October 2008 Edition
INDUSTRY NEWS
Confidence among large manufacturers eroded for a fourth
consecutive quarter in the second quarter of 2008, according to a survey
conducted by the National Association of Manufacturers. This marks the lowest
confidence level in the history of the survey going back to the fourth quarter
of 1997, with sales and employment expectations also falling to their lowest
levels on record.
For small manufacturers, the business outlook moderated in
the second quarter, but it remained significantly elevated compared to large
survey respondents.
Results of the second quarter survey are based on responses
of 314 NAM member companies. Large companies – those employing more than 1,000
workers – and small companies recorded their business outlook as well as their
12-month expectation on sales, prices, capital investment, inventories,
employment, and wages.
In addition, companies were asked about the prospects for a
recession in 2008 and the impacts of higher import prices on their company.
Asked if the U.S. economy would go through a recession in
2008, slightly more than one-third – 37 percent – answered "Yes." This is less
than the 50 percent of survey respondents who expected a 2008 recession in the
first quarter survey. Twenty-five percent answered "No," and 38 percent answered
"Maybe."
Due to a realigning dollar and rising transportation costs,
prices of non-petroleum imports have accelerated in recent months. Asked how
these forces have affected their company, survey respondents reported that the
largest effect was higher costs [see chart]:
- 79 percent of survey respondents reported that
inflationary pressures from overseas have spilled over into the domestic
economy in the form of "Increased costs of materials and supplies purchased
domestically."
- 59 percent of survey respondents reported "Increased
costs of materials and supplies imported from abroad."
- 30 percent of survey respondents reported "More purchases
are being sourced domestically."
- 22 percent of survey respondents reported "Eased import
competition" as well as "increased pricing power."
While 67 percent of small businesses responded to the Q2
survey with a positive outlook for their business, just 38 percent of large
manufacturing companies responded optimistically.
For small respondents, the three percent drop in optimism
from the 70 percent of survey respondents in the first quarter of 2008, to 67
percent in the second quarter, marked the fourth decline in the past six
quarters. The level of optimism in the second quarter was 21 percent below the
level two years prior and the lowest level since the second quarter of 2003.
After tumbling 23 percentage points from the previous three
quarters, the share of large companies who were optimistic about their business
outlook dropped another 19 percentage points in the second quarter – the largest
quarterly drop in five years. The level of optimism in the second quarter of
2008 was 58 percent below the level two years prior and the lowest level – 38
percent – in the history of the survey.
June U.S. manufacturing technology consumption totaled
$360.43 million, according to the Association For Manufacturing Technology – AMT
– and the American Machine Tool Distributors’ Association – AMTDA.
This total, as reported by companies participating in the
United States Manufacturing Technology Consumption – USMTC – program, was level
with May, and up two percent from the total of $353.4 million reported for June
2007. With a year-to-date total of $2.32 billion, 2008 is up 15.3 percent
compared with 2007.
These numbers and all data in this report are based on the
totals of actual data reported by companies participating in the USMTC program.
Chris Kuehl, Ph.D., an economic analyst for the Fabricators &
Manufacturers Association, Intl., Rockford, IL, predicts the current boom in
U.S. exports will continue even when the weak dollar recovers. He offers four
reasons for the prediction.
1. Energy Costs:The current system of export trade is
predicated on costs of transportation as they were 10 years ago. Those days are
gone, which will place more emphasis on being closer to one's supply chain. That
means U.S. manufacturers will see more business across the borders of the United
States – both coming and going. The nations of Latin America will become more
complete customers for the United States.
2. Increased Sophistication of U.S. Manufacturers Overseas:Companies that started with some tradeshow and Internet orders have often taken
this to the next level. There are sales organizations in place, contacts have
been made, and overseas consumers now have experience and familiarity with U.S.
products. The weak dollar allowed a foothold, and companies have leveraged it
from there.
3. Changes Among Foreign Manufacturers: Changes have
occurred in countries that have evolved as manufacturing bases. They are
experiencing the challenges of development – higher inflation, shortage of
qualified workers, shortage of management skill, and societal demands that could
affect their competitiveness. The advantages that these countries once had in
terms of production costs have been eroding, bringing these nations much closer
to U.S. and European costs than before.
4. More Money in Overseas Markets: With more money in
overseas markets than there used to be, global consumers are interested in and
have the wherewithal to buy U.S.-made products. The old markets used to be
confined mostly to Europe, but now there is demand from Latin America, South
Asia, East Asia, and even from parts of Africa.
The Hardinge Group, Inc., Elmira, NY, board of directors
declared a cash dividend of five cents per share on the company’s common stock.
This dividend was payable September 10, to stockholders of record as of August
29. In 2007, approximately 66 percent of the company’s sales were from outside
of North America.
Sikorsky Aircraft Corp., Stratford, CT, successfully
completed the first flight of its X2 Technology Demonstrator, maneuvering the
prototype aircraft through hover, forward flight, and a hover turn, in a test
flight that lasted approximately 30 minutes.
The X2 Technology Demonstrator is designed to establish that
a helicopter can cruise comfortably at 250 knots, while retaining such desirable
helicopter attributes as excellent low speed handling, efficient hovering, and
safe autorotation, combined with a seamless and simple transition to high speed.
Among the innovative technologies the X2 Technology
Demonstrator employs are
- fly-by-wire flight controls;
- counter-rotating, all-composite rigid rotor blades;
- hub drag reduction;
- active vibration control; and
- an integrated auxiliary propulsion system.
The project is funded solely by Sikorsky. It is a subsidiary
of United Technologies Corp.
In what seems to be counter to conventional wisdom, a survey
conducted by the sponsors of the FABTECH International & AWS Welding show,
documents that more leading manufacturing executives today say the lack of
skilled labor and management skills in the work force – not current oil prices
or the weak U.S. dollar – most hurts the growth of America’s economy.
In the poll, 27 percent of the executives cited the lack of
employee skills as the leading obstacle to growth. Ranked second was oil prices
– cited by 20 percent, followed by tax policies – 11 percent, weak U.S. dollar –
10 percent, the financial commitment in Iraq – nine percent, and the credit
crisis – seven percent.
The executives also were asked to name the two best ways to
attract greater numbers of young people to manufacturing careers. The response –
58 percent – said competitive wages. More parental and teacher encouragement
ranked second at 27 percent, followed by offering more relevant science and math
programs in high school and college – 23 percent – and greater use of computer
and high tech skills – 22 percent.
Product innovation and production efficiencies are priorities
for manufacturers, too, according to the executives polled. About 22 percent
said developing more innovative products, and 21 percent cited improving
production efficiencies as the actions companies must take to better compete in
the global marketplace. Offering more cost-competitive products and responding
more effectively to overseas competition were each ranked at 15 percent of the
respondents.
