Quite a windy week here from the east coast through the Midwest. Hurricane Sandy has most definitely left her mark on all of us. As of this writing over 90 Americans have perished and millions are still without power. Quite a devastating weather event. On the bright side, the rebuilding process will create many jobs, an increase in demand for materials, parts, new homes, new automobiles and scores of other consumer products will undoubtedly give GDP a boost in coming quarters.
Last week I attended the Precision Machined Products Association annual meeting, this year held in West Palm Beach, Florida. Yes, the storm managed to manifest itself there with plenty of rain and high winds. The outlook for members seems to be positive going forward. Briefly; machine tool consumption is projected to rise 8% above the 2012 level in 2013, roughly 10% more than the historical average. Combined tooling and workholding consumption is expected to rise 13% from the 2012 estimate, significantly above the historical average.
These strong trends are projected to continue for several years.
In talking with the folks, their businesses all seem to be doing quite well despite over regulation, excessive taxes, political issues here at home (the election, the “fiscal cliff”)and the always present geopolitical issues which exist in the world at large. There are no real supply issues in any metalworking commodity, price pressures are down. The real issue and a focus of the association is the dearth of qualified machinists and what to do about it. We have scholarships available for students, additionally, some members are involved in their local school systems to help inform and make our youth aware of the real career possibilities in the metalworking industry. Yes, there are still jobs out there where you will get your hands dirty but it is respectable work and employees are well compensated. I have also been on many a shop floor which are just as clean as or cleaner than many of the offices I have visited. These are truly skilled positions. Steady jobs, very respectable wages with good benefits and a long career are most certainly available. These are the types of jobs our middle class was built on. With the amount of re-shoring going on, the realization by our legislators (not just lip service) that we must make things here to support middle class growth, a strong picture for metalworking and other manufacturing jobs is being created.
Now to the week’s news digests:
Domestic mills are running at an average capability utilization rate of 76.5% up 3.9% from the same period last year.
Durable goods orders grew 9.9% in September-after dropping 13.1% during August leaving us with total durable goods orders net-down.
GDP magically rose to 2% for the quarter ended September 30 after a dismal 1.3% growth figure in the 2nd quarter. Government spending accounted for much of the increase (it’s an election year) and the figure will be revised several times before the actual number is determined. The first revision comes at the end of November (after the election). This was the 10th of the past 11 quarters when quarterly GDP came in under 3.0% which is the 6 decade long average.
The Chamber of Commerce reported the following September 2012 data on 10/25:
New orders for manufactured durable goods increased 9.9%, up 4 of the last 5 months.
Shipments of the same increased 0.8%
Unfilled orders for the same also increased, by 0.2%
And finally, inventories of manufactured durable goods, up 32 of the last 33 months, increased 0.3%
The Chicago Fed National Activity Index (CFNAI) (www.chicagofed.org ) increased to 0.00 in September from -1.17 in August. All four broad categories of indicators which make up the index increased from August. The index’s 3 month moving average, CFNAI-MA3, increased from -0.53 in August to -0.37 in September-its seventh consecutive reading below zero. What does this mean? When the CFNAI-MA3 value moves below 00.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. Conversely, when the CFNAI-MA3 value moves above -0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended.
When the CFNAI-MA3 value moves above +0.70 more than 2 years into an economic expansion, there is an increasing likelihood that a period of sustained increasing inflation has begun.
So, reading the tea leaves, I see no inflation in the near term, I see growth which is slow and sluggish, and although we were headed toward dangerous territory the bounce back up to 0.00 in September is a positive. At least for September. Hold on to your hat.
On November 1 the Institute for Supply Management (ISM) ( www.conference-board.org ) issued its PMI report on business with a reading of 51.7% an increase of +0.2% over August. Readings above 50 indicate economic growth.
So, here we are. The general election is 5 days away, soon all the bloviating, harassing phone calls and political junk mail will come to an end. Next week at this time we will have a much better picture of where things are headed both at home and globally. This election is truly a game changer for America and the citizens of America. Please take the time to VOTE and encourage all those you know to VOTE. It is our right and our responsibility.
God Bless America