Category: News

Manufacturers in the U.S. have a more optimistic outlook for sales and spending in 2011 than they did at the end of last year, according to a survey by the Institute for Supply Management.

Purchasing managers at U.S. factories anticipate sales will grow 7.5 percent this year, up from a 5.6 percent December forecast, according to the Tempe, Arizona-based group’s semiannual forecast issued today. By contrast, service providers estimated revenue will rise 2.1 percent this year, less than the 3.4 percent forecast in December.

“Much of manufacturing has emerged from the economic downturn and is experiencing significant growth,” Norbert Ore, chairman of the group’s factory committee, said in a statement.“The positive forecast for revenue growth and improved employment will drive the continuation of the recovery” in the industry, he said.

Companies like Corning Inc. (GLW) may continue to profit from growing emerging economies as well as increased capital investment, keeping manufacturing at the head of the economic rebound. Growth among service providers, which by the ISM’s accounting make up more than 90 percent of the economy, may fail to keep pace as American households struggle with 9 percent unemployment.

Manufacturers projected employment will increase 2.9 percent for the rest of this year, while service companies predicted a 0.9 percent increase.

More Investment

Factory managers also estimated they will boost spending on new equipment by 18 percent in 2011, up from the 14.5 percent increase projected in December, today’s report showed. Service providers forecast a 1.4 percent gain in investment, less than the 3.7 percent gain predicted at the end of last year.

“Indications are that non-manufacturing will continue on the path of slow and sustainable growth for the balance of 2011,” Anthony Nieves, chairman of the ISM’s services committee, said in a statement. “Price increases and slow employment growth are prominent areas of concern.”

A report today showed manufacturing cooled last month, reflecting a drop in auto making after supplies of parts were disrupted by the Japanese earthquake and tsunami.

Production Disruption

Output at factories, mines and utilities was unchanged after a 0.7 percent gain in March, figures from the Federal Reserve showed. Manufacturing fell 0.4 percent, led by an 8.9 percent slump in production of automobiles and parts.

In response to a special question, 23 percent of manufacturers surveyed by ISM said they will experience delays in U.S. operations due to supply shortages caused by the disaster in Japan. Fifteen percent of those in services projected disruptions.

Factory leaders see the cost of raw-materials rising 7.4 percent this year and believe they can pass along 34 percent of that increase to customers, the report showed. Service providers see a 4.7 increase in input costs this year, with 27 percent of the gain being passed through.

Earlier this month, the ISM reports showed manufacturing expanded faster than expected in April, driven by gains in exports and inventories. At the same time, service industries grew at the slowest pace in eight months as companies cut back in response to higher energy costs.

ISM Gauges

The ISM’s factory index fell to 60.4 in April from 61.2 the prior month, figures showed May 2. The measure has exceeded 60 for four consecutive months, the best performance since 2004. For both indexes, readings greater than 50 signal growth.

Corning, which makes glass for flat-panel televisions, said it expects sales will grow to $10 billion by 2014, helped by demand from China.

“We’re off to a great start in 2011,” Wendell Weeks, chairman and chief executive officer, said in a statement after the Corning, New York-based company’s annual meeting last month. A significant portion of growth will come from China, which is currently the world’s largest market for several of Corning’s major products, he said.

Two days after the factory gauge was released, the ISM reported that its index of non-manufacturing companies declined to 52.8 in April, lower than the median forecast of economists surveyed by Bloomberg News, from 57.3 in March.

Climbing gas prices have strained earnings at service providers like Union Pacific Corp. (UNP), the biggest U.S. railroad by sales, which posted a quarterly profit on April 20 that trailed analysts’ estimates.

Omaha, Nebraska-based Union Pacific utilized commodity-shipping volume growth “despite spiking fuel prices and winter weather challenges across most of the nation’s rail network,”Chief Executive Officer Jim Young said in a statement.

By Alex Kowalski – May 17, 2011 8:12 AM PT

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

In the context of the US-China Strategic and Economic Dialogue, the Washington Post (5/10) editorializes that “even as leaders again made promises about currencies and trade, evidence was mounting that some old assumptions regarding their relationship may no longer apply.” Manufacturing is presented as a prime example of this: with the advantage of manufacturing in China diminishing thanks to rising wages there and higher productivity in the US, more companies are choosing to manufacture their goods in the US. The Post offers “a few caveats,” such as the fact that China will remain a manufacturing powerhouse, and that “shifting production does not automatically translate into huge numbers of new US jobs.” But regardless, the Post adds, there are related benefits to domestic manufacturing, and a more competitive manufacturing base makes it “appear that the United States does have a future after all – as a highly efficient manufacturing platform for the developed world.”

Click HERE for full article

Manufacturing Stages A Comeback

This year’s survey of the best cities for jobs contains one particularly promising piece of news: the revival of the country’s long distressed industrial sector and those regions most dependent on it. Manufacturing has grown consistently over the past 21 months, and now, for the first time in years, according to data mined by Pepperdine University’s Michael Shires, manufacturing regions are beginning to move up on our list of best cities for jobs.

The fastest-growing industrial areas include four long-suffering Rust Belt cities Anderson, Ind. (No. 4), Youngstown, Ohio (No. 5), Lansing, Mich. (No. 9) and Elkhart-Goshen, Ind. (No. 10). The growth in these and other industrial areas influenced, often dramatically, their overall job rankings. Elkhart, for example, rose 137 places, on our best cities for jobs list; and Lansing moved up 155. Other industrial areas showing huge gains include Niles-Benton Harbor, Mich., up 242 places, Holland-Grand Haven, Mich., (up 172), Grand Rapids, Mich., (up 167) Kokomo Ind., (up 177) ; and Sandusky, Ohio, (up 128).

Industrial growth also affected some of the largest metros, whose economies in other areas, such as business services, often depend on customers from the industrial sector. Economist Hank Robison, co-founder of the forecasting firm EMSI, points out that manufacturing jobs — along with those in the information sector — are unique in creating high levels of value and jobs across other sectors in the economy. They constitute a foundation upon which other sectors, like retail and government, depend on.

Take the case of Milwaukee. The Wisconsin city rode a nearly 3% boost in industrial employment to increase its ranking among the best large metros for jobs: It rose from a near-bottom No. 49 (out of 65) to a healthy No. 23. As manufacturing employment surged, others sectors, notably business services, warehousing and hospitality, showed solid increases after years of slow or even negative growth.

Milwaukee’s growth reflects some of the greater trends affecting the industrial sector, whose overall income is up 21% since mid-2009. The Fed’s monetary policy, combined with deficit-related concerns, has certainly helped by depressing the value of the dollar, keeping American prices more competitive with foreign producers. Low prices have helped U.S. industrial exporters gain sales, much as it has boosted agricultural commodity producers to sell their goods to growing countries like China, India and Brazil. Exports now account for 12.8% of all U.S. output, the largest percentage since the Commerce Department starting tracking in 1929.

These new markets are particularly strategic to regions like Milwaukee and other parts of the Great Lakes. Despite the industry’s massive shrinkage of the past decade, these areas retain significant specialized skills in fields like machine tools, automotive parts and temperature controls, which are all in demand in the developing world as well as at locally based firms, many of which are enjoying high profits. Allen-Edmunds, a high-end shoe maker based in the region, has seen export business surge.

Similarly Peoria, Ill., has benefited from a boom in overseas orders for heavy equipment from Caterpillar, its dominant industrial company. Caterpillar sells the kind of heavy moving and mining machinery now in great demand, particularly in developing countries.
One big driver of industrial growth has come from the source of so much pain in the past: the auto industry. Although production remains 25% below its 2007 peak, the industry, which accounts for roughly one-fifth of the nation’s industrial output, is on the rebound. Ford Motor is achieving its best profits in over a decade, and both Chrysler and General Motors are officially in the black.

Long-depressed industry center Warren-Troy-Farmington Hills, Mich., topped our list of manufacturing job-creators, with an impressive 8.2% increase. Second place went to the Detroit-Livonia-Dearborn area, which experienced 3.5% growth. Of course this recent expansion hardly makes up for decades of decline — auto industry employment, for example, is still down over 34% from its 2005 peak. But industrial expansion has clearly improved job prospects across the board; over the past year, for example, Warren experienced healthy growth in its information, business services and wholesale trade sectors.

Of course, not all the big gainers in the industrial sphere are located in Great Lakes. The movement of manufacturing to other parts of the country, particularly to Texas and the Southeast means a better industrial climate helps those regions as well. The list of fastest-growing industrial areas among our big metros includes San Antonio, Texas (No. 3); Atlanta (No. 7); Oklahoma City (No. 9) and Austin-Roundrock, Texas (No. 10) — all of which did very well in our overall jobs survey. Many of these areas are business-friendly, have low housing costs, reasonable taxation and business-friendly regulatory environments that induce industrial expansions.

Another contributing factor to industrial growth in places like Austin is high-tech manufacturing. Covering everything from servers to specialized production equipments, the expansion of this sector accounts for a healthy 1.7% upturn in San Jose, No. 6 among our large metro regions, a welcome turnaround for an area that shed some 17% of its industrial jobs over the past decade.

But some of the best progress took place in smaller communities spread across the country. Take Yakima, Wash., which came out first on our manufacturing job growth list with a heady 19% growth in industrial jobs. Metal fabrication plants companies such as Canam Steel have led the way, with some of the new demand coming from Canadian sources.

Other strong performers included Midland, Texas, which ranked sixth in our industrial rankings — fifth among the smaller cities. Here an expanding oil and gas sector has sparked a strong revival not only in manufacturing but also in business services and finance.

If manufacturing growth has become a new shaper of overall job growth, some regions may need to move beyond the post-industrial mindset that dominates so much of regional e development orthodoxy. Take the coastal areas in California: Los Angeles-Long Beach, which has the nation’s largest industrial base and high unemployment, continues to lose manufacturing jobs – over 28% gone over the past decade — in part due to strict regulatory controls and a basic inattention to this sector by government officials.

In contrast, some hard-hit economic regions like Modesto, in California’s Central Valley, have promoted industrial growth. Last year, a nearly 14% increase in manufacturing jobs — much of it food related — helped the area gain some 92 places on our survey . They have not exactly won a gold medal, but certainly the improvement amount to more than chopped liver.

To be sure, cities can grow without robust manufacturing. Take financial centers like New York, university towns or Washington, D.C., where paper-pushing remains the core competency. But for many areas, particularly those beyond the urban “glamour zone,” getting down and dirty at the factory represents a solid economic strategy. In fact, it may be one of the best way to nurture your region back to health.

The Top Cities For Manufacturing Jobs In The U.S.

Yakima, Wash.
Sebastian-Vero Beach, Fla.
Palm Coast, Fla.
Anderson, Ind.
Youngstown-Warren-Boardman, Ohio-Pa.
Midland, Texas
Modesto, Calif.
Yuma, Ariz.
Lansing-East Lansing, Mich.
Elkhart-Goshen, Ind.

The Top Big Cities For Manufacturing Jobs in the U.S.

Warren-Troy-Farmington Hills, Mich.
Detroit-Livonia-Dearborn, Mich.
San Antonio-Braunfels, Texas
Milwaukee-Waukesha-West Allis, Wis.
Louisville-Jefferson County, Ky.-Ind.
San Jose-Sunnyvale-Santa Clara, Calif.
Atlanta-Sandy Springs-Marietta, Ga.
Oklahoma City, Okla.
Pittsburgh, Pa.
Austin-Round Rock-San Marcos, Texas

By Joel Kotkin in the Forbes (5/9) “New Geographer” blog

US “Rebuilding” As 244,000 Jobs Added Last Month.

ABC World News (5/6, lead story, 3:05, Stephanopoulos) reported, “Today, we got the numbers so many Americans have been waiting for” — a “strong new jobs report: 244,000 more people were hired last month, with the best private sector growth in five years.” The CBS Evening News (5/6, story 5, 2:25, Smith), however, reported, “By one measure the jobs picture is improving, but by another there is still a long way to go. The Labor Department reported today that private employers created well over a quarter of a million jobs in April, the most in more than 10 years. But there were still far more workers looking for jobs than finding them and the unemployment rate went back up to nine percent.”

NBC Nightly News (5/6, story 4, 2:10, Williams) reported, “The April jobs numbers are just out — coming in better than most of the experts expected.” NBC (Costello) added, “The good news is that it was the private sector, not the government, that added jobs at the fastest rate in five years last month: 57,000 jobs in retail, 51,000 professional jobs, 46,000 in leisure and hospitality, 29,000 manufacturing jobs.” But “despite adding 240,000 jobs in April, the unemployment rate inched up from 8.8 percent to nine percent, as the population grew and some Americans resumed their job hunt.”

Bloomberg News (5/6, Dorning) reports President Obama “said the US economy is regaining momentum even as high energy prices have crimped consumer spending.” The President said, “This is where the American economy is rebuilding, where we are regaining our footing.”

The AP (5/7, Aversa) reports, “American companies are on a hiring spree. Businesses delivered a jolt of strength to the economy by creating 268,000 jobs in April, the biggest monthly total in more than five years. The gains were solid across an array of industries, even beleaguered construction. It was the third month in a row of at least 200,000 new jobs.” The AP said the “slight rise in the unemployment rate to 9 percent appears to be a quirk.” The Los Angeles Times (5/7, Lee) reports, “A significant part of the stubbornly high unemployment may be structural: Millions of potential workers may have only the dimmest prospects for finding work even if the recovery continues — owing largely to their levels of skill and education.”

Bloomberg News (5/6, Homan) reports employers “added more jobs than forecast and the labor market in the prior two months was stronger than initially estimated.” The New York Times (5/7, Rich, Subscription Publication) reports, “For three straight months, the nation’s employers have delivered solid job growth, easing some concerns that the economy could be stalling.”

Employment Numbers May Reflect Spike In Recent Layoffs.

USA Today (5/9, Davidson) reports, “Last week’s report of better-than-expected employment gains in April raised hopes that US job growth…is finally picking up momentum,” but “some economists see flashing yellow lights in the numbers that could signal at least a temporary lull the next few months. … The number of Americans unemployed less than five weeks rose by 242,000 in April and this group now makes up 20% of the unemployed. Both figures are the highest since October 2006 and are consistent with the jump in jobless claims reported last week, suggesting layoffs have picked up recently.”

From SME Daily Executive Briefing 5/9/2011

The ISM Manufacturing Purchasing Managers Index was broadly covered in the media, which most sources mentioning manufacturing’s key role in helping the US regain its economic footing. It was also noted that April’s expansion marked a slight decline from March, due in part to higher input costs, but that overall the results, and the outlook for the sector, are very good. The impact of a weak dollar was also noted.

The AP (5/3) reports, “The nation’s manufacturing sector has expanded this year at the fastest pace in a quarter-century, boosted by a weak dollar that has made US goods cheap overseas.” The strong manufacturing sector “could help the economy rebound after experiencing weak growth in the first three months of this year,” although other industries such as construction are still struggling, and raw materials prices remain a concern. “The Institute for Supply Management said Monday that manufacturing activity expanded in April for the 21st straight month.” Although the reading of 60.4 represents a decline from 61.2 in March, it still indicates manufacturing growth..

Bloomberg News (5/3, Willis) reports “manufacturing expanded faster than forecast in April, driven by gains in exports and inventories that are keeping the industry at the forefront of the US economic expansion.” And these same factors, “demand from emerging economies like China” and “the need to replenish stockpiles and investment in new equipment, may keep benefitting manufacturers.” Bloomberg notes that “another report showed construction spending rose more than forecast in March as companies put up factories and power plants, while home improvement outlays also rebounded.”

New York Times /Reuters (5/3, B8) reports that, according to the Commerce Department report on construction, March spending was up 1.4 percent, an entire point higher than analysts had predicted on average. However, Reuters noted, the sector remained anemic overall, having a long way to go before it can offset the declines it saw last year.

AFP (5/3) characterizes the manufacturing news in opposite terms, noting the expansion but highlighting the slowing pace of “growth in new orders, production, employment and supplier deliveries.” Norbert Ore, head of the ISM’s manufacturing committee, is quoted as saying, “While the manufacturing sector is definitely performing above most expectations so far in 2011, manufacturers are experiencing significant cost pressures from commodities and other inputs.” Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI, however, said manufacturing was “booming.” He added, “It is clear from today’s report that the few things holding back domestic manufacturers are skyrocketing commodity prices, selective commodity shortages, sluggish residential construction and declining non-residential construction.”

Under the headline “Materials Costs Hit Factories’ Activity,” the Wall Street Journal (5/3, Murray, Hagerty, Subscription Publication) notes the same factors as AFP as impediments to growth, but adds that manufacturing continued to expand regardless, albeit at a slightly slower pace. Exports are playing a major role in many cases, such as Caterpillar, which recently reported that it was having difficulty meeting demand for some of its earthmoving equipment. That demand originates in developing economies in Asia and Latin America.

The Financial Times (5/3, Bond, Subscription Publication) notes that, of the 18 industries tracked by the ISM, only one showed signs of contracting – furniture and furniture-related products. The other 17 industries all showed expansion to different degrees.

The Chicago Tribune (5/3) reports, “The pace of expansion in US manufacturing slowed in April for a second straight month but was brisker than expected, data showed on Monday, a sign the sector was holding up despite slower national growth.” Kurt Karl, chief US economist at Swiss Re, said: “With what is happening in the world at this point, you would expect (manufacturing numbers) to be down.” He added, “We’ve had (higher) oil prices, we have had hits to Japan, we have had hits domestically from production and supply constraints from the Japanese disruptions and we are still over 60 on the manufacturing (index). So it is a very good report.” The Tribune also notes the Commerce Department report, and calls the increase in construction spending “encouraging.” CBC News (5/3) and Marketwatch (5/3 Bartash) also report the story.

From SME Daily Executive Briefing 5/3/2011

In the wake of financial turmoil, manufacturing takes a more central role in the economic growth potential of the United States.

BOSTON/NEW YORK (Reuters) – A pair of top U.S. manufacturers beat Wall Street’s profit expectations, as a recovering global economy drives demand for products ranging from air conditioners to truck transmissions.

United Technologies Corp and Eaton Corp also raised their full-year earnings forecasts, saying that they were becoming more confident in the economy’s direction.

Textron Inc, the world’s biggest maker of corporate jets, missed analysts’ expectations on weakness at its Cessna aircraft unit, but held its full-year forecast steady.

“The rest of the year is going to be very positive,” said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York, which holds United Tech and Textron shares.

The first-quarter results show that strong demand from China, India and other emerging markets had offset the disruptions to supplies of some electronic components after Japan’s March 11 tsunami and ensuing nuclear crisis, Pursche said.

The U.S. manufacturing sector, which accounts for about 11 percent of the economy, has expanded for 20 consecutive months, outpacing other sectors, according to data from the Institute for Supply Management (ISM).

Activity in manufacturing grew at its fastest pace in nearly seven years in February this year, before slowing slightly in March, ISM data showed.

United Tech posted sales growth across its six divisions, whose products range from Otis elevators to Black Hawk military helicopters, and said it now sees strong global demand.

The world’s biggest maker of air conditioners and elevators earned $1.01 billion, or $1.11 per share, with strong demand for Carrier air conditioners. Analysts had forecast a profit of $1.07 per share, according to Thomson Reuters I/B/E/S.

The company raised its full-year profit forecast to a range of $5.25 per share to $5.40 per share, representing growth of 11 percent to 14 percent and marking the second increase since United Tech first issued its outlook.

When the Hartford, Connecticut-based company laid out its initial 2011 profit forecast in December, it had warned investors that U.S. and European economies looked “sluggish” and that a drop in the value of the euro versus the dollar could drag down earnings.

“The risks that we saw earlier in the year just don’t seem to be materializing,” United Tech Chief Financial Officer Greg Hayes said in an interview.

United Tech shares were up 4.1 percent to $85.74 in afternoon trading, after earlier reaching a lifetime high.

HIGH EXPECTATIONS

Industrials have outperformed the broader market over the past year, with the Standard & Poor’s capital goods index up 13 percent, while the full S&P 500 is up 9.5 percent. That rise has raised investors’ expectations heading into earnings season.

“They have to beat strong,” said analyst Brian Langenberg of Langenberg & Co in Chicago. “They have to surprise.”

Eaton, which makes truck transmissions, and hydraulic and electrical systems, earned 84 cents a share, 4 cents ahead of analyst estimates, and raised its 2011 forecast for the second time this year.

Energy and mining investment is lifting electrical sales. Hydraulics markets are being helped by demand for farm equipment, amid high food prices, and for construction machinery used in emerging markets, said Eaton Chief Executive Sandy Cutler, who also cited a recovery in truck production.

“Now that the economy is coming back, freight companies are having more success pushing prices through,” Cutler said in an interview. “They’re becoming more profitable.”

Eaton shares rose 1.3 percent to $53.34. Textron fell 2.2 percent to $25.09.

The three companies kick off a wave of earnings reports from blue-chip U.S. manufacturers. Honeywell International Inc plans to report after Wednesday’s market close and General Electric Co is due on Thursday. 3M Co and Caterpillar Inc report next week.

The sector faces a few major risks this year, including rising energy prices and the aftermath of Japan’s nuclear crisis, which threatens to curtail supplies of electronic components.

Textron, which also makes industrial components used by auto-parts makers, said it expects second-quarter sales to be hurt by lower demand from Japanese customers, but said production slowdowns will be substantially made up later in the year.

Textron’s first-quarter earnings of 10 cents per share missed Wall Street’s 17-cent forecast, reflecting still-lackluster demand for its Cessna corporate jets.

United Technologies, meanwhile, could face short supplies of key components including flash memory chips used in air conditioner controllers.

“Right now we have adequate supply; it’s just a question of making sure that we continue to have access to that,” CFO Hayes said. “We don’t see any material impact, but I think you’ll see bits and drabs of this over the course of the year.”

Scott Malone and Nick Zieminski Reuters
12:19 p.m. CDT, April 20, 2011

Survey Finds Economists Optimistic On US Growth.

The AP (4/19) reports, “A survey from the National Association for Business Economics finds that economists are hopeful that the broader economy is substantially improving, with rising employment reported for the fifth quarter in a row. … The outlook for employment rose slightly, reaching a 12-year high,” and “nearly all of the 72 economists surveyed, about 94%, now expect the economy to grow at least 2% in 2011.”

From SME Daily Executive Briefing 4/19/2011

Manufacturers Alliance/MAPI Survey Suggests Continued Growth In Manufacturing.

IndustryWeek (4/14) reports, “The results of the quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook — March 2011 suggest a continued growth trend for manufacturing,” with an index reading of 72, this sixth month it has been above the 50 mark, indicating expansion. However, “the rate of growth may start slowing later this year.” Donald A. Norman, a MAPI economist and the survey’s coordinator, said, “The results of the March survey show the indexes to be strikingly robust and relatively stable. … As such, they paint a clear and consistent picture of continued growth in manufacturing sector activity.”

Manufacturing’s Strong Performance Sets High Expectations. Under the headline “US Manufacturers Face A High Bar This Quarter,” Reuters (4/15, Malone, Zieminski) reports that manufacturing’s strong performance in the past several quarters, when it has taken point in the US economic recovery, has created very high expectations from investors. “It’s easy to satisfy distraction and depression, but now things are better, companies have been reporting rising earnings and it’s harder to impress people,” explained Peter Klein of Fifth Third Asset Management. These heightened expectations are only one difficulty manufacturers must deal with; higher energy and input costs are also pressing on margins.

From SME Daily Executive Briefing 4/15/2011