A monthly round-up of the MAPI resources available to NFPA members through NFPA's membership in MAPI.

Issues in the Brief

DOJ Envy? U.K. Finally Embraces Deferred Prosecutions

If imitation is the sincerest form of flattery, the U.K. is positively infatuated with the United States. Two years ago, the U.K. essentially copied U.S. anti-corruption laws by adopting the U.K. Bribery Act. Now the U.K. has seemingly dusted off its copiers again in the form of newly adopted legislation creating deferred prosecution agreements and allowing their use starting in early 2014. This is good news for global companies operating in the U.K. because it provides a legal "middle ground" for companies to cure a recognized financial misstep, including bribery, fraud or money laundering.

Skills Gap Confusion
The manufacturing "skills gap" seems to have developed a small credibility gap. The perceptions and experiences of manufacturers have been challenged by industry and academic research. What was at first a relatively straightforward discussion has become more nuanced and political. In this report, Don examines some of the evidence for the skills gap and considers other studies that contribute to our understanding of the extent of the problem

Brazil's Manufacturing Growth Puzzle
While manufacturing activity has historically mimicked the path of the overall economy in Brazil, it seems that the 2008 crisis created a structural break, leading these two variables on divergent paths. After manufacturing production stopped growing in March 2010, Brazil's economy kept expanding. In a highly protected environment, a lack of qualified labor is limiting manufacturing growth in Brazil. It seems that absent a major influx of qualified workers -- unlikely in an inward-looking society -- growth can be achieved only through the opening of the economy; the prevailing ideology in Brasilia goes against that, however. Amid the industrial complex's standstill and the government's initiatives to foster local manufacturing -- protectionist policies, tax reductions, lower energy costs, etc. -- tensions are rising between public officials and the country's captains of industry.

Do MAPI Members Enjoy a Natural Cyclical Hedge in Transatlantic Markets?
A trade agreement between the United States and the EU would likely lead to heightened trade and investment intensity. Could the resulting trade environment offer a natural hedge to cyclical variation for American (and European) multinationals? Upon examination of countercyclical business conditions, it appears the fairly integrated transatlantic marketplace would offer few opportunities to hedge naturally; the paper and beverage sectors seem to be the best candidates.

MAPI's Conflict Minerals Toolkit
Conflict minerals are arguably the most significant, and potentially most costly, regulatory requirement for U.S. manufacturers since Sarbanes-Oxley. MAPI's primer for conflict minerals provides the who, what, when, how and why of the SEC's reporting requirements. For information about other conflict minerals initiatives within the U.S., Canada and the EU, check out our breakdown of recent events.

Economic Review

U.S. Economic Outlook for 2013 and 2014
Daniel J. Meckstroth, Ph.D.,Vice President and Chief Economist
In this audiovisual presentation, Dan presents MAPI's revised forecast for U.S. economic and manufacturing growth. Despite the volatility and struggle for growth, economic fundamentals have definitely improved. There are a number of reasons to be optimistic about continued economic growth in 2013 and 2014: Consumer deleveraging is close to an end, housing prices are rising, pent-up demand is releasing postponed spending for consumer durables and job growth is more balanced between various sectors than in the past.

Manufacturing Activity June 2013
Daniel J. Meckstroth, Ph.D.,Vice President and Chief Economist
The manufacturing industrial production index increased by 0.1% in May after falling by a strong 0.4% in April and 0.3% in March. On a year-over-year basis, the index is 1.7% higher in May 2013 than one year ago. The small production gain in May was the difference between some large increases and large declines in major industries. MAPI forecasts that manufacturing production will increase 3.1% in 2013 and grow 3.6% in 2014.

European Industrial Outlook: Eurozone Recession to Last Through 2014

The uneven recession in the eurozone is now coupled with a downturn in the Czech Republic and sharply falling economic activity in Poland. The eurozone's steadily rising current account surplus will be difficult to reconcile with a fast recovery in 2014 based solely on external demand. As households and businesses spend less (save more), output can grow only if governments or foreigners (or both) spend more. Yet these trends are unlikely to hold: the private sector is deleveraging while fiscal authorities shrink budgets. Governments are becoming net savers because the fiscal compact mandates such.

Economic Report

U.S. Industrial Outlook: Industrial Activity Strong in Early 2013, Spring Lull
The superior growth in manufacturing production early this year was due to the strong growth in housing starts, auto sales and inventory rebuilding. When there is a large inventory build in one quarter, however, the gain tends to reverse in the next period. While part of the recent weakness is from inventory swing, the economic fundamentals in the second quarter are not strong. We expect an acceleration in the general economy and a rebound in manufacturing production in the second half of this year, but nothing suggests more than a return to modest to moderate growth.

Manufacturing Facts: A New MAPI Production, is a collection of the key facts and figures that define the state of the U.S. manufacturing industry.

Manufacturing Facts: Small Companies Dominate the Industrial Landscape
The American economy is characterized by a great number of small firms. Smaller companies tend to react quickly to a changing economic environment and may offer better opportunities for internal advancement. The largest cohort of manufacturing firms is composed of those employing up to four people.

Manufacturing Facts: Domestically Manufactured Goods are Used Throughout the U.S. Economy

Domestically manufactured goods are used throughout the economy, flowing through the goods and services sectors as intermediate materials and then to final purchases via consumers, businesses, government and exports. Intermediate consumption occurs in the industry sectors because this is where manufactured materials are made into parts and components that are then incorporated into final goods. The sum of intermediate and final uses equals the total supply for manufacturing commodities.

Manufacturing Facts: Technology Transforms Safety in the Workplace

Manufacturers see workplace safety as an important business tool. Rather than simply a cost of doing business, safety programs reduce costs and contribute to the bottom line. Between 1994 and 2011, the rate of occupational injuries in manufacturing facilities decreased by two-thirds, from just over 12 injuries per 100 workers to only 4. This is a substantially faster rate of improvement than that of the overall private sector.

Manufacturing Facts: Foreign Investment in U.S. Manufacturing Grows
America is an attractive place to do business, and foreign business leaders vote with their feet when they set up shop here. U.S. affiliates of foreign industrial companies hold $838 billion worth of investments, with a clear upward trend over several decades. This investment in America's manufacturing pays well for investors, employees and government alike. About 1.68 million Americans are directly employed by foreign-owned manufacturing firms.

Manufacturing Facts: Foreign Companies are Important to U.S. Manufacturing
Foreign firms operating their U.S. subsidiaries are important players in the domestic market. Sometimes they mitigate the vagaries of a business cycle. In the past decade and a half, employment in all manufacturing companies plunged 33%. During the same time, payrolls in foreign subsidiaries dipped barely 10%, and they rose in the two years preceding the Great Recession, easing the overall pain.

Manufacturing Facts: U.S. Health Care Costs are Skyrocketing

Health care costs are one of the most difficult challenges facing manufacturers. In the 10 years ending in 2012, employer costs for employee health care increased 66% -- an increase in the U.S. structural cost disadvantage by an average of 5.2 percentage points per year. To put the cost burden in perspective, overall producer prices for finished goods excluding food and energy rose only 1.8% a year. Employer-provided health care costs are growing several times faster than sales prices.

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Disclaimer
This report is made available by NFPA as a service to the fluid power industry and contains information provided by companies in the industry. NFPA does not recommend or endorse any particular use of this report. NFPA, its directors, members and employees are not responsible for errors or omissions in the report or for loss arising from its use and disclaim all warranties and guarantees, express or implied, with respect to the information in this report.