Metals & Manufacturing Outlook Newsletter

Presented by All Metals & Forge Group
The MetalsWatch! newsletter was first published in print in 1988 for All Metals & Forge Group. Its primary focus was to be informative to the metalworking industries in the United States. Its original circulation was 2500 organizations. Today, Metals & Manufacturing Outlook™ (formerly MetalsWatch!) has a global circulation of 85,000 companies from a very diverse group of industries, including Aerospace, Defense, Oil, Chemical, Automotive, Medical, Electronics, Heavy Industry, Shipbuilding, amongst many others.

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Metals & Manufacturing Outlook – July 2014

I. Cover Story: US STILL THRIVING DESPITE NEW GOVERNMENT GDP FIGURE, FRANCE HINDERING EUROPE’S RECOVERY, CHINA SAILING THROUGH IT ALL.
II. North American Perspective
III. U.S. Forging Industry
IV. Manufacturing Talk Radio
V. Euro-Zone
VI. Asia Outlook
VII. South America
VIII. Economic Trends Across The Globe
IX. A Final Word

Publisher’s Statement

As the Northern hemisphere basks in the warmth of the summer economic sun, the U.S. Department of Commerce revised its first quarter GDP estimate sharply downward for the second time. From 0.1 % up to 1% down to 2.9% down.  Most of the mainstream media ignored the number after recalling the tough winter in the East and upper Midwest, even stretching through parts of Southeast, and as far west as Texas.  Snow and ice made roads impassable and transportation was frozen.Manufacturers in the U.S. were unable to get parts to their customers, finished goods to distribution centers for retail sale, or obtain raw materials to produce products.  Consumers were often housebound with their children home from school for up to a week on more than one occasion.  Retail figures sagged and car sales failed to pick up any steam until May.  However, the climate change wasn’t permanent as spring set in; albeit, with ice on the Great Lakes later than any year in recent memory.

Nonetheless, forecasters predict a second quarter GDP anywhere between 1.5% and 3.0%, depending on where you read the numbers, although the initial number will be a Commerce Department estimate and subject to revision.  It is extremely unlikely that any revision will produce a negative GDP number for the second quarter of 2014, with more than mere indicators signaling economic growth.

ISM, MAPI, Kiplinger, Bloomberg, the Wall Street Journal, and almost every other business analysis publication indicate a growing economy, with the long-term picture reflecting two or more years of economic expansion.

Consequently, this newsletter is expanding its scope from a metals outlook newsletter to the Metals and Manufacturing Outlook as “the voice of manufacturing globally”.  This editorial change will allow the publication to examine a broader range of topics that drive the economies of the world, including industrial strengths, weaknesses, opportunities and possible threats to continued economic expansion.

We hope you enjoy this issue of Metals and Manufacturing Outlook as All Metals & Forge Group presents a look at manufacturing around the world.

Manufacturing Talk Radio
Manufacturing Talk Radio continues to gain listeners as it presents information about manufacturing during this recovery from the Great Recession.  It appears clear that the economy has broken the bonds of the downturn and it is now time to focus what is needed to continue to fuel the economic expansion.

Hosts Lew Weiss and Tim Grady recently discussed the 2.9% drop in GDP and why it isn’t a harbinger of a recession.  They also touched on to disconnect between new skilled labor and education in America as the gray hairs retire out of manufacturing, taking decades of knowledge with them, and the absence of math, science and reading skills in the younger generations that will replace them.

This is occurring at a time when jobs are coming back to America, at least at a rate where the offshoring of jobs is completely offset by the reshoring of jobs.  As a result, there is an increased need for fresh, young talent to fill the jobs being brought back to America.

Manufacturing Talk Radio is expanding its communications universe by adding the Metals Outlook Newsletter to its media offerings, and will open up advertising in both the live talk radio show, its subsequent podcasts, and the newsletter, which will become Metals & Manufacturing Outlook, part of the voice of manufacturing globally.

Be sure to tune in to Manufacturing Talk Radio every Tuesday at 1:00 p.m. EST at www.mfgtalkradio.com.  You may also listen to previous shows on your PC or smartphone, or download them from iTunes® to your iPhone or iPad.

Lewis A Weiss
Publisher
Comments to Publisher: publisher@steelforge.com

Cover Story: US STILL THRIVING DESPITE NEW GOVERNMENT GDP FIGURE, FRANCE HINDERING EUROPE’S RECOVERY, CHINA SAILING THROUGH IT ALL.

The Bureau of Economic Analysis reports a further revised US GDP figure for the first quarter, stating that it didn’t drop by just 1.0 percent, as reported here last month, rather that it dropped by 2.9 percent. This figure is based on more complete source data than were originally available. The significance of the figure’s effect on the progress of the US economy may or may not be hotly debated, but it is not expected to get in the way of the ongoing recovery.

The US economy added 244,000 non-farm jobs in June, on the heels of May’s addition of 297,000 jobs.

The PMI figure from the Institute of Supply Management was at 55.3 percent in June, just 0.1 percentage points lower than May’s 55.4 percent reading, representing manufacturing expansion for the 13th consecutive month.

The Markit index stood at 57.3 percent for June, the highest reading since June 2010.

Dun and Bradstreet’s US Business Health Index strengthened by 7.6 percent year-on-year in June, the highest since the index began in December 2010. The D and B Small Business Index is up and there is a general increase in economic health.

Gallup’s Job Creation Index in June stayed at May’s high of +27.

World crude steel production
for the 65 reporting countries for May 2014 was up 2.2 percent on May 2013’s figure at 141 Mt. Capacity utilization in May 2014, at 78.5 percent, was 0.7 percent less than in May 2013.

US crude steel production, for May 2014, at 7.5 Mt is up 1.4 percent year-on-year.
Following are May’s auto sales for the ‘Big 8’ US auto producers:
My usual table flew away some place this month, so here are the Big 8 sales for June, with attendant percentage changes. In spite of recalling millions of cars of late, GM still posted a YTD sales increase over June 2013.

Following are May’s auto sales for the ‘Big 8’ US auto producers:

Company June 2014 YTD Change
General Motors 267,461 1.0%
Ford 221,396 -5.8%
Toyota 201,714 3.3%
Chrysler 171,086 9.2%
Honda 129,023 -5.8%
Hyundai/Kia 118,051 2.2%
Nissan 109,643 5.3%
Volkswagen 50,011 -8.3%

Overall industry sales were up 1.2% over the same period last year, and the Seasonally Adjusted Annualized Rate is now very close to 17 million units.

II. North American Perspective

North-America The Institute of Supply Management PMI figure registered 55.3 percent in June, just 0.1 percentage points less than the May figure, indicating expansion in manufacturing for the 13th consecutive month.
Of the 18 industries reporting, 15 report growth in June, including Machinery, Fabricated Metal Products, Transportation Equipment, Petroleum and Coal Products, Primary Metals and Paper Products. Chemical Products reported a contraction in June.
There are some optimistic comments from the various sectors, with Fabricated Metal Products respondents pointing to the automotive industry’s high demand for steel. Transportation Equipment respondents say business is still very solid and strong, emphasizing class 8 truck and RV production. Primary Metals respondents say seasonal business remains strong, while Chemical Products people say both outlook and company confidence are on the up. Machinery respondents say business is picking up once again. Food, Beverage and Tobacco Products respondents say business volume is on the increase and that consumers appear to be spending more. Wood Products respondents say that orders are picking up but – unusually for the time of year – pricing has declined in the past month.

The following 5 components of the ISM’s PMI, New Orders, Production, Employment, Supplier Deliveries and Inventories are equally weighted and used to calculate the PMI number. A monthly PMI over 50.0 indicates an expanding economy; a number over 60.0 indicates strong manufacturing output, although overheating may occur.
1.    The ISM New Orders Index for June, at 58.9 percent, was up 2 percentage points from May’s 56.9 percent, representing growth in new orders for the 13th consecutive month. Twelve industries reported growth in June, including Machinery, Fabricated Metal Products, Paper Products, Transportation Equipment and Petroleum and Coal Products. Chemical Products reported a decrease in new orders in June.
2. The ISM Production Index was at 60 percent in June, one percentage point less than May’s 61 percent figure. The June reading means growth in production for the fifth consecutive month. Growth was noted in 13 industries, including Machinery, Fabricated Metal Products, Paper Products, Primary Metals, Petroleum and Coal Products and Transportation Equipment. The only industry showing a decline in June was Chemical Products.

3. The ISM Employment Index for June, at 52.8 percent, is the same reading as for May, representing an increase in employment for the 12th consecutive month.  Growth in employment in June was reported in nine industries, including Petroleum and Coal Products, Fabricated Metal Products, Transportation Equipment and Machinery. Primary Metals, Paper Products and Chemical Products showed a decrease in employment in June.

4. The ISM Supplier Deliveries Index – to manufacturing organizations – slowed in June at a slower rate relative to May as the Supplier Deliveries Index registered 51.9 percent, or 1.3  percentage points lower than May’s 53.2 percent reading. A reading below 50 percent represents faster deliveries, above 50 percent means slower deliveries. Slower supplier deliveries were noted in 11 industries in June, including Primary Metals, Fabricated Metal Products, Machinery, Paper Products, Transportation Equipment and Chemical Products. The only industry reporting faster supplier deliveries in June is Textile Mills. Six industries reported no change compared to May.

5. The ISM Inventories Index, at 53 percent for June, is the same as for May and April, indicating growing raw materials inventories for the fifth consecutive month. Eight industries reported higher inventories in June, including Primary Metals, Machinery and Chemical Products. Five industries, including Paper Products, Petroleum and Coal Products and Fabricated Metal Products, reported lower inventories in June.

The following 5 components of the ISM’s PMI, Customer Inventories, Prices, Backlog of Orders, Exports and Imports are not used to calculate the PMI number but are tracked for trends in the marketplace.
1. The ISM Customers’ Inventories Index, registered 46.5 percent in June, the same as in May, meaning customer inventories are still too low. Customers’ Inventories have been too low for 31 consecutive months – a reading less than 50 percent means customer inventories are too low. Five industries showed too high inventories in June, including Petroleum and Coal Products and Chemical Products. Seven industries showed too low inventories in June, including Machinery, Transportation Equipment, Paper Products and Fabricated Metal Products.

2. The ISM Prices Index registered 58 percent in June, a 2 percent decrease on the May reading of 60 percent. In June 23 percent of respondents reported paying higher prices, 7 percent lower prices and 70 percent the same prices as in May. Eleven industries reported paying higher prices in June, including Paper Products, Petroleum and Coal Products, Fabricated Metal Products, Machinery, Primary Metals, Transportation Equipment and Chemical Products.

3. The ISM Backlog of Orders Index was at 48 percent in June, down 4.5 percentage points on May’s 52.5 percent reading. This represents contraction in order backlogs for the first time since January 2014 when the index also stood at 48 percent. Of the 83 percent of respondents reporting, 18 percent reported greater backlogs, 22 percent reduced backlogs and 60 percent reported no change from May. Six industries reported increased order backlogs in June, including Paper Products and Transportation Equipment. Six industries reported a decrease in order backlogs including Petroleum and Coal Products, Chemical Products and Fabricated Metal Products.

4. The ISM New Export Orders Index at 54.5 percent for June is 2 percentage points lower than May’s 56.5 percent reading. The month’s reading represents growth in exports for the 19th consecutive month. Nine industries reported an increase in New Export Orders, including Primary Metals, Fabricated Metal Products, Transportation Equipment, Chemical Products, Machinery and Paper Products. The three industries reporting a decrease in New Export Orders in June were Wood Products, Nonmetallic Mineral Products and Apparel, Leather and Allied products.

5. The ISM Imports Index is at 57 percent in June, 2.5 percentage points higher than May’s 54.5 percent reading. This represents the 17th consecutive month of growth in imports. Eleven industries reported an increase in imports in June, including Transportation Equipment, Fabricated Metal Products, Machinery and  Chemical Products. The only industry to report a decrease in imports in June was Apparel, Leather and Allied Products.

III. U.S. Forging Industry

round-bar-1 Alcoa will acquire Firth Rixson, A Sheffield , U.K. – based global leader in jet engine components, for $2.85 billion in cash and stock. This acquisition will further strengthen Alcoa’s aerospace business and allow it to move to additional aerospace growth with a broader range of value-added jet engine components.

IV. Manufacturing Talk Radio – Now a Weekly Live Radio Show

mfgtalkradio1steelforge
Manufacturing Talk Radio continues to gain listeners as it presents information about manufacturing during this recovery from the Great Recession.  It appears clear that the economy has broken the bonds of the downturn and it is now time to focus what is needed to continue to fuel the economic expansion.

Hosts Lew Weiss and Tim Grady recently discussed the 2.9% drop in GDP and why it isn’t a harbinger of a recession.  They also touched on to disconnect between new skilled labor and education in America as the gray hairs retire out of manufacturing, taking decades of knowledge with them, and the absence of math, science and reading skills in the younger generations that will replace them.

This is occurring at a time when jobs are coming back to America, at least at a rate where the offshoring of jobs is completely offset by the reshoring of jobs.  As a result, there is an increased need for fresh, young talent to fill the jobs being brought back to America.

Manufacturing Talk Radio is expanding its communications universe by adding the Metals Outlook Newsletter to its media offerings, and will open up advertising in both the live talk radio show, its subsequent podcasts, and the newsletter, which will become Metals & Manufacturing Outlook, part of the voice of manufacturing globally.

Be sure to tune in to Manufacturing Talk Radio every Tuesday at 1:00 p.m. EST at www.mfgtalkradio.com.  You may also listen to previous shows on your PC or smartphone, or download them from iTunes® to your iPhone or iPad.

V. Euro-Zone

eurozone Markit’s Eurozone Composite Purchasing Managers’ Index (PMI) saw a further decrease in June to 51.8 from May’s figure of 52.2, the lowest reading since November 2013. This is the twelfth successive month of the recovery, but a recovery that is losing momentum. Spain is on a seven-year high with new orders and employment up, albeit with a still disastrous unemployment rate. France seems to be dropping further into the mire, with sharp declines in new orders and employment. Slower growth was reported in Germany’s goods-producing sector.

Some PMI figures by country are:
Netherlands    52.3    11-month low    Greece        49.4    7-month low
Italy        52.6    3-month low    Austria        50.4    11-month low
Spain        54.6    84-month high    France        48,4    6-month low
Germany        52.0    8-month low    Ireland        55.3    2-month high

For the month of May 2014, Germany produced 3.9 Mt of crude steel, up 7.3 percent y-o-y, ; Italy 2.3 Mt, down 0.8 percent y-o-y; France 1.4 Mt, down 4.0 percent y-o-y; Spain 1.3 Mt, down 2.9 percent y-o-y.
French car sales were up 3 percent in June, Spain’s up 24 percent. Mercedes will bring out a million-dollar S class Pullman, larger and twice the price of the Rolls Royce Phantom.
Things might settle down a little when the World Cup’s over – France and Germany are still in there at time of writing. No they’re not, Germany just knocked out France.
The UK PMI was at 57.5 percent for June, a seven-month high, with order inflows strengthening as demand in both domestic and export sectors improves. Job creation is at a 39 – month high and new business is coming in at the fastest pace since November 2013.  But they can’t play football/soccer worth a damn.

VI. Asia Outlook

30 Meter Horse Head Sculptures Near Completion...FALKIRK, SCOTLA
Crude steel production in China in May was 70.4 Mt, up 2.6 percent on May 2013; Japan’s was 9.6 Mt, down 0.3 percent on May 2013, with South Korea up 11.4 percent at 6.2 Mt.
China’s official manufacturing PMI, went to 51.0 in June from May’s 50.8 percent, with the  HSBC figure going to 50.7. Things are still looking good in the Chinese manufacturing sector.
Overall vehicle sales in China for May 2014 rose 8.5 percent year-on-year to 1.91 million units. The first five months saw sales of 8.07 million passenger vehicles, up 11.13 percent y-o-y, with general-purpose vehicles and SUVs showing great strength.
Meanwhile, in Japan, the manufacturing PMI rebounded from May’s 49.9 to a very decent 51.5 reading in June. The effect of the increased sales tax seems to be wearing off. Contrary to predictions, overall vehicle sales were up 0.4 percent y-o-y in June.
India’s manufacturing (HSBC) PMI in June, at 51.5 percent was slightly over May’s 51.4 percent. Output was at the fastest pace since February, with both new orders and manufacturing production up for the eighth consecutive month. The growth in export orders hit a three-month high. India makes five percent of the world’s crude steel, the same percentage as the US and South Korea.

VII. South America

Montserrat-300x220
Brazil’s crude steel production in May, at 2.9 MT, was down 4.3 percent year-on-year.
The seasonally adjusted HSBC and Markit Brazil PMI was at 48.7 percent in June, just slightly lower than May’s 48.8 percent reading. Brazilian factory activity is at an 11-month low, deteriorating at the sharpest pace since July 2013.

 

VIII. Economic Trends Across The Globe

earthTHE ECONOMIST, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Industrial Production, Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month.  The figures for GDP represent change on the previous quarter, at an annual rate. The industrial production figures represent year-on-year changes, as do the consumer prices increases. The unemployment figures, %, are for the month as noted.

GDP INDL PROD CONS PRICES UNEMPLOYMENT
United States + 1.5 + 4.3 May + 2.1 May 6.3 May
Canada + 2.2 + 3.4 Mar + 2.3 May 7.0 May
China + 7.4 + 8.8 May + 2.5 May 4.1 Q1
Japan + 3.0 + 3.8 Apr + 3.4 Apr 3.6 Apr
Britain + 3.1 + 2.9 Apr + 1.5 May 6.6 Mar
Euro area + 0.9 + 1.4 Apr + 0.5 May 11.7 Apr
France + 0.8 – 2.0 Apr + 0.7 May 10.4 Apr
Germany + 2.3 + 1.9 Apr + 0.7 May 6.7 May
Spain + 0.6 – 2.0 Apr + 0.2 May 25.1 Apr
India + 4.6 + 3.4 Apr + 8.3 May 8.8 2013
Brazil + 1.9 – 5.8 Apr + 6.4 May 4.9 Apr
Argentina – 0.2 – 4.1 Apr 7.1 Q1
Mexico + 1.8 – 0.6 Apr + 3.5 May 5.0 May

The DUN AND BRADSTREET US Business Economic Health Tracker looks good again in June  for US business, with 244,000 non-farm jobs added to the payroll. Overall US business strength was up 7.6 percent y-o-y, with an increase in both economic health and small business health.

IX. A Final Word

look-ahead

In spite of the figure recently put out by the US Bureau of Economic Analysis, there is no doubt that the US economy is on the up, and still coming. All signs are pointing to this.
World events, as indeed they must, continue to make headlines. Some of us get a little nervous. There’s nothing new here: it was forever thus. We’re used by now to certain groups of people thinking they know  of a better way for us all to live.
Europe is having a rough time keeping its engine moving from idle to accelerate. While the eurozone expanded by 0.9 percent y-o-y in the first quarter of the year – and by 2.3 percent in Germany – France is dragging it down. Something must be done, and with the most unpopular French President ever in office, the job falls on the shoulders of his new Prime Minister, Manuel Valls, whose progress will be followed with interest here.
China, in the meantime, is still surging ahead. Its forever-growing middle class is looking to buy its new car, and to fill its new home with all available consumer goods.
India will try to play catch up with China. With roughly the same population as China but a somewhat different political system and culture, it may take generations to see its people as materialistically comfortable as are those in China.
Brazil, as South America’s flagship, is doing none too well at the moment. Again, something must be done.
The final word, in spite of regional glitches, has still to be optimism.

 

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