U.S. Manufacturing and Service Sectors Show Diverse Trends

The flash Purchase Managers’ Index (PMI) for the United States indicates a rebound in its manufacturing sector, but a slowdown in its service sector, according to data from Markit. The latest reading suggests that that manufacturing will increase from 53.1 in September to 54 in October, and service will drop from 55.1 to 54.4.

Robust and accelerated expansion of productions levels were noted across the manufacturing sector. Business conditions have seen the sharpest improvement since May, and output and new order volumes experienced the fastest rise in October.

Chris Williamson, chief economist at Markit, said October’s flash manufacturing PMI brought welcomed signs of stronger growth at the start of the fourth quarter. “The faster growth of export sales is particularly good news and will help to alleviate fears that the U.S. economy is being hurt by the strong dollar and slower growth in China,” Williamson said.

The U.S. service sector, however, is experiencing the slowest expansion of business activity since January—an estimate based on 85% of the usual monthly replies. The index also points out that the sector has experienced the weakest rise in payroll numbers since February, and business confidence is only slightly higher than the three-year low recorded in July.

“With the survey also finding price pressures to have remained subdued, especially in terms of wages, the sharper than expected slowdown in October will add to calls for policymakers to delay hiking interest rates until the economy finds a firm footing,” Williamson added.

- Jennifer Lehman, NACM marketing and communications associate

How to Make Your Credit Team Stronger

Finding and retaining qualified business-to-business credit staff can be a challenge. For small- to medium-sized businesses, “there are lots of reasons these jobs are difficult to fill,” said Pamela Krank, president of The Credit Department, Inc., a Minnesota-based credit management technology and outsourcing solutions provider. “They take a very interesting skill set that merges into one position.”

Larger operations are more likely to create a variety of positions—each highlighting particular skill strengths, making it easier to find individuals who have that strength. For example, if a company is looking for credit analysts, it can recruit finance majors, Krank said. “But when a credit professional does multiple things—requiring all of these skill sets—the nature of the work makes it difficult.” That’s the biggest difference between small and large businesses when it comes to finding qualified staff, she noted. “A traditional credit department hires generalists and then throws everything at them.” Both sides, however, could still have difficulty retaining staff. A larger corporation might have more appeal for a prospective employee, but it will also offer more opportunity for advancement, which could woo your employee to other departments and positions within the organization, Krank said.

To improve a firm’s chances of finding the best fit, “you have to provide a process and framework that makes sense,” she said. Not having a clear and uniform job description also makes finding and keeping staff difficult. Twenty different credit departments could provide 20 different job descriptions, she explained.

One way to improve credit managers’ chances of attracting the right people is by identifying the strengths they know that they want to hire. Then consider each applicant’s talents and strengths, Krank said. Once a person is hired, focus on making it a positive environment and fun for them, she added. “Hire right and keep them happy.”

To facilitate finding that person, the team, processes and technology have to come all together. Begin by assessing your portfolios; dissect the processes required to manage them; determine what you can automate; and then find the right people to complete what cannot be automated. “Most people do that backwards,” Krank said. “If you have the best people, but you have lousy technology and processes, you’re not going to keep them.”

On Nov. 2, Krank will present a NACM webinar, Developing High Performance Teams, from 3 to 4 p.m. EST. The session will help participants identify what elements they need to review to strengthen their team such as the following:

  • Needs of your specific receivables asset
  • Your role as a credit leader
  • Importance of process and automation
  • How to attract and retain the right talent
  • Performance measurement tools to ensure success
- Diana Mota, NACM associate editor

Learn more about the webinar Developing High Performance Teams.

Export-Import Bank Reauthorized

The struggle to get the Export-Import (Ex-Im) Bank reinstated was long and protracted and created some of the strangest of political bedfellows. The vote in the House was 313 to 118. Almost all of the Democrats voted for it and a majority of the GOP members backed it, but less than was the case a year or so ago. The number coming out for the reauthorization was 147 three years ago, and this time the support was 127 in favor.

Granted, there were doubtless a few in the GOP who voted against it once it was certain the bill would pass so they would not have to face the issue in the primary, but there remains a solid opposition in the GOP to programs like this one. The divide in the Republican ranks gets wider every day. The Democrats supported a plan that was geared to business, and only a small number voted no. The Democrats saw this as a bill to save U.S. jobs and allow the U.S. to compete globally. Those who opposed it took the position that it was some form of corporate welfare.

The U.S. export community has been affected negatively by the strength of the dollar and the general weakness of the global economy. Programs that promote trade and give U.S. companies some advantages as far as global competition have always been important, but it can be argued they are vital today. The U.S. is not a country that engages in direct subsidy and trade support, and it prefers to work more indirectly. This is where the Export-Import Bank fit in. The expectation now is that several countries and companies that had been looking to buy U.S. goods will now be able to access the loans through Ex-Im and will then be able to buy from the U.S. again.

-- Chris Kuehl, NACM economist

To read more about the Ex-Im's reauthorization vote, see tomorrow's eNews.

Real GDP Growth Slows in United Kingdom

Real gross domestic product (GDP) in the United Kingdom fell below the expectations of many analysts during the third quarter, as it grew only 0.5% compared with 0.7% growth the previous quarter, according to a new Wells Fargo report.

Data, however, show that services output accelerated in the third quarter, rising 0.7% on a sequential basis. “The robust growth in services output we have seen in recent quarters has coincided with the continued upward trend in retail sales growth,” the report states. “In that regard, real personal consumption expenditures likely grew at a healthy clip in Q3.”

Despite some growth, manufacturing output contracted for the third-consecutive quarter and construction output saw an even sharper fall. Yet, mining output grew at 2.4% despite declines in commodity prices.

In addition, the Bank of England’s (BoE) Monetary Policy Committee (MCP) voted to maintain the 0.5% bank rate. One of the 10 committee members disagreed and wanted to increase the bank rate “in light of accelerating wage costs and fears that inflation would subsequently overshoot the BoE’s 2% target.”

Analysts at Wells Fargo, however, stated that rising wage costs have not shown signs of increasing the country’s general price levels. While overall inflation in the UK is negative, the core rate also remains subdued. “We believe the MPC is unlikely to sanction a rise in the bank rate at its meeting next week,” the report notes. “However, if the domestic recovery continues to advance at a respectable pace, inflation should start to move back toward 2% over the ‘medium term.’ We currently expect the MPC to sanction the first rate hike in the first half of 2016.”

- Jennifer Lehman, marketing and communications associate

China’s Rate Cut and Payment Practices Examined

In an attempt to revive the Chinese economy, the People’s Bank of China clipped interest rates for the sixth time since November as well as reduced its reserve-requirement ratio for banks. The country’s benchmark lending and deposit rate was cut 25 basis points, while its reserve-requirement ratio for banks dropped 0.5 basis points.

"The idea that this signals even greater weakness in the Chinese economy is flawed, but so is the idea that rate cuts represent a solution to slowing growth,” said Leland Miller, president of China Beige Book International, in an email to NACM. “When firms don't want to borrow, which is the case now, stimulus doesn't work. So while this is certainly a trading event, its effect on the economy will be negligible."

Credit insurer Atradius also released a new report this week that focuses on payment practices in China. It states that 62% of businesses said domestic business-to-business (B2B) “customers have slowed invoice payment due to liquidity problems over the past year.” On average, domestic B2B credit-based sales are 41.8% of local sales, while abroad B2B credit-based sales are 34.2% of the total value of exports. Both figures are notably lower than the average of the other Asia Pacific countries surveyed.

The statistics “confirm that Chinese respondents prefer payment in cash, cash equivalents or on other terms other than trade credit, particularly in transactions with their foreign B2B customers,” the report notes. “This suggests an inconsistent perception of payment default risks arising from domestic and foreign B2B trade.”

On average, domestic B2B customers are given 37 days to pay invoices and foreign B2B customers receive 41 days. Late payments occurred almost as frequently domestically as abroad, and nearly 94% of respondents experienced late payments from their B2B customers over the past year. “The domestic insolvency environment in China is expected to deteriorate in the coming months, as economic growth is cooling down,” the report says.

- Jennifer Lehman, NACM marketing and communications associate

Business Optimism Takes a Dive

China’s economic slowdown is spreading to businesses worldwide, according to a quarterly survey of more than 2,500 business leaders in 36 economies.

Grant Thornton’s International Business Report finds business confidence and expectations for revenue and exports have fallen in several major economies that rely on China as a trading partner. While business optimism in the world’s second largest economy slipped 20 percentage points (pp) to net 26% in third-quarter 2015, its top partners saw similar declines: Germany, -46pp to 46%; Japan, -36pp to -28%; Australia, -15pp to 39%; and the ASEAN nations, -22pp to 18%. The survey’s global figure went down 7pp to 38%.

"The slowdown in China is a major concern for the global economy at a time of stuttering growth and heightened uncertainty,” said Francesca Lagerberg, global leader for tax services at Grant Thornton. “The past three months have shown how reliant global growth has become on China; 20 years ago, it was the top export destination for just two countries. Today that figure is 43.”

Growth prospects also took a hit. Fewer ASEAN businesses expect revenues to increase (-21pp to 31%) over the next 12 months, and none of them believe exports will grow. Revenue and export expectations in Germany also have fallen (42pp and 7pp, respectively). In addition, export expectations in Australia declined (-9pp to 5%), while Japan and Brazil registered declines in revenue prospects.

The depreciation of the yuan, however, appeared to improve “export hopes of Chinese businesses (up 5pp to 14%),” the survey notes. “This has also made imports to China more expensive with businesses in Brazil (up 9pp to 47%) and Russia (up 9% to 83%) increasingly concerned about the impact of exchange rate fluctuations on their ability to grow.”

- Diana Mota, NACM associate editor

Home Builders are Upbeat

Many sectors of the economy are worrying analysts. Energy is sitting in bust territory after enjoying a boom; the export sector has been faltering due to the value of the dollar; and concerns about the effect of flat wages on consumers in the months ahead. However, one of the sectors bucking that trend is housing.

The latest survey of new home builders shows a 10-year high with a reading of 64. The expectation had been for a gain to about 63 at best after readings in August and September of 61. The index is built along the same lines as the Purchasing Managers’ Index and the Credit Managers’ Index—anything over 50 is expansion. These are readings that are definitely more than respectable.

The big question is why the builders are so enthusiastic given all the economic headwinds that have been appearing of late. It seems the optimism is fueled by three factors. The first is home prices are coming up a little in most markets and that provides a bit more profit for the builders without affecting demand all that much. Mortgage rates are still relatively low, and there are still plenty of potential buyers. The second motivator is that builders are starting to see the Millennial buyer hit the market. This generation has been very slow to leave the multifamily option to buy a single-family home and that has been a drag on the builder. And finally, there has been a reaction to cheaper inputs as everything from lumber to textiles to appliances has been falling in price.

The enthusiasm could reverse in a hurry if home buying is not as expected; but for now, the sector is upbeat. It has helped that many builders have left the scene—unable to keep pace. This has left bigger market shares for the companies that have survived and has provided more resilience in the sector as a whole. There are many hot markets these days, and most of the damage from the sector collapse at the start of the recession has been dealt with. There is even less competition from existing home sellers than was the case a year ago.

-- Chris Kuehl, NACM economist

To read more of Chris Kuehl’s commentaries, visit FCIB’s Knowledge and Resource Center.

Croatia Reopens Border with Serbia; Trade Blockade Lifts

The opening of Croatia’s border with Serbia this week not only will help thousands of stranded migrants, but it also removes the trade blockade between the two countries. The opening may only be temporary, however, according to October’s Risk Monthly report from the Credendo Group.

“This sort of event could recur, with the continuing migrant’s inflow and parliamentary elections in Croatia looming in November,” the report states. “Until then, the ruling party will try to reinforce its presence on the national security ground. Croatian officials have announced that the border could be closed again as soon as they suspect that Serbia is intentionally directing migrants away from Hungary toward Croatia.”

Earlier this month, Serbian trucks were stopped at the Croatian border because of the ongoing migrant crisis. In retaliation, Serbia imposed a ban on Croatian trucks. After receiving pressure from trading partners in Europe, the two countries lifted the blockade.

According to the Credendo report, most of Serbia’s exports to Western Europe travel through Croatia or Hungary. The group estimates that €21 million crosses the borders of Serbia and Croatia daily. “Serbia has more to lose in handling the situation, as this could obstruct the EU [European Union] accession talks that were started last year,” the report says. “Croatia, on the other hand, has already been an EU member for two years.”

- Jennifer Lehman, NACM marketing and communications associate

China's Third-Quarter GDP Slows, but Better than Expected

China's gross domestic product (GDP) slowed further in third-quarter 2015. The real GDP grew 6.9% year-on-year, down from 7% in the first two quarters. Although it did better than the 6.7% some analysts predicted, it’s the slowest rate since 2009.

Preliminary data show output growth continued to slow in the secondary sector, which includes manufacturing, mining and construction, while growth in services output continued to pick up for the fourth-consecutive quarter.

NACM economist, Chris Kuehl, questions whether China is really slowing to less than 7% growth, however. “It appears that way, but to be honest nobody is really sure,” Kuehl said. “The Chinese economy is vast and hard to assess.” Some analysts believe China’s GDP growth is “slower than many had believed—maybe growth as anemic as 5%,” he noted. But others believe its economy has been underreported, he added. “… and may be growing at 8% or 9%.”

Transitioning to an economy “dependent on its own consumer” has been challenging, Kuehl said. “It is far easier to tally up the exports of a country than to assess the activity of the domestic consumer—just ask those who have to revise the U.S. growth numbers three and four times.”

Ron Shepherd, FCIB's director of membership and business development, agreed. “While economists and analysts examine China’s third-quarter GDP growth for clues to the economy’s future, it is very clear that the goal of transitioning from an export and infrastructure focused economy to an internal consumption powered one continues to be a tremendous challenge," Shepherd said. "The second-largest economy in the world, like a huge battleship, will take time to turn and will not be without confusing and contradicting  data, which will be reported over many quarters and years."

Kuehl added that he believes the Chinese government could stimulate the country’s economy, if it chooses to do so. Presently, it’s focusing on inflation rather than growth. “The Chinese have options although they are not as clear as they once were,” he said.

A long-term slowdown could continue. Wells Fargo analysts’ forecast sees continued gradual deceleration over the next few years and for “the renminbi to depreciate modestly vis-à-vis the greenback in the coming quarters.” Next week, the 18th Central Committee of the Communist Party of China plans to hold its fifth annual plenary session, where it will announce the country’s 13th five-year plan. The plenum will help set China’s GDP growth rate for the next five years.

- Diana Mota, NACM associate editor

Small Business Confidence Creeps Up

 Although small business owners remain uncertain about the economy, September’s National Federation of Independent Business’s Small Business Optimism Index crept up 0.2 points month-on-month to 96.1. It remains below the 42-year average of 98, however.

“Small business optimism continues to be stagnant, which is consistent with the expected economic growth of about 2.5%,” said Bill Dunkelberg, NFIB chief economist. “The percent of owners citing the difficulty of finding qualified workers as their most important business problem increased and is now third on the list behind taxes and regulations. This is the highest reading since 2007 and suggests that employers will continue to face wage pressure in order to attract and keep good employees.”

Two percent, a record low, of owners said their borrowing needs were not met; 30% said they were; and 57%, a record high, didn’t want a loan. Of those that borrowed, 29% reported doing so on a regular basis. The average rate paid on short maturity loans dropped 60 basis points to 4.8%. The net percent of owners who expected credit conditions to ease over the coming months was minus 6%--a 1 point improvement. “Interest rates are low, but prospects for putting borrowed money profitably to work have not improved enough to induce owners to substantially step up their borrowing and spending,” the index states.

- Diana Mota, NACM associate editor

Focusing on Supply Chain Infrastructure

It is interesting to listen to analysts discuss the next big supply chain trend. We all get caught up in it, looking at emerging technologies and theories for moving goods from point A to point B. But, the single biggest thing that the U.S. could do to improve business competitiveness would be to focus on national supply chain infrastructure. And, national port infrastructure is the place to start.

Port regions around the country got lucky this fall because the economy is actually sluggish. A really strong U.S. dollar has pushed exports down. And, because of massive overstocking earlier this spring, the number of imports headed to the U.S. is also measured and “spread out.” That comes after a difficult first quarter in which we had a significant set of delays at West Coast ports. Those delays impacted the flow of goods in the U.S. and led to some economic challenges in the third quarter. Simply put, companies became overstocked. But, had they not been in this situation, they would be facing a chronic problem across the country: inadequate inland port infrastructure.

Ports have done a great job of getting themselves physically ready to handle large container ships. They have the cranes; the waterways around the ports have been deepened; and they have the partners interested in helping to move more containers through the port area. But, the infrastructure that can take those containers and move them inland is inadequate in most areas.

-- Chris Kuehl, NACM economist

To read more of Chris Kuehl’s commentaries, visit FCIB’s Knowledge and Resource Center.

Complying with Trade Sanctions Takes Due Diligence

Doing business abroad requires knowledge about and compliance with U.S. trade sanctions in the United States. Knowing how to navigate these sanctions can help firms avoid hefty consequences.

Know who you’re doing business with and where the money is coming from, cautioned speaker Lizbeth Rodriquez-Johnson, Esq., of Holland & Hart LLP in Denver, during the FCIB Global 2015 Conference held Oct. 11-13 in Miami. Rodriquez-Johnson co-presented the session Compliance and Global Fraud with Jon Yormick, Esq., of Phillips Lytle LLP in Buffalo, NY.

“Follow the trail,” Rodriquez-Johnson said. Some companies conducting business in the Middle East have assumed they were working with a United Arab Emirates company because of the firm’s physical location. It was later discovered “their actual customer was in Iran,” she noted. “They’re not screening.” Yormick concurred. “If you don’t have documentation as far as the government is concerned, it did not happen.”

U.S. trade sanctions don’t just impact companies in America. They also affect foreign companies, Rodriquez-Johnson said. For example, if a company in Mexico has payments processed via a credit card in the U.S., that company could be subject to U.S. jurisdiction, she said. “It’s really important for companies that do business internationally or companies that are not U.S. based, but that do business in the U.S., to understand how these sanctions can impact their activities as they move on in their business.”

Putting together a compliance program is important. “No matter the cost, you want to make sure you have one that works,” Rodriquez-Johnson said. And companies that operate in other nations must pay attention to any sanctions those countries have, she noted. “You’ve got to pay attention to all of them.” Ignorance is not a defense. “If you violated them, you’re liable,” she said. “How big your liability is going to be will depend on a lot of circumstances.”

- Diana Mota, NACM associate editor

For additional coverage on FCIB’s Global Conference, read this week’s eNews from NACM.

Puerto Rico a 'Hot Spot' at FCIB Conference

Some members expressed concern Monday morning about the economic crisis in Puerto Rico, during FCIB's Global 2015 Conference in Miami. Philip Stafford, director of country risk analytics for Wells Fargo Bank, explained that the country is a territory of the United States and by default receives a positive rating.

Earlier this year, Puerto Rico made headlines for owing $72 billion to its investors, and “from an economic standpoint, it is nothing short of a disaster,” Stafford said during the session, “Country Risk from a Banker's Perspective.” If the commonwealth state stood as it's own country, Stafford said it's risk rating would be much lower. “But technically, Puerto Rico is not a foreign country; it is part of the United States.”

During his session, Stafford spoke in depth about country risk versus credit risk and how the meaning varies depending on the industry. FCIB's Global 2015 Conference wraps up on Tuesday, Oct. 13, with upcoming sessions including, “Demystifying China's Economy-Through Private Data' and 'Trade and Geopolitical Risk.”

- Jennifer Lehman, NACM marketing and communications associate

Economic Activity Concerns Reason for Fed Rate Delay

Federal Reserve officials delayed the anticipated interest rate hike due to concerns over global economic activity and inflation, according to minutes released from the Sept. 16-17 meeting between the Federal Reserve Board and the Federal Open Market Committee. 

“After assessing the outlook for economic activity, the labor market and inflation, and weighing the uncertainties associated with the outlook, all but one member concluded that, although the U.S. economy had strengthened and labor underutilization had diminished, economic conditions did not warrant an increase in the target range for the federal funds rate at this meeting,” according to minutes from the meeting released on Thursday.

While the committee expressed several improvements to economic activity, some members noted that further market growth may become restrained due to the financial crisis in China as well as in several other emerging countries. Inflation also remained below the committee’s initial projection—a slowdown attributed to declines in energy and commodity prices. Most members, however, agreed that their confidence in inflation would increase if “economic activity continued to expand at a moderate rate and labor market conditions improved further.” 

Due to the varying concerns, the committee decided they needed more concrete information to confirm the “economic outlook had not deteriorated” and inflation would move closer to 2%. One member, however, disagreed and wanted to raise the federal rate immediately following the September meeting. That board member argued that “the current low level of real interest rates was not appropriate in the context of current economic conditions.”

- Jennifer Lehman, NACM marketing and communications associate

Famous Pair Gives Alternative Payment Currency Another Confidence Boost

More widespread business acceptance of tech-based alternative payment methods, notably the controversial currency known as Bitcoin, in consumer and B2B spheres will continue to depend on some level of regulation and reliability. This week, another stride was taken thanks to a pair best known for botching their quest to change the direction of social media.

The Gemini Bitcoin exchange was slated to open today after the New York Department of Financial Services this week approved an application for a trust charter submitted in July by operators Tyler and Cameron Winklevoss. The Winklevoss brothers became pseudo-celebrities about a decade ago when they sued and eventually settled with Facebook creator Mark Zuckerberg amid allegations that the latter stole their idea for the now wildly successful social media site. Gemini becomes just the third licensed and regulated Bitcoin exchange based in the United States.

New York became the first state to officially regulate and try to guide Bitcoin practices in any way, with rules it believes address issues like security and money laundering compliance. Other states reportedly are working to model similar efforts after New York’s program, dubbed “BitLicense.”

Continuing moves toward increased regulation are "inevitable” to achieve greater use and trust first in consumer payment transaction and, inevitably, B2B ones, NACM Executive Vice President Rudet Fountain has said. Fountain and a number of Bitcoin market-watchers have repeatedly noted that, despite the rebellious roots of alternative currencies, efforts to legitimize digital payment means would be needed well into the future for platforms like Bitcoin to be able to reach their potential as payment options.

- Brian Shappell, CBA, CICP, NACM managing editor

N.Y. Judge Rules Card Surcharging Illegal Despite Antitrust Settlement Elsewhere

The Second Circuit Court of Appeals has ruled that imposing a surcharge for payment by credit card is still illegal in New York even though the settlement of the antitrust litigation against MasterCard and Visa permits the imposition of such a surcharge. Nevertheless, 11 states, including New York and Puerto Rico, maintain declaring such an imposition of a surcharge to be illegal—eight of those specifically refer to “consumer,” but it is questionable whether the remaining states’ laws also apply to commercial transactions.

Five businesses banded together and commenced a lawsuit in New York’s federal district court seeking to have the New York State law deemed unconstitutional, vague and in violation of the First Amendment. New York permits a merchant to offer a discount for cash, but that same merchant may not impose a surcharge for payment by credit card. On October 3, 2013, U.S. District Court Judge Rakoff issued his ruling determining that the New York law on surcharging was unconstitutional. Among his reasons was that surcharges are perceived negatively while discounts are looked upon as a bonus or gain.

The Second Circuit ruled on Sept. 29 that Section 518 is neither unconstitutional nor does it violate a merchant’s freedom of speech. In the meantime, antitrust litigation relating to credit cards against American Express is still ongoing. A settlement that received preliminary approval in February 2014 failed to achieve final approval, and it appears that such approval may not happen in any near future. Several parties objected to the settlement on numerous grounds.

- Wanda Borges, Esq., principal member of Borges & Associates LLC and member of NACM-National’s Government Affairs Committee
For the full version of this article, with more background and analysis, check out this week's edition of eNews, available late Thursday afternoon at www.nacm.org. 

Upcoming Wells Fargo Webinar to Focus on U.S. Exports to China

NACM extends a complimentary invitation to its members to participate in Wells Fargo’s upcoming webinar, “Exporting to an Evolving China,” on Tuesday, Oct. 13 at 11 am (EST). This is the first of three webinars focusing on U.S. exports to Asia that Wells Fargo will conduct in partnership with the U.S. International Trade Administration.

“The market for U.S. exports in China continues to evolve and it’s critically important for U.S. companies to be aware of current conditions and the resources and strategies available for addressing these dynamics,” said Bob Macek, marketing program manager of international group marketing for Wells Fargo.

Representing the International Trade Administration, will be Sarah Kemp, senior commercial officer for U.S. Embassy Beijing, and Patrick Santillo, deputy assistant secretary for China and Washington, DC. From Wells Fargo, the panel includes, Cheng Ye, China country head of sales; Romano Kwok, head of Asia FX trading and sales; and Matt Jergenson, trade solutions relationship manager.

“In-country trade experts will provide perspectives on the ground from China,” Macek explained. “Officials from the U.S. International Trade Administration will discuss the resources available in China for U.S. companies doing business there and international trade specialists from Wells Fargo will provide some strategies to help U.S. companies strengthen their position with buyers in China.”

For more information or to register, please click here.

- Jennifer Lehman, NACM marketing and communications associate

TPP Victory Celebration May Be Short-Lived, National Legislatures Still Must Be Sold

The first step has been taken as far as closing out the Trans-Pacific Partnership (TPP) trade deal is concerned: Negotiators have reached a deal after five years and a solid week of round-the-clock talks. The problem is that many of the provisions that make up the deal are not going to be very popular with the national legislators who will now have to ratify it.

The majority of the opposition in the United States has come from the Democrats, who do not appear to be in the mood to switch sides after candidates Hillary Clinton and Sen. Bernard Sanders have both expressed their displeasure. Republicans had been backing the trade deal; but in an election year, they may be hesitant to make Obama look good. There are many in the Tea Party wing of the GOP who oppose the TPP as well.

The U.S. is not the only nation that is going to struggle to pass this. Canada is not happy about opening its market to dairy imports; and Japan still wants more access to the U.S. for its manufacturers. The fight is now highly political and even the most optimistic of observers give this a somewhat remote chance of passage. This is simply not a good time for trade pacts.

The TPP represents a greater interest in emerging nations located in the southeast part of Asia (Vietnam, Singapore and Malaysia) on the part of the North American economic powers as well as others like Japan, Peru and Australia.

- Chris Kuehl, Ph.D., NACM economist and co-founder of Armada Corporate Intelligence

Global Manufacturing PMI Inches Closer to Contraction Territory

Although only a slight decrease from the previous month, the JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) for September recorded its lowest reading since July 2013. It slipped to 50.6, from 50.7 in August, according to an Oct. 1 news release.

“The manufacturing sector remained in very low gear in September, due to sluggish final demand and ongoing inventory adjustments,” said David Hensley, director of global economic coordination at JPMorgan. “These impacts are also starting to cross over into the labor market, leading global employment PMI to fall below 50 [contraction point] for the first time in over two years.”

The United States and European Union (with the exception of Greece) showed positive growth, while China continued to weaken. The China PMI fell to 47.2, a more than six year low. Brazil remained in a severe downturn, as Russia, Canada and Turkey also showed weakness.

The categories of new exports, employment, input prices and output prices all posted below 50. Output and new exports were the only categories to remain in positive territory; however, both decreased slightly from August. Manufacturing employment also dropped for the first time since July 2013, and job losses were reported in Japan, China, India, South Korea and the United Kingdom.

- Jennifer Lehman, NACM Marketing and Communications Associate

Be sure to check out eNews on Thursday, Oct. 8, for more on the Purchasing Managers’ Index.

Sales on Credit Terms Extensive in the Americas

Nearly 90% of respondents to a recent survey about payment practices in Brazil, Canada, Mexico and the United States, reported having offered trade credit to either domestic or foreign business-to-business customers. Respondents were more inclined to sell on credit to domestic customers, however, according to the September 2015 edition of the Atradius Payment Practices Barometer. Almost half of the total value of domestic B2B sales was made on credit, compared with 40% of sales made to customers abroad.

Of the four countries, U.S. respondents tend to use trade credit in transactions and have no clear preference for selling on credit to domestic (51%) or foreign (46%) buyers. In the remaining three countries surveyed, respondents were more likely to trade on credit with domestic than with foreign B2B customers. “On average, 50% (Mexico and Brazil) or less (Canada) of the value of domestic B2B sales and 38% (Canada, Mexico) or less (Brazil) of the value of foreign B2B sales was made on credit terms,” Atradius noted.

The findings suggest that respondents in the Americas “perceive trading on credit with foreign B2B customers to be more complex and to pose more risks than selling on credit within their own country, where they are more familiar with local trade patterns and business practices,” the firm reported.

Compared with previous payment practices surveys of the Americas, over the past two years, no significant fluctuation in the proportion of domestic B2B sales on credit has occurred. The trend in foreign credit-based sales appears to be more volatile. “After a sharp drop in 2014, export sales on credit increased again this year, most notably in the U.S. (by 10 percentage points, compared to a 5.7 percentage point increase for the region),” Atradius noted. “This oscillating trend may reflect the heightened commercial and political risk landscape at global business level, which continues to pose various.”

For additional information about the survey, read this week’s eNews; or for the complete report, click here.