Category: Blog

Manufacturing activity expands at fastest pace in 7 years

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Manufacturers expanded at the fastest pace in nearly seven years last month, but a sudden rise in the price of raw materials could threaten their profits.

The Institute for Supply Management said Tuesday that its index of manufacturing activity rose to 61.4 in February, up from 60.8 the previous month. That’s the highest reading since it reached the same level in May 2004. The index bottomed out at 33.3 in December 2008, its lowest point in nearly 30 years.

Any reading above 50 indicates expansion. The manufacturing sector has expanded for 19 months.

The rebound in manufacturing is gaining momentum, the report showed. The new orders index rose to a seven-year high. A measure of order backlogs climbed to its highest level in a year. And inventories are shrinking at manufacturers and their customers. All are signs that factory output is likely to keep growing.

“The recovery in the sector is both robust and on track,” said Ian Shepherdson, an economist at High Frequency Economics.

Solid growth overseas, particularly in developing countries such as China, Brazil and India, has also helped by boosting exports. A measure of export orders rose to its highest level in more than 22 years.

And an employment index topped 60 for only the third time in a decade, evidence that manufacturers are adding employees at a rapid clip.

But prices paid for steel, plastics, rubber and other raw materials rose for a third straight month, a sign that increasing production costs could spark higher inflation.

“Growth may not be as robust as we would like because of these rising commodity prices,” said Brian Levitt, an economist at OppenheimerFunds.

High gasoline and food prices reduce the amount of money consumers can spend on discretionary items such as computers and other electronics. Manufacturers may also eat some of the higher costs, which would cut into profit margins, Levitt said.

“While there are many positive indicators, there is also concern as industries related to housing continue to struggle and the prices index indicates significant inflation of raw material costs across many commodities,” said Norbert Ore, chairman of the institute’s survey committee.

The price of materials is another challenge for the struggling construction industry. The Commerce Department said Tuesday that spending by builders fell in January to a seasonally adjusted annual rate of $791.8 billion.

That’s slightly above the decade low of $791.5 billion in August, and about half of the $1.5-trillion level that economists believe would signal a healthy construction sector. It could take four more years before construction recovers to that level, economists say.

Associated Press
March 1, 2011, 1:30 p.m.

Robust US Manufacturing Growth Leads Recovery As Consumer Spending Slows.

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Bloomberg News (2/28, Kowalski) reported that in the US, manufacturing continues to lead the recovery – and blisteringly so — with the Institute for Supply Management-Chicago index rising to 71.2 for February, “the highest level since July 1988, from 68.8 in January” and exceeding “every estimate of economists surveyed by Bloomberg News.” In fact, the index had been expected to fall. At the same time, US households spent less on purchases, “a sign the expansion will become more dependent on gains in factory production.” In addition, “manufacturers like Deere & Co. are raising profit forecasts as business investment in new equipment accelerates and exports climb as the global economy recovers.” Moreover, the Labor Department said factory payrolls were increased “by 49,000 workers in January, the most since August 1998.” The Chicago index is perhaps the most closely watched measure, but “the Fed Bank of New York on Feb. 15 said manufacturing expanded in that region this month.”

Click image below for a video on “Pace of Recovery to Quicken: Bernanke” by CNBC where Fed Chairman Ben Bernanke tells the Senate Banking Committee that the nation’s GDP growth has now matched the pre-crisis peak, reports CNBC’s Hampton Pearson.

Reuters (3/1, Mutikani) also reports the growth in manufacturing activity, also noting that the Midwestern benchmark reached the highest levels in more than 22 years. Reuters says manufacturing activity could help the US ride out fluctuations in oil prices. RBS economist Omair Sharif said, “The data shows that the manufacturing side continues to be extremely solid,” against consumer spending, which likely will be “only a modest driver of growth this year.” Swiss Re’s Kurt Karl said, “The big surprise of this recovery is how strong and how robust the manufacturing sector has been.” Reuters also notes that Fed officials are counseling against much tinkering with economic support yet.

Payroll Tax Cut Fails To Spur Consumer Spending. The AP (3/1, Crutsinger, Pitt) reports a Social Security tax cut “that economists say should help the economy this year is off to a slow start. Consumers increased their spending last month at the weakest pace since June, even with the extra money in their paychecks.” Analysts said “some people may be using the additional money to pay down holiday credit card bills or higher gas prices,” and “harsh weather may have deterred some people from shopping in January.” Consumers “increased spending by only 0.2 percent in January, the smallest gain since June, the Commerce Department said Monday. At the same time, their incomes rose 1 percent – the biggest jump in nearly two years and a reflection of the tax cut.” The increased income “is part of an additional $110 billion that economists say workers will receive this year from the cut in their Social Security taxes.”

The Washington Post (3/1, Mui) reports “rising food and energy prices ate away at the extra money workers received in January from a reduction in the payroll tax, according to government data released Monday, stalling the momentum in consumer spending.” The tax cut “saved workers roughly $66.3 billion and helped boost incomes by one percent in January compared with the previous month, the government data shows. But much of the increase went toward paying for more expensive food and fuel, which together account for about one-fifth of consumer spending, the Commerce Department report said.”

AFP (3/1, Smith) reports “adjusted for inflation, consumer spending — which accounts for about two-thirds of US economic output — actually fell for the first time in a year, by 0.1 percent from the previous year.” Bloomberg News (3/1, Chandra) reports economists “at Morgan Stanley and Deutsche Bank Securities Inc. cut forecasts as the data showed households may have used some of the extra cash from the payroll tax cuts to boost savings.”

SME Daily Executive Briefing

The Guillotine: Symbol of a Kinder, Gentler Nation?

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guil•lo•tine –noun

1. a device for beheading a person by means of a heavy blade that is dropped between two posts serving as guides: widely used during the French Revolution.

2. any of various machines in which a vertical blade between two parallel uprights descends to cut or trim metal, stacks of paper, etc.

Origin:
1785–95; named after J. I. Guillotin (1738–1814), French physician who urged its use

Disclaimer: C Marshall Fabrication Machinery in no way condones beheading, and in no way, shape or form should any of its offerings be interpreted for such or similar uses.

Although the guillotine should by no means be confused with the guillotine shears sold here at C Marshall Fabrication Machinery, their basic mechanical functions can both be traced to the same origins.

Many of us are familiar with the gorgeous irony of the Nobel Peace prize, which was established by the Swedish chemist Alfred Nobel – whose original claim to fame was his invention of dynamite.

However, although its story is just as ironic as that of the Nobel Peace Prize, the history and namesake of the original guillotine is not widely known.

Most commonly associated as a bloody icon of the horrors of the French Revolution, the guillotine was originally invented by Doctor Antoine Louis, the Secretary of the Academy of Surgery in France. Its purpose was to devise a machine that would basically kill people equally. More specifically, the dawn of the French Revolution also happened to coincide with the Age of Enlightenment, which was sweeping through not only France but all of Europe at the time. As part of the restructuring of the French government, it was reasoned that a standardized and swift method of execution should be made readily and uniformly available throughout France. Also in keeping with the “enlightenment” of the times was the desire for a less painful and less torturous form of execution.

Enter Dr. Joseph-Ignace Guillotin, a big fan of Voltaire and Locke, and a champion of “humanitarian” forms of execution.

Originally laughed out of France’s new Legislative Assembly for his peace-loving, hippie-dippy beliefs (the French still preferred lots of blood, guts and noisy screaming when it came to their justice procedures), Dr. Guillotin proposed that decapitation should become the sole method of execution in France. The machine he proposed for the job was a prototype of Dr. Antoine Louis’ handy-dandy decapitation machine, which even included a privacy screen for enhanced dignity of its soon-to-be headless customers. Guillotin’s proposal was, in fact, ahead of its time in that it advocated, for the first time in France’s history, a fast and painless method of execution that was egalitarian, regardless of background, social status, age, sex or rank: in short, it was seen as an embodiment of such enlightened concepts as humanity and equality.

If Death is the great Equalizer, then the guillotine was its first true enforcer.

In spite of his lofty ideals, once Guillotin’s proposal took hold in actual French law, his name became irrevocably associated with rolling heads, and thus the name “guillotine” was born. Dr. Guillotin’s children, who were none too thrilled by this association, respectfully requested that the French government change the name of the beheading machine. Although the government wouldn’t concede to their request, it did offer them the option of changing their own names – which they did, to distance themselves from the icon of execution that had become their namesake.

The fact that guillotine shears still to this day operate on the same basic principles as the original beheading machine is a testament to their functionality of design. In this sense, at least, the Age of Reason seems to have prevailed. After all, “if it ain’t broke, don’t fix it”; and as long as you read the instructions, you probably won’t lose your head using one.

-Anja Wulf

US Manufacturing News

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US Manufacturing Remains Strong, Expert Writes.

In an article titled “The Truth About US Manufacturing,” Mark Perry, a professor of economics at the University of Michigan, Flint, and a visiting scholar at the American Enterprise Institute, writes in the Wall Street Journal (2/25, Perry, subscription required) that while some people may believe that manufacturing is on the decline in the US. But the data, Perry writes, shows that manufacturing remains strong in this country. Times are tough for many in the industry, Perry concedes. But he argues that with the proper skills, American workers will still have a place in the new US manufacturing economy.

Kansas City Regional Manufacturing Activity Index Hits Several Highs.

The Kansas City Business Journal (2/25, Dornbrook) reports, “Regional manufacturing activity hit several highs in February, and companies also expect strong activity in the months ahead, according to a survey by the Federal Reserve Bank of Kansas City.” The Kansas City Fed reported “the seasonally adjusted index, which can range from 100 to minus-100, came in at a high of 23,” up from 18 this time last year. “Other measurements also hit highs, with the index reflecting new order volume surging and the employment index swinging to a positive reading.”

SME Daily Executive Briefing, Febr. 25, 2011

Factory Activity Grows; Utilities Dip After Storms

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by The Associated Press
February 16, 2011
Factories produced more goods for the fifth straight month in January as strong auto sales spurred demand for new cars and trucks. But overall U.S. industrial production fell for the first time in 19 months.

Output by America’s factories, mines and utilities dipped 0.1 percent last month, the Federal Reserve said Wednesday. The decline was caused mostly by a decrease in output by utilities after a weather-related peak in December.

Industrial production increased in every month but one last year. It has risen by more than 11 percent since hitting its recession low in June 2009. But it remains about 6 percent below its pre-recession peak in 2007.

Manufacturers boosted their output last month by 0.3 percent, led by increased production of autos and business equipment. Output of consumer goods edged up modestly.

“Despite a small decline in overall industrial production, solid growth in the manufacturing sector continues to lead the recovery,” said Thomas Duesterberg, president and CEO of the Manufacturers Alliance/MAPI, an industry group.

Duesterberg said the group expects demand for exports, business equipment and long-lasting consumer goods such as autos to boost factory output by at least 5.5 percent this year. That’s the same amount it increased in the past 12 months.

“If relative weakness in the aerospace sector and in construction materials and supplies for the U. S. market were to turn around, we could see even stronger growth in 2011 and 2012,” Duesterberg said.

The increase in factory output was expected, in part because factories added 49,000 jobs last month, the most since August 1998. And factory employees worked longer hours, another positive sign for output.

Severe winter storms in January might have limited some factories’ ability to increase production.

Overall production increased in December by the largest amount in seven months. The Fed revised December’s production gains upward to 1.2 percent from 0.8 percent.

U.S. industry operated at 76.1 percent of its total capacity in January, a decline of 0.1 percent from December, the Fed said.

Manufacturing is the single largest component of industrial production. Output by utilities decreased by 1.6 percent in January. Mines produced 0.7 percent less.

Sales of cars and light trucks in January rose 17 percent from a year earlier, as Americans signaled that they were ready to replace their clunkers. Nearly all big car companies reported double-digit gains for the month, a sign that the slow recovery in U.S. auto sales that began in 2010 remains on track.

Sales of auto parts also have boomed, as some consumers choose to drive their cars longer.

Brisk demand helped auto makers produce 3 percent more cars and parts in January than they did in December, the Fed said.

What if?

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Today I was looking at the C Marshall Fabrication Machinery Shears, and, as most of you who have been reading my post will know, that can lead to very odd places.

Once upon a time, in land far far away – ancient Greece and Rome to be exact, plate armor was invented and put into use.

Now, like most people, when I think of plate armor I think of Camelot, the Round Table, the Knights, etc., but interestingly enough, it was the Greeks, then the Romans who were the first “knights”.

The first plate armor was made of Bronze, but was only worn by elite soldiers as it was expensive as bronze is a combo of copper and tin. Today, most of us could tip up the cushions on our couch and find enough pennies to plate an army, but back then copper wasn’t as readily available.

So, as with everything, cost drove the Greeks and Romans to abandon it, particularly after the fall of the Roman Empire.

I mean really, if your empire is already fallen what do you need armor for right?

Of course things picked up in the 14th century and plate armor once again had a place in the world, especially with steel being used as the primary material.

However, it was still costly and time consuming to make, and only the upper strata could afford to buy it. Then of course you had to be strong enough to wear the stuff.

That’s where the knights came in. The knights, being nobility (and having to prove it with patents of nobility), were the only ones who could afford such a luxury.

Then the musket came. Thus marked the beginning of the end for plate armor…well the armor we’re talking about anyway.

The steel used for plate armor was great for swords and arrows, but just a smart man doesn’t bring a knife to a gun fight, he doesn’t pretend that his plate armor is going to stop a bullet either.

Now to my wrap up. I like stories and notions of alternative history. I like the ‘what if’ factor in them.

Many writers who write such, often focus on ‘what if a tank went back in time’ or ‘what if an airplane went back in time’. I like to think outside the box a bit, as those of you who know me can attest to.

What if an entire line of C Marshall Fabrication Machinery products were dropped into Germany in 1632 in the middle of the Thirty Years War? Mind you this is a war that completely devastated what is now Germany and in my opinion set the tone thereafter for the German people. As a people, they were never going to let that happen again. And that mind set eventually led too…well you know the rest there.

Think about it. What if they were given the tools to completely arm every soldier regardless of income or status? It could have given them the edge and victory instead of devastation. That victory could have then changed their mindset completely, therefore affecting the rest of history in so many ways.

I will let you mull that over, but a few words come to mind. Hitler, Holocaust, WWII.

What if?

U.S. manufacturers see emerging market boost

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Reuters
1:04 p.m. CST, February 8, 2011

BOSTON (Reuters) – Strong demand from big emerging markets, particularly China and India, is boosting U.S. manufacturers’ prospects for 2011, a pair of top executives said on Tuesday.

But not everyone in the sector regards the recovery from the worst recession the world has seen in living memory as a sure thing.

“We feel very good about the economy,” said Greg Hayes, chief financial officer at United Technologies Corp . “There’s good news, but we’re not out of the woods yet … It’s going to be a gradual, slow, uneven recovery.”

A top General Electric Co executive sounded a more confident note on the economy in a presentation to investors.

“We feel really good about emerging market demand, really across all of our infrastructure businesses,” said John Rice, a GE vice chairman who oversees the company’s international operations. “We’re starting to see some signs that the economy is rebounding a little bit.”

Rice, recently transferred to Hong Kong and charged with accelerating GE’s growth outside the United States, said the company is changing the way it approaches developing markets. Building on a recent successful test in India, the largest U.S. conglomerate plans to move more higher-ranking executives into emerging markets to speed its decision-making, rather than requiring local executives to consult with headquarters in Fairfield, Connecticut.

The company has also begun designing more equipment, such as medical devices, with emerging-market customers in mind, rather than trying to retool machines made for rich customers.

“You can’t do it by downsizing … what you have,” Rice said. “You have to start with a clean piece of paper.”

Hartford, Connecticut-based United Tech is counting on growth in emerging markets — where it generated more than 20 percent of its revenues for the first time in its history last year — to drive 2011 sales growth, Hayes said.

The world’s largest maker of air conditioners and elevators expects to grow its Indian revenue to $2.5 billion by 2015, up from $500 million last year, Hayes told the same investor conference.

(Reporting by Scott Malone, editing by Gerald E. McCormick)

In Business Outreach, Obama Urges Companies To “Invest In America.”

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To mostly positive media reviews, President Obama yesterday addressed executives in what has been billed by the White House as major outreach from Washington to business. His speech received widespread coverage in most major media outlets, some of which also reported on the reaction by business.

ABC World News (2/7, lead story, 2:50, Sawyer) reported that the President “delivered an urgent message to the companies to get in the game, start spending money and hiring workers — throwing down a gauntlet but also trying to build a bridge.” ABC (Tapper) added that “Obama is desperate to get the economy going,” and showed him saying, “So if I’ve got one message, my message is now is the time to invest in America. Now is the time to invest in America. And if there is a reason that you don’t share my confidence, if there is a reason that you don’t believe that this is the time to get off the sidelines, to hire and to invest, I want to know about it. I want to fix it.”

The CBS Evening News (12/7, story 3, 2:25, Couric) said “Obama continued his campaign to improve relations with business,” urging “corporate America to invest the nearly $2 trillion it has saved up and start hiring again. For his part, he President promised to address their complaints about the corporate tax code and burdensome government regulations.”

Bloomberg News (2/8, Brower, Dorning) reports that in his remarks, “Obama said he is doing his part to improve the business climate after a free- trade agreement with South Korea, a deal to extend Bush-era tax cuts, and a State of the Union address that proposed more government support for infrastructure and ‘innovation.'” The President “touched on some of the same themes he struck in his State of the Union address: the need to rebuild and modernize the nation’s transportation and telecommunications systems and take steps that will promote research and innovation in areas such as biotechnology, information technology and clean energy.”

Politico (2/8, Cummings),The Wall Street Journal (2/8, Williamson; subscription required), Financial Times (2/8, Braithwaite; subscription required) and Christian Science Monitor (2/8, Feldmann), among other news outlets, also report on Obama’s speech.

SME Daily Executive Briefing
2/8/2011

U.S. Manufacturing Starts to Pick Up

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By Ed Crooks and Hal Weitzman, FT.com
February 7, 2011 — Updated 0129 GMT (0929 HKT)

(FT) — Demand for capital equipment in the US is starting to pick up strongly, manufacturers say, boosting confidence in the health of the economic recovery and raising hopes of a revival in American industry.

Comments in recent days from many of the leading manufacturers of capital goods — including factory equipment, earthmovers and truck components — have suggested that while the fastest growth is still likely to be in emerging economies, they also expect significant growth in US sales.

Emerson, the Missouri-based manufacturer of industrial equipment, told investors at the end of last week that it expected non-residential investment in the US to grow by 8-9 per cent this year; as much as the average for emerging markets.

The company said it expected that the pressure to cut costs and expand capacity would encourage many industries to raise their capital spending this year — and companies that cut investment sharply during the downturn would be forced to catch up, replacing worn-out and obsolete equipment.

David Cote, chief executive of Honeywell, which makes aircraft and vehicle components and industrial equipment, told the Financial Times: “I do believe the US economy is more resilient now. Barring any unforeseen circumstances, we’re on the comeback trail.”

Caterpillar, the world’s biggest manufacturer of earthmoving equipment, is raising its capital spending budget from $1.7bn in 2010 to $3bn this year. More than half of the budget will be spent in the US to build capacity, going towards projects such as an excavator factory in Texas and a motor-grader facility in Arkansas.

“If you look at our 2011 outlook, it’s still with the US, Europe and Japan well off historical peaks,” Ed Rapp, Caterpillar’s chief financial officer, told the FT. “So, in this cycle, we have tried to get ahead of some of that, to put the investment in place now. That way when we get a more robust recovery in the developed world, we’ll be ready.”

Eaton, the Ohio-based manufacturer of industrial equipment and components, has said it expected its US sales to grow faster than its international sales this year. Sandy Cutler, Eaton’s chief executive, told the FT that demand was “far stronger than people had thought it would be”.

The Institute of Supply Management survey released last week pointed to the fastest rate of growth for manufacturing industry since 2004.

Barry Knapp, strategist at Barclays Capital, said two factors contributed to the upturn in confidence since last summer: the Federal Reserve’s bond-buying programme and signs of a more business-friendly approach from Congress.

Factories added 49,000 jobs in January

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By Paul Davidson, USA TODAY

Manufacturers emphatically defied Friday’s lackluster employment report, adding 49,000 jobs last month in what some economists say should signal the start of a surge for the beleaguered industry.
The job gains were the most by manufacturers since August 1998. More impressive, they came despite an otherwise disappointing report that showed employers added a net total of 36,000 jobs in January, far fewer than the 146,000 expected.

Strong job gains by U.S. factories would be a welcome boon to a sputtering job market. Makers led a modest jobs rebound early last year as firms replenished stocks depleted in the slump. But it petered out in August after shelves were refilled and substantially higher customer demand didn’t materialize.

Higher demand is finally kicking in, particularly in emerging markets, says economist Cliff Waldman of research group Manufacturers Alliance/MAPI. And productivity gains that let makers put off hiring last year amid economic uncertainty are wearing thin.

After adding 112,000 jobs in 2010, producers are projected to add 275,000 this year and 300,000 more in 2012, according to the alliance. That would offset some of the 2.3 million losses in the downturn. Those layoffs “were clearly overdone,” Waldman says.

Yet don’t expect the industry to reclaim its former employment. The industry lost nearly 4 million jobs in the 10 years prior to the recession due to technology advances and the flight of jobs to countries with lower costs. Waldman expects those trends to continue.

Last month’s job gains were by makers of durable goods, such as cars, factory gear, metals and computers, much of them exported to overseas businesses. Makers of non-durables such as apparel, food and paper shed 13,000 jobs amid still moderate U.S. consumer demand, Waldman says. Some hiring:

•After keeping its 192-worker staff stable the past few years, Atlas Machine & Supply in Louisville added 10 workers the past 90 days and last month converted two temporary employees to full time. The industrial parts maker increased overtime last year. But Atlas President Rich Gimmel says, “You reach a point of diminishing returns when you work 70, 80 hours a week.” Plus, “The recovery seems to be getting some legs.”

•Ford Motor added 600 workers in Ohio and Michigan since November to speed production of vehicles and engines, spokeswoman Marcy Evans says. U.S. car sales rose to an annual rate of 12.6 million last month from 11 million early last year.

•No. 1 aluminum maker Alcoa said last month it’s re-opening three U.S. smelting plants this quarter that will employ 260. “We see more demand going into aluminum,” CEO Klaus Kleinfeld says.

•Top chipmaker Intel added 3,000 workers last year, about double projections, as demand for servers and notebooks surged.