Hot spots amid slow growth in manufacturingAfter a steady recovery in the manufacturing industry for the last 2 years, economic growth faces a potentially tumultuous political scene this fall. Like the broader economy, manufacturers will have to consider the impact that some key Supreme Court decisions and election results will have on business in 2013. Whatever the politics, though, there will be a few manufacturing sectors that are likely to breeze through this period, continuing to grow and investing in capital equipment at rates considerably above the average for manufacturing.
While industrial production is the best gauge of sector-by-sector output, a better leading indicator to use for forecasting purposes is capacity utilization. Released by the Federal Reserve in the same monthly report as industrial production, capacity utilization is a percentage measure of actual output versus total maximum output. As an overall rule of thumb, AMT uses 75 percent as the point at which orders from an industry move from replacement toward expansion. The 80 percent level is typically the point at which investments in expansion tend to grow at a rapid pace. This can vary somewhat between sectors, with some industries hovering above 85 percent for years and others staying closer to 70 or 75 percent. Looking at the last several months of data for capacity utilization, it is worth noting that a few sectors appear to be on the verge of a breakout.
.gif)
Fabricated metals reached a miserable low in spring 2009, dropping to almost 60 percent of capacity. This industry group (classified under the NAICS code 332) is an important one for job shops and general machining because a great deal of components need to be incorporated into durable goods under this heading. Prior to the recession, capacity utilization for this sector hovered near 85 percent and has now recovered to almost that level thanks to nearly continuous growth out of the recession. Industrial machinery manufacturing suffered similarly in the recession, with its worst month in June 2009. That sector has seen an even more impressive rebound performance, with March, April and May capacity all over 85 percent and above the average for 2007. The May figure decreased slightly from the previous month, but remained at a high level compared to the last 5 years.
Strong readings in motor vehicles/parts and computer peripheral equipment suggest these segments are also worth watching closely, particularly because they are profitable sectors with cash on hand. Any time capacity is squeezed and businesses have money to spend, you can expect that industry is ready to invest.
Whatever happens on the political landscape, watching capacity utilization and sector-wide financial positions can help you figure out which industries will elect to expand their production in the coming months.
If you have any questions about the data presented here, don’t hesitate to contact Pat McGibbon at pmcgibbon@AMTonline.org or Russell Waddell at rwaddell@AMTonline.org. Both can be reached by phone at 703-893-2900.
Producer Price and Wage Report
The Producer Price Index for Finished Goods decreased 0.6 percent in May to 193.9 (1982 = 100). Compared with the level a year earlier, finished goods prices increased by 0.7 percent. Prices for crude manufacturing materials decreased 4.6 percent from April and 4.8 percent from a year ago.
The metal cutting machine tool index increased 0.1 percent, and the metal forming machine tool index increased 1.0 percent. Compared with last May, metal cutting prices rose 4.2 percent and forming prices rose 3.0 percent.
For more information or for a copy of the complete Producer Price & Wage Report, contact Russell Waddell, Industry Economist, at 703-827-5258 or rwaddell@AMTonline.org.
Foreign Trade Report – April 2012
U.S. machine tool exports valued $196.4 million in April, down 11.2 percent from March’s total of $221.1 million. Exports for year-to-date 2012 totaled $795.8 million, a decrease of 2.1 percent when compared with the same period of 2011. Monthly machine tool imports valued $552.5 million in April, up 1.2 percent from March’s total of $545.9 million. Imports for year-to-date 2012 totaled $2,004.1 million, an increase of 65.4 percent when compared with the same period for 2011.
China was the leading destination for U.S. machine tool exports in April with $34.2 million, a 16.0 percent decrease from March. The second largest destination for U.S. machine tool exports was Mexico, with $28.0 million, a 26.3 percent decrease from March. Completing the top five destinations for U.S. machine tool exports were Canada ($20.8 million), India ($11.2 million) and Germany ($7.9 million).
Japan ($224.5 million) and Germany ($80.4 million) were the top suppliers of U.S. machine tool imports for April 2012. Compared with March’s figures, Japanese imports decreased by 2.5 percent and German imports decreased by 4.1 percent. Completing the top five sources of U.S. machine tool imports in April were Italy ($52.9 million), Taiwan ($43.2 million), and South Korea ($43.0 million).
With MTInsight, you can interactively evaluate the imports and exports of machines tools by the United States. Discover all of the countries with whom the United States is trading, scrutinize that trade at the most detailed commodity classification level, and interpret the progression of U.S. machine tool trade over time. For more information about any aspect of this report or to make a specific data request, contact Kim Brown, Industry Engagement Manager, at kbrown@AMTonline.org or 703-827-5223.