased 4.7%.

Shipments of manufactured durable goods in March, up six of the last seven months, increased $1.0 billion or 0.4% to $230.0 billion. Inventories of manufactured durable goods in March, up seventeen of the last eighteen months, increased $0.3 billion or 0.1% to $377.2 billion.

Rep. Camp and Sen. Baucus Team Up to Reform Tax Code

House Ways and Means Chairman Dave Camp (R-MI) and Senate Finance Committee Chairman Max Baucus (D-MT) today teamed up to launch TaxReform.gov, a new website dedicated to obtaining input from the American public on tax reform.

“The tax code is littered with special interest provisions that Washington has put in over the last 27 years. It is time to go line-by-line through the tax code and clean it up. There is no reason Americans should have to spend over 6 billion hours and over $160 billion every year just trying to comply with the tax code. Chairman Baucus and I believe in a tax code that is more effective and efficient,” Chairman Camp said.

In early 1985, at the start of the last successful overhaul of the nation’s tax code, a little-known House committee chairman named Dan Rostenkowski delivered the Democratic response to President Reagan’s national address on tax reform. Rostenkowski used his speech, which drew immediate praise, as an opportunity to launch his “Write Rosty” campaign, calling on Americans to send his Capitol Hill office letters of support for a tax reform plan that would make the system simpler and fairer.

MIT Report Suggests Manufacturing “Skills Gap” May be Overstated

Research groups formed within MIT’s new Production in the Innovation Economy (PIE) report analyze two critical inputs to bringing innovation to market: jobs and skills and advanced manufacturing technologies. For these research modules, the project used surveys as well as interviews. The group working on jobs and skills talked with companies, community colleges, high schools, and labor market programs across the country. Their sample of close to 1000 manufacturing establishments is the first nationally representative data on what skills are needed and shortages occur.

In Springfield, MA, the Hampden County Regional Employment Board (REB) is mandated by federal job training legislation to work with firms, localities, and educational institutions in the operation of the Workforce Investment Act. When the local machining association faced a shortage of skilled workers as the result of the closing of several large companies that had previously trained apprentices, it approached the REB. The REB brought the firms together with five vocational high schools and two community colleges. The connections between the schools and the companies had been thin and intermittent. With active intervention from the REB, the parties started to work on curriculum development; on training programs for supervisors and for unemployed workers; organized career fairs and firm visits to encourage high school students to consider machining jobs; and the gaps began to close.

Fed Survey: Banks Eased Business Lending Last Quarter

The April 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of, and demand for, bank loans to businesses and households over the past three months. The summary is based on responses from 68 domestic banks and 21 U.S. branches and agencies of foreign banks. In the April survey, domestic banks, on balance, reported having eased their lending standards and having experienced stronger demand in several loan categories over the past three months.

The survey results generally indicated that banks’ policies regarding lending to businesses eased over the past three months and demand increased, on balance. In particular, a relatively large fraction of domestic respondents reported having eased standards on C&I loans, and moderate to large net fractions of such respondents reportedly eased many terms on C&I loans to firms of all sizes. Banks that eased their C&I lending policies generally cited increased competition for such loans as an important reason for having done so. Demand for C&I loans also reportedly increased, but such reports were less widespread than in the previous survey.

Survey: Small Businesses Not Planning to Increase Hiring in 2013

With continuing uncertainty on the effects of ObamaCare and other tax and regulatory laws, many private businesses are not planning on increasing their staff sizes in 2013, according to a new Sageworks survey.

Sageworks, a financial information company, surveyed accounting professionals who work closely with these firms. More than 50% of respondents said that in the next 12 months their clients expect their staffing levels to remain largely unchanged. Twenty percent of respondents said their clients plan to increase their number of employees.

Also according to the survey, 6.5% of respondents believe their clients will reduce their number of employees in the coming months.

The most recent Private Company Report from Sageworks shows privately held companies have seen their sales grow by an average annual rate of 9.7% in the period ended February 2013. The average private company had a 7.6% net profit margin for the period, compared to 4.6% a year earlier.

Conference Board Employment Trends Index Edged Up in April

The Conference Board Employment Trends Index (ETI) increased in April. The index now stands at 111.68, up from 111.61 (an upward revision) in March. The April figure is 3.8 percent higher than a year ago.

“Despite weak economic activity, the Employment Trends index is still signaling moderate job growth in the coming months,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “On average, employment has grown almost as fast as GDP over the past three years, and that is likely to continue into the third quarter of 2013. As a result, the average labor productivity of American workers will struggle to improve until GDP growth accelerates.”

April’s improvement in the ETI was driven by positive contributions from five of its eight components. The increasing indicators — from the largest positive contributor to the smallest — were Number of Temporary Employees, Initial Claims for Unemployment Insurance, Job Openings, Industrial Production, and Real Manufacturing and Trade Sales.

New Fed Beige Book Credits Manufacturing, Housing for Moderate Economic Growth

Reports from the twelve Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April. Most Districts noted increases in manufacturing activity since the previous report.

Manufacturing activity held steady or increased in most Districts since the previous Beige Book. The pace of growth picked up in the Cleveland, Atlanta, Minneapolis, Dallas, and San Francisco Districts, while the Richmond and Chicago Districts noted that the pace of growth in production was slower than earlier this year. Contacts in the Boston District reported mixed conditions, and manufacturing activity held steady in the New York District. Manufacturing conditions in the Kansas City District continued to soften, driven by weaker durable goods production, although factory managers project a rebound in coming months. Firms in the New York, Philadelphia, and Dallas Districts were broadly optimistic about prospects for 2013, while cautious optimism was expressed by manufacturers in the Cleveland District, and mixed outlooks were expressed in the Boston District. Contacts in the Atlanta District do not expect future production to be as high as previously projected.

Factory Orders Fell In March

New orders for manufactured goods in March, down two of the last three months, decreased $19.5 billion or 4.0% to $467.3 billion, the U.S. Census Bureau reported Friday. This followed a 1.9% February increase. Excluding transportation, new orders decreased 2.0%. Inventories, up four consecutive months, increased $0.2 billion to $620.2 billion. This was at the highest level since the series was first published on a NAICS basis in 1992, and followed a 0.2% February increase. The inventories-to-shipments ratio was 1.29, up from 1.27 in February.

U.S. Manufacturing Output Declined in March

Industrial production rose 0.4 percent in March after having increased 1.1 percent in February, the Federal Reserve announced today. For the first quarter as a whole, output moved up at an annual rate of 5.0 percent, its largest gain since the first quarter of2012. Manufacturing output edged down 0.1 percent in March after having risen 0.9 percent in February; the index advanced at an annual rate of 5.3 percent in the first quarter. Production at mines decreased 0.2 percent in March and edged down in the first quarter. In March, the output of utilities jumped 5.3 percent, as unusually cold weather drove up heating demand. At 99.5 percent of its 2007 average, total industrial production in March was 3.5 percent above its year-earlier level. The rate of capacity utilization for total industry moved up in March to 78.5 percent, a rate that is 1.2 percentage points above its level of a year earlier but 1.7 percentage points below its long-run (1972–2012) average.