Rising Industrial and Capital Goods Prices Fuel Export Growth
U.S. import prices advanced 0.3% in January, after increasing 0.2% in December, with both higher fuel and nonfuel prices contributing to the rise. Over the past year, import prices rose 1.9%. Meanwhile, U.S. export prices advanced 1.3% in January, the largest monthly increase since May 2022, following a 0.5% rise in December. Higher nonagricultural prices more than offset lower agricultural prices for exports. Over the past year, export prices rose 2.7%, the largest year-over-year increase since December 2022.
Fuel import prices increased 3.2% in January, after rising 1.7% in December. These increases are attributed to higher prices for natural gas and petroleum. Meanwhile, prices for import fuel rose 2.4% over the past year. Import prices for petroleum advanced 2.3% in January, the largest over-the-year increase since July 2024. Natural gas prices surged 13.4% in January, following a dramatic 173.1% increase over the last quarter of 2024 and a 12.9% rise from January 2024.
Nonfuel import prices ticked up 0.1% for the third consecutive month in January. Nonfuel import prices have not declined on a monthly basis since May 2024, when they fell just 0.2%. Higher prices for nonfuel industrial supplies and materials, foods, feeds and beverages and capital goods more than offset lower prices for consumer goods and automotive vehicles in January. The price index for nonfuel imports increased 1.8% over the past year.
After rising 0.7% in December, agricultural export prices declined 0.2% in January. Over the past 12 months, agricultural export prices increased 0.5%. Meanwhile, nonagricultural export prices rose 1.5% in January, the largest monthly increase since August 2023. Higher prices for nonagricultural industrial supplies and materials, capital goods, consumer goods and nonagricultural foods more than offset lower prices for automotive vehicles. Over the past year, nonagricultural export prices advanced 2.9%, the largest annual increase since December 2022.
Small Business Optimism Declines but Remains Above Historic Average
The NFIB Small Business Optimism Index fell 2.3 points in January to 102.8. Despite optimism falling, it was the third consecutive month above the 51-year average of 98. Of the 10 components included in the index, one increased, seven decreased and two stayed the same. After declining the past two months, the Uncertainty Index jumped 14 points to 100, the third highest reading of the index.
Inflation and labor quality were cited as the top concerns for many small business owners in January, with 18% reporting them as their most important problems. Although inflation remains a top concern, the last time the index was this low was November 2021, suggesting higher input and labor costs concerns eased in January. In January, 35% of small business owners reported jobs they could not fill, unchanged from December. Reports of too few unskilled applicants declined, but shortages of skilled applicants remain, particularly in manufacturing, transportation and construction.
A net 33% of small business owners reported raising compensation, up 4% from December. Profitability remained under pressure, with a net negative 25% reporting positive profit trends, one point less negative than December. Of those reporting lower profits, 34% claimed weaker sales, while 17% cited ordinary seasonal adjustments. A net 26% of small business owners planned price hikes in January, down two points from December. Just 3% reported their last loan was harder to get than previous attempts, and a net 3% of owners reported paying a higher rate on their most recent loan.
The outlook for general business conditions stalled slightly, slipping five points to 47. Small business owners, while still broadly optimistic, are still responding to the uncertainty of the Trump 2.0 transition. In particular, the continuation of the 2017 tax cuts and deregulation will be the key policy areas of concern for the small business community in 2025.
Wholesale Prices Climb for Fourth Consecutive Month
The Producer Price Index for final demand (also known as wholesale prices) increased 0.4% in January, after rising 0.5% in December. Over the year, producer prices moved up 3.5%, which is the largest increase since the year-over-year gain in February 2023 of 4.7%. Prices for final demand excluding foods, energy and trade services rose 0.3%, after increasing 0.4% in December. Prices for these goods advanced 3.4% from January 2024.
In January, prices for final demand services rose 0.3%, the sixth consecutive increase, while prices for final demand goods grew 0.6%, the fourth increase in a row. More than half of the increase in the index can be attributed to prices for final demand energy, which rose 1.7%, led by a 14.2% increase in liquefied petroleum gas. The index for final demand goods, excluding foods and energy, edged up 0.1%, the same as December.
Processed goods for intermediate demand rose 1.0% in January, the largest increase since February 2024. Two-thirds of the increase could be attributed to a 3.5% boost in the index for processed energy goods. On the other hand, prices for industrial electric power fell 1.2%. Over the year, the index rose 1.0%, the largest 12-month increase since February 2023.
Meanwhile, prices for unprocessed goods for intermediate demand jumped 5.5% in January, the largest increase since May 2022. The rise was driven by a 13.0% boost in energy materials, led by a 14.8% jump in crude petroleum. Unprocessed foodstuffs and feedstuffs rose 0.9%. Prices for unprocessed goods for intermediate demand rose 8.7% from January 2024, the largest increase since December 2022.
Consumer Prices Rise More Than Expected in January
Consumer prices increased 0.5% over the month and 3.0% over the year in January, accelerating from the 2.9% over-the-year rise in December and coming in higher than expectations. Core CPI, which excludes more volatile energy and food prices, edged up to a 3.3% over-the-year increase and rose 0.4% over the month, which is up from 0.2% in December.
Shelter rose 0.4% over the month, accounting for nearly 30% of the monthly increase of the all-items index, and 4.4% over the year. Energy costs grew 1.1% over the month in January, with fuel oil leading the increase, rising 6.2%. Meanwhile, prices for gasoline rose 1.8% and electricity was unchanged from December. Prices for transportation services jumped 1.8% over the month and 8.0% over the year, with motor insurance leading the increase, surging 11.8% over the year.
Food price increases continue inching up, rising 0.4% over the month and 2.5% over the year in January. The food at home index grew 0.5% over the month, with the indexes for meats, poultry, fish and eggs rising 1.9% in January. Driven by the bird flu outbreak, the index for eggs alone increased 15.2% over the month and 53% over the year, the largest rise since June 2015 and accounting for two-thirds of the food at home index increase. Food away from home rose 0.2% in January but was up 3.4% over the year.
As the over-the-year headline rate has ticked up in previous months, markets are anticipating that the Federal Open Market Committee will keep rates steady at its meeting next month. This expectation was confirmed further in Federal Reserve Chairman Jerome Powell’s testimony to Congress last week where he said that the Fed is in no hurry to reduce its interest rate target.
Industrial Production Rises Again, But Manufacturing Falls
Industrial production increased 0.5% in January after rising 1.0% in December. Meanwhile, manufacturing output slipped 0.1%, held down by a 5.2% drop in the motor vehicles and parts index. With the dramatic decrease in January, motor vehicles and parts output was down 5.9% over the year. At 103.5% of its 2017 average, total industrial production in January rose 2.0% from the same month last year. Capacity utilization stepped up to 77.8% and increased 1.2% over the past year, but remains 2.4 percentage points below its long-term average from 1972 to 2023.
In January, a majority of major market groups posted gains. Among consumer goods, the production of durables decreased 3.0%, led by automotive products (-4.9%) and appliances, furniture and carpeting (-3.2%), while the index for nondurables rose 1.8%, with the greatest increases in energy (6.1%) and clothing (2.7%). The business equipment index improved 2.1% in January, with transit equipment up 8.6% after rising 10.5% in December.
Durable goods manufacturing stayed the same in January, and most durable manufacturing industry groups exhibited mixed results. Nondurable goods manufacturing slipped 0.3% in January, with the 2.6% growth in apparel and leather partially offsetting declines in printing and support (-1.8%) and plastics and rubber products (-1.6%). Manufacturing capacity utilization slipped slightly to 76.3%, which is 1.9 percentage points below the long-term average.
Manufacturers: National Energy Dominance Council Shows President Trump’s Commitment to American Energy Leadership and Manufacturing Growth
Washington, D.C. – National Association of Manufacturers President and CEO Jay Timmons released the following statement on President Donald Trump’s recent executive order establishing the National Energy Dominance Council:
“President Trump is moving quickly to unleash America’s full energy potential by establishing the National Energy Dominance Council, setting America up to lead on energy and secure our energy independence. This action demonstrates President Trump and his administration’s commitment to ensuring manufacturers have the energy they need to drive economic growth.
“On day one, President Trump declared the United States will be a manufacturing nation, lifting the moratorium on liquefied natural gas (LNG) export permits—one of the NAM’s top recommended regulatory actions for the Trump administration to tackle. This was a significant move that will bolster our energy sector, strengthen our position in the global market and ensure manufacturers in America have the energy resources they need to power economic growth here at home. We look forward to working with President Trump and the administration to improve the processes for permitting for all energy sources, which this action also addresses. The federal permitting system is broken—delaying projects that would create jobs, secure supply chains and reinforce America’s competitive edge.
“The National Energy Dominance Council, under the leadership of Interior Secretary Burgum and Energy Secretary Wright, will help power the future of manufacturing in America because when manufacturing wins, America wins.”
-NAM-
The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.93 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.
Why Constellium Recycles Cans—and You Should, Too
If you’re finished with that soda, Constellium hopes you’ll throw the can in the nearest recycling bin.
Use and reuse: Used cans are the mainstay of the global aluminum manufacturer and recycling giant, which owns and operates one of the world’s largest used beverage can (UBC) plants, in Muscle Shoals, Alabama. There the company recycles the equivalent of more than 20 billion cans every year.
- “We shred the cans, remove the inks and coatings and then remelt that into aluminum we can use,” said Constellium Vice President of Strategy and Business Planning for Packaging and Automotive Rolled Products Raphael Thevenin. “It’s a very circular way of using the material. Within 60 days, it’s back on the shelf” as new cans.
- Using UBCs to make new cans consumes 95% less energy than using new aluminum and is a key piece of the entire aluminum production supply chain.
Many uses: Aluminum can be recycled almost infinitely, a characteristic that gives the metal a wide variety of applications in manufacturing, as does its light weight and durability.
- In addition to canstock, Constellium’s aluminum products include auto rolled and structural products used for vehicle hoods, doors, battery enclosures and bumpers, as well as aerospace solutions, armored products for the defense industry and much more.
Why cans? UBCs are “so widely available in the U.S., and we have such a strong network of traders that we’re able to recycle them in large volumes,” Thevenin continued, adding that 10 American states give cash deposits on beverage containers. (This means that consumers can redeem their empties for cash, currently an average of 5 cents a pounds for aluminum cans.)
- However, while the U.S. consumer recycling rate for UBCs is generally higher in states with deposits, it’s on the decline nationwide, having fallen to 43% in 2023 from 45% in 2020.
- “We’re seeing a million tons of aluminum landfilled in the U.S. every year,” according to Thevenin.
What they’re doing: The increasing number of UBCs consigned to the trash means “the availability of scrap metal is declining,” Thevenin continued.
- In an effort to reverse the trend, Constellium is assessing the possibility of pushing for greater collection efforts in areas where UBC recycling is low, urging states with deposits to offer more money for exchanges and advocating the construction of more UBC-recycling infrastructure throughout the U.S.
Why it’s important: For the sake of both cost and sustainability, the U.S. must increase its stock of available aluminum scrap, Thevenin said.
- “Because we don’t have the [widespread] infrastructure in place, a lot of scrap is exported outside the U.S.,” he told us. “But if we want to make sure the products we put on the market are sustainable and profitable, we have to use as much recycled material as possible.”
- Europe recycles about 75% of its UBCs and is set to recycle about 90% by the end of the decade, according to Thevenin. “There’s a huge need to reduce the gap between the U.S. and Europe.”
- To that end, Constellium has undertaken a campaign to educate lawmakers on the need to build out U.S. infrastructure. “We need to make sure legislators are aware,” said Thevenin. “They need to understand the importance of keeping more scrap metal at home.”
Recycling cars: In Europe and North America, Constellium is actively investigating new ways to recycle aluminum from old cars efficiently, either through sorting or dismantling.
- “It’s about a 10-to-15-year cycle for car recycling, meaning that the metal comes back in the form of a new car all those years after” the initial recycling, Thevenin said. “Today the most economical way to get scrap from a car is to shred it, so you get a mix of materials and have to sort plastics, glass, metals, then nonferrous metals and steel. We’re working on developing new alloys that are more scrap tolerant and testing them on the market.”
- Constellium is also collaborating with manufacturers on creating a laser/X-ray machine that will be able to sort the different alloys in recycled cars, easing and speeding the recycling process.
- In the longer term, the company hopes to work with automotive makers to standardize the alloys used in vehicles because “when it’s mixed, it’s more difficult to sort.”
The bottom line: Aluminum recycling is a no-brainer because it’s a win for consumers, manufacturers, retailers and the environment, Thevenin went on.
- For example, once a UBC collection plant “is operational, it’s self-sustaining because [the operator] can sell to companies, such as Constellium, and then invest that revenue on more and better infrastructure.”
- When it comes to vehicles, “when car makers develop a new model, they should make sure it’s easy to recycle” because doing so will mean both cost savings and “being able to offer consumers lower-carbon products.”
SEC Guidance Rescission a Win for Manufacturers
The Securities and Exchange Commission this week reversed Biden-era guidance that required publicly traded companies to include environmental and social activist shareholder proposals on proxy ballots (InvestmentNews).
What’s going on: In a move that NAM President and CEO Jay Timmons called a “depoliticiz[ation of] the proxy process” and “a crucial plank of President Trump’s pro-manufacturing deregulatory agenda,” the SEC rescinded Staff Legal Bulletin 14L, which had allowed activists to mandate consideration of social policy proposals on corporate proxy ballots—even when the policies in question were unrelated to a company’s business.
Why it’s important: SLB 14L “empowered activists at the expense of manufacturers and Main Street investors—turning the proxy ballot into a debate club, forcing businesses to court controversy and divert resources from growth and value creation,” Timmons continued.
- Replacing SLB 14L with the new SLB 14M “return[s] the SEC’s review of shareholder proposals to a company-specific process based on relevance to a business’s operations and its investors’ returns,” which will “allow manufacturers to focus on what they do best: investing for growth, creating jobs and driving the American economy.”
What we’ve been doing: Since SLB 14L was adopted in 2021, the NAM has been a leading voice calling on the SEC to reverse course.
- Most recently, the NAM, along with more than 100 manufacturing associations, outlined for President Trump more than three dozen regulatory actions the new administration could take across federal agencies to boost the manufacturing economy and end the regulatory onslaught—including rescinding SLB 14L.
- The NAM also has called on President Trump’s nominee to chair the SEC, Paul Atkins, to take steps to depoliticize the proxy process.
Manufacturers: AI Regulations Should Support Innovation and U.S. Leadership
The introduction of artificial intelligence has been a boon to manufacturing, and the technology will continue to have a positive impact—as long as regulations are “right-sized,” manufacturers told Congress this week.
What’s going on: “Manufacturers are utilizing AI in myriad ways on the shop floor and throughout their operations,” the NAM told the House Subcommittee on Commerce, Manufacturing and Trade in a statement for the record at Wednesday’s hearing, where data was cited.
- “The diverse use-cases of AI in manufacturing suggest a need for a cautious regulatory approach to this groundbreaking technology: one that supports innovation and U.S. leadership in AI while providing context-specific, risk-based, right-sized rules of the road for manufacturers,” the NAM said.
- Giving testimony at the hearing, Siemens USA President and CEO and NAM Board Member Barbara Humpton discussed the many benefits of using AI in manufacturing and emphasized the need to ensure that AI regulations include “targeted” rather than “overly broad” definitions.
Industrial vs. consumer-focused AI: First, it’s important to distinguish between industrial and consumer-facing AI, Humpton told the subcommittee members.
- “Industrial AI is different from consumer AI,” she said. “Industrial AI uses controlled data from the manufacturing environment to help manufacturers create business value. Think better products, more efficient operations, a more prepared workforce. … AI will enable all companies—from startups to small and medium enterprises to industrial giants—to thrive in this new era of American manufacturing.”
- In written testimony, she added that “the core distinction of industrial AI is that it is trained on highly monitored data from sensors and machines, providing a more reliable foundation for training AI models.”
Simple, singular and targeted: Regulation of AI should be undertaken with a light touch and following a full accounting of on-the-books laws to prevent duplicative and/or contradictory rules, the NAM said.
- “[P]olicymakers should always review existing laws and regulations before enacting new ones, because most uses of AI correspond to tasks and objectives that industry has faced for a long time and that are thus highly likely to have already been addressed by existing laws and regulations,” said the NAM, which also referenced its first-of-its-kind AI report, “Working Smarter: How Manufacturers Are Using Artificial Intelligence,” released last May.
- “Similarly, policymakers must right-size any compliance burden associated with AI regulation,” the NAM continued. “The ubiquitous use of AI throughout modern manufacturing, as well as manufacturing’s dependence on innovation, underscore the need for rules that enable rather than hinder manufacturers’ development and adoption of AI systems.”
Protect without hindering: Congress “must advance industrial AI by prioritizing strong rules for digital trade, especially to include strong protections for source code and algorithms,” Humpton went on in her written testimony. “We encourage policymakers to build upon the success of previous U.S.-led efforts to protect intellectual property.”
- Legislators must also safeguard privacy and protect against baseless legal claims, the NAM said. “[I]t is … crucial that Congress take steps to maintain the privacy of personal data when utilized in AI contexts. … A federal standard should avoid a patchwork of state-level rules by fully preempting state privacy laws; it also should protect manufacturers from frivolous litigation.”
The last word: “The range and importance of uses of AI—transforming every aspect of the core of manufacturers’ operations—make it clear that AI has become integral to manufacturing,” said the NAM. “With the right federal policies, manufacturers in the U.S. will continue to devise new and exciting ways to leverage AI to lead and innovate and stay ahead of their global competitors.”
President Trump Reining in Regulatory Onslaught
SEC Rescinds Biden-Era Staff Legal Bulletin 14L; Action Depoliticizes Proxy Process
Washington, D.C. – Following the Securities and Exchange Commission’s rescission of Staff Legal Bulletin 14L, which required publicly traded manufacturers to include activists’ ESG proposals on their proxy ballots even when the issues raised were unrelated to their business, National Association of Manufacturers President and CEO Jay Timmons released the following statement.
“Manufacturers asked for regulatory certainty, and President Trump has delivered. Today’s action by the SEC under Acting Chairman Mark Uyeda’s leadership depoliticizes the proxy process—a crucial plank of President Trump’s pro-manufacturing deregulatory agenda.
“As we relayed to President Trump in December, SLB 14L empowered activists at the expense of manufacturers and Main Street investors—turning the proxy ballot into a debate club, forcing businesses to court controversy and divert resources from growth and value creation. Returning the SEC’s review of shareholder proposals to a company-specific process based on relevance to a business’s operations and its investors’ returns will allow manufacturers to focus on what they do best: investing for growth, creating jobs and driving the American economy.”
Background:
In December, the NAM, along with more than 100 manufacturing associations, sent a letter to President Trump highlighting more than three dozen regulatory actions across a wide range of agencies that would boost the manufacturing economy and put a stop to the regulatory onslaught that is costing manufacturers $350 billion each year, according to NAM research. President Trump began tackling these issues on Day 1, including by lifting the pause on liquefied natural gas exports. Today’s move by the SEC is another important step in the administration’s efforts to address burdensome regulations that are stifling manufacturing investment and growth
-NAM-
The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.93 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.