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Manufacturing Biweekly Update

December 15, 2006 (Past Updates)

 

U.S. Manufacturing Trends Current Period Year-to-Date Previous Year
Wage Rates up up up
Profits down up up
Employment down down down
Production up up up
Capacity Utilization up up up
Productivity up up up
Exports na up up
Goods Shipments down up up

 

Biweekly Notes

Amway and Mary Kay Obtain Direct-Selling Licenses in China

On December 1, 2006, these two major U.S distributors of home and health care products were granted direct-selling licenses from the Ministry of Commerce in Beijing. Amway, based in Michigan, has a large volume of sales from distributing its products via stores in various cities in China. Mary Kay, based in Texas, also manufactures its beauty care products in China. Both U.S. companies manufacture and market globally many of their products in great volume. In direct selling, a company delivers right to its customers by enlisting a domestic sales force instead of distributing to the stores. This means of selling gives Amway and Mary Kay another vehicle for exporting its products, marginally affecting the Key note trade balance, but personally reaching out to a potentially global clientele.

Sources: The Washington Post, China Opens Its Door to Amway, Mary Kay, December 5, 2006, p.D7; www.amway.com/product/Distribution-10168.aspx

 

U.S. Manufacturing Key Stats

Manufacturing Wage Rates

Manufacturing Profits

Revised BEA estimates for manufacturing profits were unchanged from their previous September 28 estimates. For the second quarter of 2006, manufacturing profits fell 3.6 percent or $10.8 billion to $289.9 billion from $300.7 billion in the preceding period (first quarter). However, corporate profits for manufacturing have risen $210.1 billion or 263.3 percent since the second quarter of 2001 and are above corporate profits for 2005. Third quarter profit estimates were available for non-financial industries, of which manufacturing is a part. BEA estimates profits for non-financial industries were an annualized $1,076.4 billion, up 7.2 percent from the second quarter and up 19.1 percent from the third quarter of 2005. [Profits Data; Quarterly Change Data; Graph]

(BEA/DOC GDP data from “Gross Domestic Product and Corporate Profits, BEA 06-51,” released, November 29, 2006; next release is December 21)
Current GDP Data ; Archived GDP Data

Manufacturing Employment

In November 2006, manufacturing employment decreased 15,000 to 14.2 million from October. The decline was reported in both durable and non-durable sub-sectors. Within durable goods, employment continued to decline in industries, such as Wood Products (-5,900), Furniture and Related Products (-5,200), and Motor Vehicles and Parts
(-7,000). However, employment increased in Computer and Electronic Products (5,000). For non-durable goods, job losses registered in paper and paper products (-1,200), and textile mills (-1,400). Since July 2006, manufacturing employment has declined by 72,000. Nonetheless, manufacturing employs 14.2 million workers and represents 10.4 percent of total non-farm employment. [Employment Data; Monthly Change Data; Annual Change Data; Graph]

(BLS/DOC Employment data from “The Employment Situation November 2006, USDL 06-2041,” released December 8, 2006; next release is January5, 2007) Current Employment Data; Archived Employment Data

Manufacturing Production

In November 2006, manufacturing output increased 0.3 percent from October, reflecting a 0.7 percent increase in durable and no change in non-durable manufacturing. In durable manufactures, Motor vehicles and parts rose 3.7 percent with a decline of 2.4 percent from its year ago level. Conversely, Computer and electronic products increased 1.5 percent in this current month and 19.1 percent over a year ago. Also, on the rise in production were Aerospace and Miscellaneous durables. Among non-durable goods, industries that had small increases in November were Textile & product mills and Plastics & rubber products, while Petroleum and coal products output declined. In slight transition from the October performance, in general, the manufactures output index seems to be moving in the same direction as its 4.6 percent trend from last year. [Production Data; Monthly Change Data; Annual Change Data; Graph]

(Federal Reserve Statistical data from “Industrial Production and Capacity Utilization, G17 (419),” released December 15, 2006; next release is January 17, 2007) Current Federal Reserve Statistical Data; Archived Federal Reserves Statistical Data

Manufacturing Capacity Utilization

U.S. manufacturing industries operated at 80.2 percent of capacity in November 2006, a rate 0.9 percent higher than their 1972-2005 average of 79.5 percent and 0.2 percentage points above capacity utilization in October 2006. Durable manufacturing capacity utilization also was up 0.2 percentage points from October to 79.8 percent. Decreases in capacity utilization for the Wood Products, Primary Metal, Nonmetallic mineral products, Fabricated metal products, Furniture & related products industries (declines ranging from 2.6 to 0.5 percentage points) accounted for the lower capacity utilization in Durable manufacturing with other Durable manufacturing changing upward. Capacity utilization in Non-durable manufacturing was down 0.1 percentage point to 81.8 percent from October. Non-durable manufacturing industries were at lower capacity utilization except Textile & product mills and Plastics & rubber products industries. Non-durable manufacturing industries down by more than the industry-average were Food, beverage & tobacco products, Apparel & leather, and Chemicals, down 0.1, 2.8, and 3.4 percentage points, respectively. [Capacity Utilization Data; Graph]

(Federal Reserve Statistical data from “Industrial Production and Capacity Utilization, G17 (419),” released December 15, 2006; next release is January 17, 2007) Current Federal Reserve Statistical Data ; Archived Federal Reserves Statistical Data

Manufacturing Productivity

Manufacturing productivity rose 6.7 percent in the third quarter of 2006, as output increased 5.1 percent and hours of all workers fell 1.6 percent (seasonally adjusted annual rates). This was the largest quarterly gain in productivity since the third quarter of 2003. In the second quarter, productivity rose 2.7 percent, reflecting a 5.1 percent rise in output and a 2.3 percent increase in hours. In durable goods industries, productivity increased 9.0 percent in the third quarter of 2006, as an increase of 5.9 percent in output combined with a decrease of 2.9 percent in hours. Productivity grew more slowly in the nondurable goods industries, 3.1 percent, reflecting increases of 3.9 percent in output and 0.8 percent in hours. Strong productivity growth has resulted in the decline in manufacturing employment. [Productivity Data; Quarterly Change Data; Annual Change Data; Graph]

(BLS/DOL Productivity data from “Productivity and Costs, USDL 06-2039,”released December 5, 2006; next release is February 7, 2007) Current Productivity News Release ; Archived Productivity News Releases

Manufacturing Trade

For the first ten months of 2006, U.S. manufactured goods exports accounted for 64.2 percent of all U.S. exports of goods and services. During that same period, manufactures exports were 14.4 percent above year ago levels, while imports were up 10.8 percent. The trade deficit in manufactures increased to $562.8 billion (annual rate) for 2006, up from $534.3 billion a year ago.

(Census/BEA/DOC Foreign Trade Statistics data from “U.S. International Trade in Goods and Services, CB06-180, BEA06-54, FT 900,” released December 12, 2006; next release is January 10, 2007) Current Foreign Trade Press Release; Historical Foreign Trade Press Releases

Manufactured Goods Shipment

Shipments of manufactured durable goods in October 2006, as revised, increased $0.9 billion or 0.4 percent from September to $209.7 billion. This followed a 2.7 percent September decrease. Machinery, up seven of the last eight months, had the largest increase, $0.5 billion or 1.9 percent to $28.3 billion. Manufactured goods shipments were up 5.6 percent from October 2005 with shipments of Defense communications equipment as the largest percentage annual gain, up 32.7 percent from shipments in October 2005 (but down 0.7 percent from September 2006). [MGS Data; Graph]

(Census Bureau/DOC data from “Advance Report on Durable Goods Manufacturers’ Shipments, CB06-174” released November 28, 2006; next release is December 27) Current Durable Goods Press Release, Archived Durable Goods Press Releases

 

Manufactured Goods Prices

The producer price index for finished goods, except foods and energy, declined 0.9 percent in October 2006, after rising 0.6 percent in September. The finished energy goods price index fell 5.0 percent in October, 3.4 percentage points faster than the September decline of 1.6 percent. The index for finished consumer goods except foods and energy had dropped 0.8 percent in October after increasing 0.7 percent in previous month. [Price Index Data; Annual Change Data]

(BLS/DOL data from “Producer Price Indexes,” released November 14, 2006; next release is December 19) Current Producer Price Index; Archived Producer Price Indexes

 

Institute for Supply Management (ISM) Index

  • In November 2006, the Index of Manufacturing Production was 49.5 percent, 1.7 percentage points lower than the 51.2 percent reported in October. Index reading above 50 points indicates that the manufacturing economy is generally expanding; below 50 points indicates that it is generally contracting.

  • Manufacturing activity in November had declined to its lowest level in 42 months as manifested by the recent index. The last time the PMI registered below 50 percent was April 2003 (46.5 percent). The components of the index counter to the overall November figure were Prices (+6.5%), Supplier Deliveries (+2.6%), Orders Backlog (+2.0%), and Inventories (+0.3%).

U.S. Industries Reporting Growth in October 2006

  • Apparel, Leather and Allied Products
  • Miscellaneous Manufacturing
  • Computer & Electronic Products
  • Printing & Related Support Activities
  • Plastic and Rubber Products
  • Primary Metals
  • Chemical Products
  • Food, Beverage & Tobacco Products

(Institute for Supply Management data released December 1, 2006; next release is January 2, 2007) Current ISM Release; Archived and Current ISM Releases

 

Prepared by: Elliot Levy
Office of Competition and Economic Analysis
International Trade Administration
U.S. Department of Commerce
(202) 482-1606

 
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