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ABC 2014: Economist sees a turn in the bend for manufacturing

WASHINGTON — The effects of the recent winter’s poor weather can be seen in various sets of data collected by the National Association of Manufacturers, but in general manufacturing is picking up again.

That’s according to NAM chief economist Chad Moutray, who spoke at the close of the American Boating Congress last Wednesday.

“Really from the beginning of the first quarter of last year, we saw this manufacturing trend of a lot of momentum,” Moutray told the conferees. “From mid-2012 to the end of 2013 it was growing, but there were a lot of doubts. Uncertainty reduced the Gross Domestic Product by a full percentage point. And that’s not a word economists like because it’s intangible.”

The second half of 2013 saw renewed growth, he said.

“We came into 2014 with a lot of optimism,” Moutray said. “And then the weather happened. Workers couldn’t get [to work], shipments couldn’t get there and it also affected retail spending. People weren’t going to showrooms to buy cars. They weren’t going to malls. They weren’t going out much at all.”

The good news is that the manufacturing sector has begun to rebound from the weather-induced lag, he said.

“In general, manufacturing is picking up again, but you see that weather effect in a lot of different data sources,” Moutray said.

The U.S. economy is expected to grow 2.6 percent this year. Growth of more than 3 percent is expected in 2015.

“I remain optimistic despite the weather,” he said. “Most manufacturers expect higher sales this year and for production to pick up. So I’m still relatively optimistic.”

However, “there’s also a nervousness that they’ve heard this song before and that as soon as we get some traction, something’s going to happen,” he said. “But generally we’re optimistic.”

News on the trade front has not been as good despite positive domestic manufacturing trends, Moutray said.

“We hit record highs on U.S. manufactured goods,” Moutray said. “Yet exports have grown frustratingly slowly. Manufacturers are not seeing the growth in international sales that they would like to see. Obama said he wanted to double the number of exports by 2015, and we won’t make that goal.”

But there were brighter spots.

“Last year our manufacturers’ goods to China were up 18 percent,” he said. “That doesn’t mean we don’t have a large trade deficit with China, but they are up nicely. There are lots of references to this being the fastest growth we’ve had since before the recession. And another trend is we have begun to reach pre-recession levels” for manufacturing.

The falling unemployment rate was good news, but a 30-year low in the labor force participation rate skews that number, he said.

“As manufacturing has picked up, hiring picked up,” Moutray said. “Does that mean that manufacturers said, ‘Let’s just hire everyone we can’? No, there’s still a hesitance to bring on new workers. Nonetheless, the unemployment rate fell to 6.3 percent, so that’s a nice change there.”

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