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Manufacturing Biweekly Update

October 12, 2012 [past updates]


U.S. Manufacturing Trends Current Period Year-to-Date
Wage Rates no change up
Profits up up
Employment down up
Production down up
Capacity Utilization down up
Productivity up up
Exports up up
Goods Shipments down up


Biweekly Notes

Moment of truth approaching for U.S. manufacturers

How far can cost-cutting get you in a slowing economy? That's the question the U.S. manufacturing sector will answer over the coming weeks. Through the first half of the year, big industrial companies including General Electric Co, United Technologies Corp and Caterpillar Inc notched impressive profit growth despite shaky demand, largely thanks to their success in boosting productivity. But that bit of management magic may have run its course - Wall Street expects manufacturers to report a sharp slowdown in earnings growth in the just-ended third quarter, as Europe's deteriorating economy, slowing growth in Asia and the risk of the United States going over a self-imposed fiscal cliff cause customers to throttle back spending even further. Warning signs abound. In recent weeks, Caterpillar, United Tech and FedEx Corp have noted that the world economy is slowing - and that they are bracing for an extended period of tepid growth. FedEx, the world's No. 2 package-delivery company, this week unveiled plans to cut costs at its air-express operation by about $1.7 billion over the next four years, because it no longer expects that business to maintain its prior growth rate, which was twice that of global GDP growth. Despite those cost-cutting plans, analysts expect profit for FedEx's 2013 fiscal year, which ends in May, to be roughly flat after rising about 40 percent in fiscal 2012 - suggesting that belt-tightening can only do so much to offset a weak economy.

(Reuters| October 12, 2012)
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Manufacturers hiring, but job growth is slowing

Some manufacturers are still hiring, but the industry's resurgence is losing some steam after a strong start earlier this year. Manufacturing accounted for 16% of new U.S. jobs in the first seven months of this year, exceeding the industry's 9% share of overall employment. Now employers are growing cautious as they see slowing economies in Europe and China and await the outcome of next month's U.S. elections. Moody's Analytics forecasts U.S. manufacturing employment will be flat for the next 12 months compared with a 1% gain over the past 12. In recent years, much of the manufacturing job growth has occurred in the durable-goods category, which includes automobiles, aircraft, fabricated metals and machinery. Pent-up demand and strong exports helped to fuel sales. (USA Today| October 5, 2012)
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U.S. Manufacturing Key Facts

Manufacturing Wage Rates UPDATED

  • In September 2012, average hourly earnings in manufacturing were unchanged from previous month at $19.15, but up 1.11 percent from September 2011’s $18.94.

    (BLS/DOL Employment data from “The Employment Situation, USDL 12-1981,” released October 5, 2012; next release is November 2, 2012)
    http://www.bls.gov/news.release/pdf/empsit.pdf

       

Manufacturing Wage Rates (Quarterly, Yearly)

  • In the second-quarter of 2012, hourly compensation from previous quarter, annual rate (revised) was up (+0.9 percent) in total manufacturing, up (+0.4 percent) in durable manufacturing and up (+2.0 percent) in nondurable manufacturing.

  • In the second-quarter of 2012, hourly compensation of all manufacturing workers increased (+0.4 percent), compared to a (+2.9 percent) increase during the second-quarter of 2011. Real hourly compensation in the total manufacturing sector decreased (-1.4 percent) in the second-quarter of 2012, compared to (-0.4 percent) decrease in the second-quarter of 2011.

    (BLS/DOL Productivity data from “Productivity and Costs, Second Quarter 2012,” USDL 12-1795, released September 5, 2012; next release is November 1, 2012)
    http://www.bls.gov/news.release/pdf/prod2.pdf

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Manufacturing Profits

  • In the second quarter of 2012, manufacturing profits increased 2.6 percent, or $9.3 billion, to $372.8 billion from $363.5 billion in the first quarter. Compared with second quarter profits of 2011, manufacturing profits were up $143.6 billion in the second quarter of 2012.

  • Second quarter 2012 profits for all non-financial industries (manufacturing being a subcategory) increased $29.0 billion from the first quarter to $1245.8 billion.

    (BEA/DOC GDP data from “Gross Domestic Product, BEA 12-44,” released September 27, 2012; next release is October 26, 2012)
    http://www.bea.gov/newsreleases/national/gdp/2012/pdf/gdp2q12_3rd.pdf

           

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    Manufacturing Employment UPDATED

    • In September 2012, manufacturing employment went down, with a decrease of 16,000 jobs.

    • In September, durable goods manufacturing lost 13,000 jobs with decreases in computer and electronic products (-5,500), primary metals (-3,400), transportation equipment (-3,000), miscellaneous manufacturing (-1,500), nonmetallic mineral products (-900), electrical equipment and appliances (-200), and machinery (-200). However, job gains were reported in wood products (+1,700), and furniture and related products (+200). Meanwhile there was no change of employment in fabricated metal products.

    • In September, nondurable goods manufacturing lost 3000 jobs with increases in chemicals (+1,600), food manufacturing (+600), textile mills (+400), beverages and tobacco products (+300), and petroleum and coal products (+200), However, job loss occurred in printing and related support activities (-3,200), paper and paper products (-1,100), apparel (-1,000), textile product mills (-400), plastics and rubber products (-200), and leather and allied products (-100).

    • The manufacturing employment of 11.9 million workers represents 8.9 percent of total non-farm employment.

      (BLS/DOL Employment data from “The Employment Situation, USDL 12-1981,” released October 5, 2012; next release is November 2, 2012) http://www.bls.gov/news.release/pdf/empsit.pdf

           

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    Manufacturing Production

    • In August 2012, manufacturing production was down (-0.7 percent) from previous month and was up (+3.8 percent) above its year-earlier level.

    • In August 2012, production of durable goods was down (-1.1 percent) from the previous month. The durable industries that registered decreases in output included motor vehicles and parts (-4.0 percent), furniture and related products (-1.6 percent), fabricated metal products (-0.8 percent), machinery (-0.8 percent), computer and electronic products (-0.7 percent), miscellaneous manufactured product (-0.6 percent), nonmetallic mineral products (-0.3 percent), aerospace and miscellaneous transportation equipment (-0.2 percent), and wood products (-0.2 percent). The durable industry that registered an increase in output was primary metals (+0.6 percent). There was no change of output in electrical equip., appliances, and components.

    • In August 2012, production of nondurable goods was down (-0.4 percent) from the previous month. The nondurable industries that registered decreases in output included apparel and leather (-1.7 percent), plastics and rubber products (-1.6 percent), textile and product mills (-1.0 percent), petroleum and coal products (-0.5 percent), printing and support (-0.3 percent), chemicals (-0.3 percent), paper (-0.3 percent), and food, beverage and tobacco products (-0.1 percent).

    • In August 2012, production of other manufacturing goods (non-NAICS) was unchanged.

      (Federal Reserve Statistical data from “Industrial Production and Capacity Utilization, G17 (419),” released September 14, 2012; next release is October 16, 2012)
      http://www.federalreserve.gov/releases/g17/Current/g17.pdf

           

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    Manufacturing Capacity Utilization

    • In August 2012, manufacturing industries (NAICS based) operated at 77.6 percent of capacity, down (-0.7 percentage points) below the capacity utilization level of the previous month, and down (-1.1 percentage points) below their 1972-2011 average of 78.7 percent.

    • In August 2012, durable manufacturing, capacity utilization operated at 77.3 percent capacity, down (-1.0 percentage points) from the previous month. Decreased capacity utilization was registered in motor vehicles and parts (-3.5 points), furniture and related products (-1.0 points), machinery (-0.9 points), miscellaneous (-0.9 points), computer and electronic products (-0.9 points), fabricated metal products (-0.7 points), and aerospace and miscellaneous transportation equipment (-0.4 points). Increased capacity utilization was registered in primary metals (+0.5 points). There was no change of capacity utilization in nonmetallic mineral products, electrical equip., appliances, and components, and wood products.

    • In August 2012, non-durable manufacturing, capacity utilization operated 77.9 percent capacity, down (-0.3 points) from the previous month. Decreased capacity utilization was registered in plastics and rubber products (-1.4 points), textile and product mills (-0.6 points), chemicals (-0.3 points), printing and support (-0.2 points), petroleum and coal products (-0.1 points), and food, beverage, and tobacco products (-0.1 points). Increased capacity utilization was registered in apparel and leather (+1.0 points). There was no change of capacity utilization in paper.

    • The index for other manufacturing industries (non-NAICS) was up (+0.1 points).

      (Federal Reserve Statistical data from “Industrial Production and Capacity Utilization, G17 (419),” released September 14, 2012; next release is October 16, 2012)
      http://www.federalreserve.gov/releases/g17/Current/g17.pdf

           

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    Manufacturing Productivity

    • Manufacturing sector productivity was up (+0.1 percent) in the second-quarter of 2012, as output increased (+1.5 percent) and hours increased (+1.4 percent). Productivity was up (+3.7 percent) in the durable goods industries and down (-3.8 percent) in the nondurable goods industries. Unit labor costs in manufacturing increased (+0.8 percent) in the second-quarter of 2012, and decreased (-2.4 percent) over the last four quarters.

    • In durable goods industries, productivity was up (+3.7 percent) from previous quarter, as output increased (+5.4 percent), while hours worked increased (+1.6 percent).

    • In nondurable goods industries, productivity was down (-3.8 percent) from previous quarter, as output decreased (-2.8 percent), and hours worked increased (+1.0 percent).

      (BLS/DOL Productivity data from “Productivity and Costs, Second Quarter 2012,” USDL 12-1795, released September 5, 2012; next release is November 1, 2012)
      http://www.bls.gov/news.release/pdf/prod2.pdf

           

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    Manufacturing Trade UPDATED

    • • Manufactured goods exports in August 2012 were (+5.85 percent) higher than the previous month. Imports were (+1.65 percent) higher.

    • • Year-to-date August 2012, U.S. manufactured goods exports accounted for 87.3 percent of all U.S. exports of goods, compared with 85.9 percent a year ago.

    • The year-to-date August 2012 trade deficit in manufactured goods of $302.0 billion was $10.0 billion more when compared with $292.0 billion a year ago.

      (USA Trade Online, U.S. Census Bureau, released October 11, 2012; Next release is November 8, 2012)
      http://www.usatradeonline.gov/

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    Manufactured Goods Shipments UPDATED

    • Shipments of manufactured durable goods in August, down two of the last three months, decreased $6.7 billion or 2.9 percent to $222.4 billion, revised from the previously published 3.0 percent decrease. This followed a 1.8 percent July increase.

    • In August, shipments increased in furniture and related products (+0.8 percent), miscellaneous durable goods (+0.7 percent), wood products (+0.4 percent), and nonmetallic mineral products (+0.2 percent). However, shipments decreased in transportation equipment (-7.9 percent), computers and electronic products (-3.8 percent), primary metals (-0.6 percent), machinery (-0.3 percent), and electrical equipment, appliances, and components (-0.3 percent). There was no change in shipment for fabricated metal products.

      (Census Bureau/DOC data from “Report on Manufacturers’ Shipments, Inventories and Orders (M3-2(12)-8, CB12-187),” October 4, 2012; next release is November 2, 2012)
      http://www.census.gov/manufacturing/m3/

           

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    Manufactured Goods Prices UPDATED

    • In September 2012, there was no change in the Producer Price Index (PPI) for finished goods, except foods and energy, when compared to previous month.

    • The index for finished energy goods was up (+4.7 percent) from previous month.

    • A seasonally adjusted increase in price from August to September was registered in gasoline (+9.8 percent), no. 2 diesel fuel (+9.2 percent), liquefied petroleum gas (+3.5 percent), home heating oil and distillates (+3.1 percent), residential gas (+1.3 percent), and residential electric power (+0.3 percent).

      (BLS/DOL data from “Producer Price Indexes, USDL 12-2032,” released October 12, 2012; next release is November 14, 2012)
      http://www.bls.gov/news.release/pdf/ppi.pdf

           

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    Institute for Supply Management's (ISM) Index  UPDATED

    • Economic activity in the manufacturing sector expanded in September following three consecutive months of slight contraction, and the overall economy grew for the 40th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

    • Manufacturing expanded in September as the PMI™ registered 51.5 percent, an increase of 1.9 percentage points when compared to Augusts' reading of 49.6 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

    • The percentage-point changes in the components of the PMI in September were New Orders +5.2 points increase to 52.3; Employment, +3.1 points increase to 54.7; Production, +2.3 points increase to 49.5; Supplier Deliveries, +1.0 points increase to 50.3; and Inventories, -2.5 points decrease to 50.5.

      U.S. Industries Reporting Growth in September 2012

      • Textile Mills
      • Food, Beverage & Tobacco Products
      • Printing & Related Support Activities
      • Wood Products
      • Apparel, Leather & Allied Products
      • Paper Products
      • Petroleum & Coal Products
      • Primary Metals
      • Fabricated Metal Products
      • Furniture & Related Products
      • Miscellaneous Manufacturing

      (Institute for Supply Management, data released October 1, 2012; next release is November 1, 2012)
      http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942

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    Prepared by
    Director of Office of Trade Industry Information
    Manufacturing and Services
    International Trade Administration
    U.S. Department of Commerce
    (202) 482-4691