Outlook for Manufacturing in 2012 is Up

U.S. manufacturers are bullish about 2012 despite lingering economic problems.

On Jan. 3, the Institute of Supply Management announced manufacturing expanded for the 29th-consecutive month. "Manufacturing is finishing out the year on a positive note, with new orders, production and employment all growing in December at faster rates than in November, and with an optimistic view toward the beginning of 2012," says Bradley Holcomb, chair of ISM's Manufacturing Business Survey Committee.

Most economists expect continued growth in the U.S. economy and in manufacturing, but that growth is likely to be modest. The Manufacturers Alliance for Productivity and Innovation (MAPI) expects manufacturing production to increase 3% in 2012, outstripping U.S. GDP growth which MAPI predicts will be 2.1%. MAPI Chief Economist Daniel Meckstroth says, "Pent-up demand for postponed consumer durable goods continues to exist, particularly in motor vehicles. In addition, firms are profitable and have the need to spend more for both traditional and high-tech business equipment, and reasonably strong growth in emerging economies is still driving U.S. exports."

Barry Misthal, the global leader for PwC's Industrial Manufacturing Practice, also predicts slower growth for the U.S. economy. "My anticipation is we will see a continued slowdown in demand "both in the U.S. and globally, with a few bright spots," he says. "The bright spots are U.S. companies that are aligned to the energy sector, whether it is oil, gas, natural gas or shale gas extraction. U.S. manufacturers that have good exposure to the energy sector will still have very solid demand going into 2012."

Kuehl, who serves as economic analyst for the Fabricators & Manufacturers Association International, says attendees surveyed at the Fabtech show last November were clearly in the mood to buy new machinery. He says some company executives were saying they needed to replace old machines that were wearing out while others need new machines in order to enter new markets.

Source: Industry Week

Corporations Spending on Capital Equipment

As Equipment Purchasing Surges, Unemployment Remains High

Many companies are ramping up equipment purchases to boost productivity, reinforcing a gap between capital spending and employment in the United States.
Corporate investment will rise 11 percent this year as sales pick up, following a 15 percent gain in 2010, according to “Man vs. Machine,” a Feb. 2 report from Bank of America Merrill Lynch. Employment will grow just 1.7 percent, after a 0.7 percent increase last year.
Inventory rebuilding, low borrowing costs and government policies that include a new tax break on equipment purchases are powerful spurs for capital spending, said Neil Dutta, the Bank of America economist behind the report. The job market lacks such drivers and will form a “mediocre” underpinning for household spending, the biggest part of gross domestic product, he said.
The Institute for Supply Management’s manufacturing index has risen for seven consecutive months, surging in February to the highest level since May 2004. Although the labor market is “improving gradually,” unemployment remains “elevated,” according to the Federal Reserve. The jobless rate could hold at 8.9 percent in March for a second month, the lowest since April 2009, based on the median forecast in a Bloomberg News survey ahead of Labor Department figures due April 1.

Economy: Factory Production Increases, Housing Stagnates

Production at U.S. factories climbed in January for a fifth consecutive month, while builders began work on fewer single-family houses, showing the expansion remains driven by manufacturing as housing stagnates.

The Fed’s report also showed total production was unexpectedly restrained by a decline in utilities as milder temperatures curbed demand for heating. Output fell 0.1 percent after a 1.2 percent increase in December.

Mining production, which includes oil drilling, decreased 0.7 percent last month. Utility output fell 1.6 percent after a 4.1 percent increase the prior month.

Automakers are benefiting from rising sales. Output of motor vehicles and parts jumped 3.2 percent in January after rising 0.2 percent a month earlier.

Business Equipment

Production of business equipment rose 0.9 percent after a 1 percent gain. Output of computers and semiconductors rose 0.9 percent after increasing 1.5 percent.

Read entire article at bloomberg.com

Economic Data Indicate Strength

A rise in productivity showed companies continue to keep costs controlled and offered hope for jobs growth, while disparate U.S. economic reports noted continued growth in the service and manufacturing sectors.

Productivity increased while labor costs fell for the second consecutive quarter at the end of 2010, though many economists expect that a stronger economy means that businesses won't be able to keep squeezing more output from the same workers.

"There is a good chance that productivity will slow further this year, as firms are increasingly forced to hire more workers to expand output," said Paul Ashworth, chief U.S. economist at Capital Economics.

Nonfarm business productivity rose at a 2.6% annual rate in the October to December period after rising by a revised 2.4% in the third quarter, the Labor Department said Thursday. For the full year, productivity was up 3.6% in 2010 and 3.5% in 2009.

http://online.wsj.com/article/SB10001424052748703652104576121843066398666.html?mod=WSJ_economy_LeftTopHighlights

U.S. Manufacturing Expected to Grow in January

Manufacturing in the U.S. probably grew in January for an 18th consecutive month as the expansion strengthened at the start of the year, economists said before a report.

The Institute for Supply Management’s factory index was little changed at 58 last month from an eight-month high of 58.5 in December. Readings greater than 50 signal growth. A separate report could show construction spending rose 0.1 percent in December.

The manufacturing index reached 60.4 in March 2010, the highest point in nearly six years, as industrial output rose and helped the economy rebound. The index bottomed out at 33.3 in December 2008, the lowest point since June 1980.

A reading of 58, while lower than the previous month, would still signal solid growth at U.S. factories. Greater consumer spending on cars, household appliances and furniture, among other goods, has given manufacturers a boost. Manufacturers actually added 136,000 jobs last year, the first annual net employment gain for the sector since 1997.

Consumer spending rose 4.4 percent in the October-December quarter, the fastest pace in four years, the Commerce Department said last week. The economy grew at a 3.2 percent annual rate in that same period. Despite manufacturing’s strength, economists don’t expect the sector will do much to reduce the nation’s 9.4 percent unemployment rate.

Also at 10 a.m., the Commerce Department will release data on construction spending. Projections in the Bloomberg survey ranged from a drop of 1.3 percent to a gain of 0.5 percent, following a 0.4 percent increase in November.

Alliance for American Manufacturing calls for access to capital and trade deficit reduction

Industry Group Urges President Obama to Adopt Manufacturing Strategy in 'State of the Union' Agenda

As President Obama prepares to report to the nation on the State of the Union, the Alliance for American Manufacturing has sent a letter urging him to renew his focus on the challenges and opportunities facing American manufacturers and their workers. 

"American manufacturing is in crisis mode," said AAM Executive Director Scott Paul. "In his State of the Union address, we're asking the President to announce a comprehensive national manufacturing strategy that can revitalize our industrial base and ensure a wider economic recovery."

AAM's letter to the President outlines five key areas of a national manufacturing strategy that should be delineated in the State of the Union:

*Access to capital
*Creating demand and promoting manufacturing utilization
*Workforce development
*Competitiveness
*Trade deficit reduction

Major Incentives for Equipment Purchases in Year-End Tax Bill

Companies have something to cheer about when it comes to their upcoming large equipment purchases.  The new tax-law that went into effect this week includes 100% expensing for qualified capital investments, including investments in plants and equipment, for 2011 and a 50% deduction for 2012. This is great news as companies remain uncertain when it comes to the economic growth for business.
 
Mazuma Capital supports the ELFA in their crusades for the use of capital formation tax incentives.  The focus remains on the need to invest in plants and equipment as a key component of economic growth and competitiveness. The provision allowing the full deduction – without monetary limitations – of qualified capital investments through 2011 and the 50% bonus depreciation level for 2012 is a major win for economic growth.
 
We hope to see growth in manufacturing and in many industries whom have felt the pinch of the current economy.  Agriculture, construction, manufacturing and transportation outlooks seem positive as growth is reported.  We will all be routing for the best as we continue full steam ahead into 2011.

September Machine Tool Consumption Up 157% Over ’09

September’s machine tool consumption totaled $339.76 million, up 156.8% compared with the total of $155.69 million for the same month in 2009. That puts the year-to-date total at $2,090.27 million, up 74.1% compared with the same YTD figures in 2009.
This comes from the U.S. Manufacturing Technology Consumption Report is compiled by the American Tool Distributors’ Association and The Association for Manufacturing Technology.
“September 2010 was a watershed in the recovery from the recession of 2008-2009,” said Peter Borden, AMTDA President. “The 1,992 units sold (in September) is the highest number since September of 2008 and demonstrates the resilience and staying power of the U.S. manufacturing base. More remarkably, this was done while many factories are running below the capacity levels that require capital goods purchases, despite the tight credit, and in spite of questions about government debt and potential tax increases. The catalysts of the successful IMTS, the weaker dollar, and the passage of bonus depreciation paid surprising and long awaited dividends.”
By region, Northeast consumption stood at $64.44 million, 66.3% higher than August’s $38.76 million and 77.4% higher that the September 2009 total. A year-to-date total of $362.73 million was 53.4% more than the same figure for 2009.
The Southern Region’s manufacturing technology consumption totaled $66.85 million, up 119.9% when compared with the $30.4 million total for August and up 389.4% when compared with September a year ago, the report noted.
For the Midwest, consumption was 49% more than August’s $81.75 million and up 157.6% when compared with last September. The $629.19 million 2010 YTD total was 84.4% above the 2009 total at the same time.
The Central Region saw manufacturing technology consumption climb to $114.99 million, 77.0% more than the August total, and 238.3% higher than the total for September 2009. With a YTD total of $561.03 million, 2010 was up 94.0% compared to the same period in 2009.
The Western Region also saw an increase in consumption, with a total of $31.68 million in September (up 27.5%), compared to August’s $24.84 million. At $228.66 million, 2010 YTD was 36% higher than the comparable figure a year ago.