1. 1 “All Eyes on the Economy” David Huether National Association of Manufacturers October 27, 2004

2. 2 Overview The Importance of Manufacturing The Importance of Manufacturing The Economic Situation and Outlook The Economic Situation and Outlook Long Term Challenges Long Term Challenges

3. 3 Manufacturers Drive Economy in 1990s Manufacturing22% Software* Finance/insurance Finance/insurance /real estate Retail trade Retail trade Services Services Wholesale trade Wholesale trade Transportation/public utilities Transportation/public utilities Rest of economy Source: Commerce Department

4. 4 Manufacturers Lead U.S. Exports U.S. Agricultural Exports top $50 Billion a year. U.S. Manufactured Exports top $50 Billion a month. Source: Commerce Department

5. 5 Manufacturing Dominate R&D SOURCE: National Science Foundation

6. 6 Manufacturers Have Biggest Jobs Multiplier SOURCE: Department of Commerce, NAM }

7. 7 Confidence and Business Activity...are Recovering SOURCE: Conference Board 9-11 Accounting Scandals Iraq War 40 45 50 55 60 65 70 2000.062001.062002.062003.062004.06 100 120 140 160 180 200 220 240 Business Activity Consumer Confidence

8. 8 Profits are Recovering Source : U.S. Department of Commerce Corporate Profits Manufacturing Profits

9. 9 Global Conditions are Improving for Exporters SOURCE: Federal Reserve, NAM $ Value of Dollar Foreign GDP Growth

10. 10 What a Difference a Year Makes! SOURCE: Commerce Department -2 0 2 4 6 8 10 12 14 16 18 GDPConsumptionInvestmentExportsGovernment Percent Change from Quarter 1 Year Ago 2003.22004.2

11. 11 Manufacturing Has Turned the Corner SOURCE: Federal Reserve 92 93 94 95 96 97 98 99 100 101 102 2000.062001.042002.022002.122003.102004.08 Manufacturing Production Index (June 2000=100)

12. 12 …But Still Underperforming Past Recoveries SOURCE: NAM calculations from Federal Reserve Data

13. 13 Job Losses Concentrated in Manufacturing Source : U.S. Department of Labor

14. 14 Manufacturing Employment Decline SOURCE: NAM Estimates -800,000 -700,000 -600,000 -500,000 -400,000 -300,000 -200,000 -100,000 0 Manufacturing Export Decline Productivity Acceleration Downturn in Business Investment in Equipment and Structures Rising Import Penetration Inventory Work Off 2000-2003 Manufacturing Employment Loss

15. 15 Manufacturing Employment Declines Widespread SOURCE: Ecowin

16. 16 4b: U.S. Mfg Employment Down Across the Board SOURCE: Commerce Department -62k -800k -330k -1.1 mil Overseas In the U.S.

17. 17 Overseas Markets Dominate Overseas Manufacturing Affiliates Sales SOURCE: Commerce Department

18. 18 Higher Energy Prices Source: Ecowin

19. 19 Economic Outlook – high oil prices lowers growth Source: NAM 0 2 4 6 8 10 12 GDPPCEBusiness Investment ExportsImportsMfg Production Percent Change

20. 20 Manufacturing Employment Recovery Around the Corner Source: Labor Department and NAM Estimates -12 -10 -8 -6 -4 -2 0 2 4 1998.11999.22000.32001.42003.12004.22005.3 Percent Change from Quarter 1 Year Ago -12 -10 -8 -6 -4 -2 0 2 4 Percent Change from Quarter 1 Year Ago Manufacturing Output less Productivity Growth Manufacturing Employment

21. 21 Challenges Facing Today’s Manufacturers Domestic: High costs Domestic: High costs International: Increased Competition & Trade Barriers to U.S. Exports International: Increased Competition & Trade Barriers to U.S. Exports

22. 22 Challenges: Structural Costs Source : NAM Cost Study Productivity-adjusted Labor Costs ($ per hour) 0 5 10 15 20 25 30 35 United States CanadaMexicoJapanChinaGermanyUnited Kingdom South Korea TaiwanFrance These costs add 22% to the cost of producing in the U.S.

23. 23 Challenges: Trade Barriers Abroad Source : Commerce Department, ITC 0 50 100 150 200 250 300 350 400 450 Industrialized CountriesDeveloping Countries U.S. Manufactured Exports (Billions) 0% 2% 4% 6% 8% 10% 12% 14% Tariff Rates 56% 44% 4% 13%

24. 24 Summary Manufacturing is critically important to the U.S. economy and standard of living. A cyclical recovery is finally underway We are challenged as never before, here and abroad. WHAT CAN YOU DO: GET INVOLVED Register workers to vote Find out where your representatives stand on manufacturing www.nam.org/p2 Click on “Take Action” www.nam.org/p2 Contact policy makers

25. 25 “All Eyes on the Economy” David Huether National Association of Manufacturers October 27, 2004