Category: News

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

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

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)

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

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.

Under the headline “Economic Data Indicate Strength,” the Wall Street Journal (2/4, Sparshott, Leo, subscription required) reports that service sector growth is rising at a sharp pace, mirroring the performance of the manufacturing sector, while productivity is also on the rise. That may change, and “there is a good chance that productivity will slow further this year, as firms are increasingly forced to hire more workers to expand output,” one economist said. But overall, the predominance of indicators are pointing to stronger economic momentum for 2011.

The AP (2/4) concentrates its reporting on “the US service sector, which employs nearly 90 percent of the work force.” The sector’s increases bode well for the job market. The index from the Institute for Supply Management “rose to 54.5, the highest since May 2006. The employment indexes in the manufacturing and service sector indexes both rose in January, a positive sign that the economy may soon generate more jobs.” And, “the report’s index of new orders jumped to 64.9 last month, the highest in seven years. That’s a sign that services firms will keep growing.”

Under the headline “Data Points To Stronger Growth Momentum,” Reuters (2/4) quotes Robert Dye of PNC Financial Services, who said, “Momentum from the end of 2010 is carrying over. It will be another year of recovery and repair.”

Despite Snow, Retailers See Strong January Sales. The New York Times (2/4, B3, Hauser) reports, “Retailers kicked off 2011 with better-than-expected sales in January, with some relying on discounts to clear merchandise left over from the holiday season.” Overall, “same-store sales rose 4.2 percent in January compared with a 3.3 percent increase in the month a year ago and forecasts of 2.7 percent,” and these gains “followed a holiday shopping season that was the strongest since 2006.” However, “some analysts said that January in general was not considered a good bellwether month for the rest of the year.” And “while the results exceeded forecasts, analysts said there were challenges ahead as rising costs pare profits.”

SME Daily Executive Briefing

Orders for goods jump

CHRISTOPHER S. RUGABER AP Economics Writer

9:36 a.m. CST, February 1, 2011

WASHINGTON (AP) – Factory activity expanded in January at the fastest pace in nearly seven years, as manufacturers reported a sharp jump in new orders.

The Institute for Supply Management, a private trade group, said Tuesday that its index of manufacturing activity rose last month to 60.8. The sector has expanded for 18 straight months, and January’s reading was the highest since May 2004. Any reading above 50 indicates expansion.

The manufacturing sector bottomed out at 33.3 in December 2008, the lowest point since June 1980. It has helped drive growth since the recession ended in June 2009.

Consumers are spending more on autos, appliances and other goods, while businesses have invested in more industrial machinery and computers. Those trends boosted economic growth to a 3.2 percent pace in the October-December quarter, the Commerce Department said last week.

Factories healthy pace of expansion is likely to continue in the coming months. Manufacturing firms surveyed by ISM said their backlog of orders jumped in January, pushing an index measuring that activity to 58 from 47.

U.S. factories are also benefiting from rising overseas sales. The index of export orders jumped to 62 in January, from 54.5 the previous month. That matches a recent peak reached in May.

The employment index also rose, a sign that manufacturing companies are hiring more workers. And the prices paid index, which measures whether manufacturing companies are paying more for raw materials, jumped sharply. That’s a sign that inflation could pick up soon.

If manufacturers are unable to pass on the higher costs, it could cut into their profit margins.