Despite export boom, manufacturers cautious

The overall U.S. trade deficit, which set records for five straight years, fell in 2007 because of export strength. The weak dollar also has helped limit imports of aluminum, steel and other materials that have become cheaper to buy from domestic producers.

Nearly half of the manufacturing industry's 73 subsectors were expanding through February, according to the National Association of Manufacturers. Manufacturing output rose 1.8 percent in 2007 and is forecast to climb to 1.5 percent in 2008 as continued export strength cushions the blow of slumping home and automobile sales, said David Huether, NAM's chief economist.

Construction machinery makers like Terex Corp. are straining to keep up with foreign demand for equipment used on infrastructure development projects. Also thriving are food processors, oil refineries, electronics makers and others, Huether said.

Terex Chief Executive Ron DeFeo said 70 percent of the Westport, Conn.-based company's business comes from outside the U.S., and that 2007 ended with a record backlog of $4.18 billion. Some of its cranes are sold out beyond next year.

"We're scrambling to increase production capacity," DeFeo said, adding that Terex added about 500 workers last year and expects to match that in 2008, with 40 percent of the new hires based in the U.S.

But other companies being boosted by exports, including the U.S. unit of German conglomerate Siemens, have no plans to add workers as they monitor the current economic climate.

Exports are up nearly 30 percent in the last three years at Siemens Corp., and the company has added about 3,000 employees in the last two years, said George Nolen, the company's president and CEO. But that growth is over. While domestic sales remain strong, German parent Siemens AG has announced work force reductions that will affect U.S. operations.

If overseas demand for U.S. products is stronger than expected in the year ahead, manufacturers may need to rethink their hiring plans, some economists said.

"Net exports ought to remain a bright spot for a bit of a while going forward ... but at some point, you have to add bodies," Jared Bernstein, senior economist with the Economic Policy Institute in Washington. "You can't meet increased demand with productivity growth alone."

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