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Obsessed With Recession, US Manufacturers Trumpet Pro-Growth Strategy
US manufactures, who as the seller have suffered dearly from the current economic slowdown in the country, have trumpeted a more aggressive pro-growth strategy to help bail them out of a manufacturing recession.
A group of leading figures in the US manufacturing industry, obssessed with the continued trend of recession, called for a more aggressive remedy to restore the sluggish manufacturing and the American economy to a healthy state.
"The current manufacturing recession that began in the latter half of 2000 is chiefly due to the combined effects of excessively high interest rates, high energy prices, the overvalued dollar and increased regulatory and legal costs," according to Jerry Jasinowski, president of the U.S. National Association of Manufacturers (NAM).
"An inventory overhang from the unexpected drop in demand last year exacerbated the manufacturing slump," a disgruntled Jasinowski told a press conference held here earlier this week.
"Meanwhile, slow growth overseas further reduced sales opportunities for U.S. firms and all but eliminated pricing power for most manufacturers, forcing firms to cut costs by lowering capital spending and by reducing employment levels by 837,000 jobs or 4.5 percent since last July," he explained.
On the causes of the manufacturing recession, the NAM president said that an excessively punitive rise in interest rates in the past few years was a factor which affect almost exclusively manufacturing and occurred at a time when the underlying economy, although not completely apparent, was beginning to slow.
Secondly, the energy cost increases in the last year were very large and had a disproportionately large effect on manufacturing, which uses about a third of the American energy.
According to Jasinowski, an overvalued dollar, which makes U.S. exports more expensive, was the third and unique factor for the downturn.
The fourth important factor is higher regulatory and legal costs which prevent manufacturers from raising prices, thereby further pushing down profits.
John Wittstock, president and chief executive officer of Oldcastle Products and Distribution from Atlanta, Georgia, said his company was particularly hit by a higher cost in energy.
Much of the company's construction-related products are energy intensive. It needs natural gas to manufacture clay facing bricks and fuel to deliver products to local customers on their own trucks. The high energy costs, he said, have inflicted severe pressures on the company's profit margin over the past 18 months.
Ronald Budzik, vice president of government affairs of the U.S. Mead Corporation, explained how the overvalued dollar has affected the U.S. paper industry.
He said that his company which manufactures and sells wood and paper and packaging products has been losing export share largely because the over-valued dollar has eroded the competitiveness of its product on the international market.
For the U.S. paper industry as a whole, he said, that means about 39 paper mills have been closed in the last three years, and about 30,000 men and women have lost their good-paying jobs.
Budzik said that the dollar is probably overvalued by 25 to 30 percent.
"The overvalued dollar is forcing American business to make decisions that are really not good, that limits our growth opportunity, limits our investments and capacities, and actually to shut down capacity domestically," the businessman said.
According to Jasinowski, although U.S. economy as a whole are nearing a turning point, U.S. manufacturing still faces challenges at home and overseas.
"We have a huge trade deficit. Exports have declined for three straight quarters and the dollar remains at near a 15-year high against other currencies -- although it has recently shown some signs of rationalizing," Jasinowski said.
"Additionally, business has excess capacity, and firms will wait until the slack is taken up before they begin investing again. Profit margins remain tight because of competitive pressures and increased legal and regulatory costs," he continued.
"Lower interest rates and energy costs should spur some improvements in margins, but profits remained constrained, and firms will respond by holding off on employment or investment actions," he added.
The NAM president called on the U.S. government and the Federal Reserve to work on a more aggressive pro-growth agenda to restore manufacturing and the American economy to a healthy state.
He summarized that there is a need for greater reductions in interest rates, a more benign policy with respect to a sound dollar, passing an energy bill in the Senate, and holding down regulatory and legal costs.
He also maintained that the U.S. Congress should move forward to grant President George W. Bush trade promotion authority so as to place him in a better position to negotiate trade deals with foreign countries.
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