Metals & MFG Outlook Newsletter June 2015

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Metals & Manufacturing Outlook – June 2015

I. Cover Story: U.S., EUROPE BOUNCING BACK
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE MANUFACTURING SCENE
IX. THE FINAL WORD


Publisher’s Statement

The current economy and reports coming out of industry associations and the government is what cautious optimism looks and feels like.

The economy (read: employers, mostly in the private sector) created 280,000 jobs in May and the unemployment rate went up – yes, up – from 5.4% to 5.5%.  While Walmart announced wage increases, and restaurants seem busy, consumers are still skittish and either saving or more likely paying down debt.

Low prices at the pump have abated with the national average for a gallon of gas now approaching $2.80 a gallon, so the oil dividend has moderated at the pump as we enter the summer driving season.  But mining and oil exploration are still in the doldrums, laying off workers used for exploration.  That has had a big ripple impact on the metals industry for several months because these big metal consumers aren’t consuming, just harvesting from what is already in the ground.

GDP projections are all over the board, from a tepid 1.9% for 2015 to over 4% for the last half of 2015 – a number not seen in over a decade.  We would be thrilled to see GDP at the top end of projections, but our money is on the bottom end of the scale – unless – consumer spending kicks in fairly soon.  But, wages have not kept up over the last decade either, particularly since the Great Recession.

We’re all ready for the boom times – wouldn’t that be exciting!  Right now, keep in close contact with your current customers and work hard to develop new ones.  Don’t bet that the status quo will tide you over.

When do we expect an economic pick-up?  It could be after the 2016 elections if a Republican enters the White House, although neither party has proven particularly effective at much of anything except running up a colossal national debt since 1999 and bickering for half a decade what to do about it.  That old can being kicked down the road is looking pretty shoddy, rusted, dented and beat up.

The answers are in customer relationships and the ebb and flow of the marketplace, not in or out of Washington D.C.  Shift your sales emphasis from waiting for the phones to ring to driving outbound calling like never before. If the economy does leap upward, you will have gained new ground.  If it stays stalled, you will be no worse off and you will have not wasted your time.

By the way, out of 60,000+ readers, we heard from just a handful and they were not happy campers.  Even as we prepare this newsletter with all the seemingly upward indicators, we wonder what we’re missing.  It just doesn’t feel right out there yet.

So, as you read this issue of Metals & Manufacturing Outlook, we’d still like to hear from more of you.  Send you comments, positive or pensive, to publisher@steelforge.com.  Until then, enjoy the ebbs and flows of each of the following sections.

Sincerely,

Lewis A Weiss

Publisher

 

 COVER STORY: U.S., EUROPE BOUNCING BACK

manufacturing The U.S. economy looks better in May than it did in April, with new orders and employment significantly on the up.  People are still rushing to buy new cars, and at a rate not seen for quite some time.

Europe had a relatively good month, certainly compared to what we’ve been used to seeing out of there. Even France is looking (a little) better, but not many sources are making much of a fuss about it for the present.

Over in Asia, Japan had a better May than April. India’s figures suggest good times for its manufacturing economy, but nobody seems to be hiring as there are doubts about sustainability. Prime Minister Modi will not be pleased about that; he has a lot of jobs to find.

Meanwhile, back at the China ranch, there was nothing sparkling about May’s performance, and we may as well get used to month-by-month changes in the Chinese manufacturing sector.

And Brazil? No improvement for the moment – and don’t expect much very soon.  It’s a real mess down there.

The Bureau of Economic Analysis came out with its ‘second’ estimate for the annual rate of Real GDP growth in the first quarter of 2015, placing it at minus 0.7 percent.  This has been put down, in large part, to higher imports, lower inventory investment, lower international property investment and weaker services spending. Coincident with this, residential investment was up from 1.3 to 3.0 percent and equipment investment from 0.1 to 2.7 percent.  The difficult weather in January, February and March plagued the Midwest and Northeast, while the West Coast port issues took a bite out of our economic engine, as predicted during several broadcasts of Manufacturing Talk Radio.

The PMI figure from the Institute of Supply Management was at 52.8 percent in May, 1.3 percentage points above April’s 51.5 figure, representing manufacturing expansion for the 29th  consecutive month and growth in the overall economy for the 72nd  consecutive month.

The Markit PMI for the U.S. manufacturing sector was at 54.0 percent in May, effectively unchanged from April’s 54.1 percent figure. Markit stated that new orders were increasing at the slowest rate since early 2014, but that employment was increasing at the fastest rate for six months.

The Dun and Bradstreet Economic Health Index for May showed that 211,000 new non-farm jobs were added to U.S. payrolls in the month. The business services segment continued to lead, with the construction sector showing an improvement. Small business health showed a drop of 0.4 percent.

D and B note a continuing year-on-year decline in the Business Health Index in May as it slipped 0.12 points from the April reading.

World crude steel production for the 65 reporting countries for the month of April 2015 was 135Mt, down 1.7 percent from the April 2014 figure. The capacity utilization ratio, at 72.5 percent, was down 3.2 percent y-o-y, and up 0.9 percent on March 2015.

U.S. crude steel production, for April 2015 was 6.5Mt, down 9.8 percent y-o-y as overall demand for steel remains slow despite a strong auto industry.

Primary Global Aluminum Production in April 2015 was 4.733 million tonnes. Of this total, 2.587 million tonnes, or almost 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 421,000 tonnes and North America 374,000 tonnes.

Here are the latest figures for U.S. new car and light truck sales for ‘the big eight’ for May 2015.

 

The ‘Big Eight’ May ’15 May ’14 YTD % change
General Motors 293097 284694 3
Ford 250086 253346 -1.3
Toyota 242579 243236 -0.3
FCA 198320 189650 4.6
Honda 154593 152603 1.3
Nissan 134779 135934 -0.8
Hyundai/Kia 126043 130994 -3.9
Volkswagen 34758 32163 8.1
Total new  cars and light trucks 1635090 1608693 1.6

 

The SAAR – seasonally adjusted annualized rate – is now at 17.8 million cars for the year.

THE ECONOMIST magazine, 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 the % change on the previous quarter, 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.

DATA FOR TAIWAN HAVE BEEN SUBSTITUTED FOR THOSE FOR ARGENTINA.

GDP Indl Prodn Cons prices Unemployt
United States +0.2 (qtr) +1.9 (Apr) -0.2 (Apr) 5.4 (Apr)
Canada +2.4 (qtr) +1.6 (Feb) +0.8 (Apr) 6.8 (Apr)
China +5.3 (qtr) +5.9 (Apr) +1.5 (Apr) 4.1 (Qtr 1)
Japan +2.4 (qtr) -1.7 (Mar) +2.3 (Mar) 3.4 (Mar)
Britain +1.2 (qtr) +0.6 (Mar) -0.1 (Apr) 5.5 (Feb)
Euro Area +1.6 (qtr) +1.8 (Mar) nil (Apr) 11.3 (Mar)
France +2.2 (qtr) + 1.3 (Mar) +0.1 (Apr) 10.6 (Mar)
Germany +1.1(qtr) -0.1(Mar) +0.5(Apr) 6.4 (Apr)
Spain +3.6 (qtr) +4.7 (Mar) – 0.6 (Apr) 23.0 (Mar)
India + 4.0 (qtr) +2.1 (Mar) + 4.9(Apr) 8.6 (2014)
Brazil + 1.3 (qtr) – 3.5 (Mar) + 8.2 (Apr) 6.4 (Apr)
Taiwan +2.7 (qtr) +1.1 (Apr) – 0.8 (Apr) 3.8 (Apr)
Mexico + 1.6 (qtr) + 1.7 (Mar) + 3.1 (Apr) 4.2 (Mar)

 

 NORTH AMERICAN PERSPECTIVE

North America USAThe Institute of Supply Management PMI figure registered 52.8 percent in May, 1.3 percentage points above April’s reading, representing expansion in manufacturing for the 29th consecutive month and growth in the overall economy for the 72nd consecutive month. Fourteen of the eighteen industries reported growth in May, in order,  Apparel, Leather & Allied Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Printing & Related Support Activities; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; and Chemical Products. The two industries reporting contraction in May are: Textile Mills; and Computer & Electronic Products.

Comments on the month from the manufacturing sector are as follows: Food, Beverage & Tobacco Products state that the economy is showing signs of improvement; Fabricated Metal Products point to automotive still being strong, but steel prices down due to overcapacity; Transport Equipment says business is steady and employment is up; Chemical Products say there is a strong spring demand in agriculture; Computer & Electronic Products say the strong dollar is hurting both Asian and European business; Machinery states that the West Coast port issues have eased and incoming imports are flowing again; Wood Products say that oversupply is continuing to tighten profit margins; Plastics & Rubber Products say that chemical pricing has bottomed out and is slowly rising again; Apparel, Leather and Allied Products find that sales are starting to stabilize and improve on prior months; and Miscellaneous Manufacturing finds continuing market challenges related to the oil and gas industries.  

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.

  • The ISM Employment Index for May, at 51.7 percent, is up 3.4 percentage points on April’s 48.3 reading. Growth was reported in fourteen industries, namely, in order,  Textile Mills; Printing & Related Support Activities; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Plastics & Rubber Products; Primary Metals; Paper Products; Miscellaneous Manufacturing; Chemical Products; and Transportation Equipment. The only industry reporting a decrease in employment in May is Computer & Electronic Products.
  • The ISM New Orders Index for May, at 55.8 perccnt, was up by 2.3 percentage points from April’s 53.5 percent reading, representing growth in new orders for the 30th consecutive month. Eleven industries reported growth in new orders in May, in order, Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; and Chemical Products. The only industry reporting a decrease in new orders during May is Petroleum & Coal Products. Six industries reported no change in new orders in May compared to April.
  • The ISM Production Index, at 54.5 percent in May, was down by 1.5 percentage points on April’s 56.0 percent reading,  representing growth in production for the 33rd consecutive month. Growth was noted in eleven industries in May, in order, Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Paper Products; Primary Metals; Transportation Equipment; Machinery; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Fabricated Metal Products; and Chemical Products. The only industry reporting a decrease in production during May is Computer & Electronic Products. Six industries reported no change in production in May compared to April.
  • The ISM Supplier Deliveries Index – to manufacturing organizations – slowed in May at a faster rate as the Supplier Deliveries Index registered 50.7 percent, or 0.6 percentage points higher than April’s 50.1 percent reading. A reading below 50 percent represents faster deliveries, above 50 percent means slower deliveries. Six industries reported slower supplier deliveries in May, namely, in order Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Paper Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Transportation Equipment. The five industries reporting faster supplier deliveries during May are: Machinery; Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; and Primary Metals. Seven industries reported no change in supplier deliveries in May compared to April.
  • The ISM Inventories Index, at 51.5 percent for May, is 2.0 percentage points higher than the 49.5 percent reading for April. This indicates that inventories are growing in May following a month of contraction in April. Seven industries reported higher inventories in May, Electrical Equipment, Appliances & Components; Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Primary Metals; Chemical Products; and Computer & Electronic Products. The four industries reporting lower inventories in May are: Textile Mills; Nonmetallic Mineral Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. Seven industries reported no change in inventories in May compared to April.

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 45.5 percent in May, 1.5 percentage points higher than April’s 44.0 reading, meaning that customers’ inventories are considered to be too low, but higher than in April.Two manufacturing industries showed too high customers’ inventories in May, namely Fabricated Metal Products; and Paper Products. Ten industries reported too low customers’ inventories in May, namely, listed in order, Petroleum & Coal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; and Food, Beverage & Tobacco Products.
  1. The ISM Prices Index registered 49.5 percent in May, 9.0 percentage points higher than in April, indicating a decrease in raw material prices for the seventh consecutive month. In May, 15 percent of respondents reported paying higher prices, 16 percent reported paying lower prices and 69 percent reported paying the same prices as in April. Five industries reported paying higher prices in May, namely, listed in order, Plastics & Rubber Products; Primary Metals; Computer & Electronic Products; Paper Products; and Miscellaneous Manufacturing. The seven industries reporting paying lower prices during the month of May, listed in order, are: Wood Products; Petroleum & Coal Products; Fabricated Metal Products; Furniture & Related Products; Machinery; Transportation Equipment; and Chemical Products. Six industries reported no change in prices in May compared to April.
Up in Price in May were:

Copper, Diesel Fuel, HDPE Resin and Nickel.

Down in Price in May were:

Aluminum (6); Corn, Scrap Steel (6); Stainless Steel (7); Steel (6);         and Steel  — Hot Rolled (7).

           In Short Supply in May: No commodities were in short supply in May

Note: The number of consecutive months the commodity is listed is    indicated  after each item.

  1. The ISM Backlog of Orders Index was at 53.5 percent in May, 4 percentage points higher than the April reading of 49.5 percent, indicating growth in order backlogs following two consecutive months of contraction. Of the 88 percent of respondents reporting, 26 percent reported greater backlogs, 19 percent reduced backlogs and 55 percent reported no change from April. Nine industries reported increased order backlogs in May, namely, in order, Primary Metals; Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Paper Products; Food, Beverage & Tobacco Products; and Machinery. The five industries reporting a decrease in order backlogs in May are: Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Transportation Equipment; and Furniture & Related Products.
  1.  The ISM New Export Orders Index was at 50.0 percent for May. The month’s reading indicates that the volume of new export orders was unchanged from April. Seven industries reported an increase in new export orders in May, namely, in order:  Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; Fabricated Metal Products; and Transportation Equipment. The five industries reporting a decrease in new export orders during May are: Primary Metals; Miscellaneous Manufacturing; Plastics & Rubber Products; Chemical Products; and Machinery. Six industries reported no change in new export orders in May compared to April.
  2.   The ISM Imports Index, at 55.0 percent in May, is 1.0 percentage points up on April’s 54.0 percent reading. This represents the 28th consecutive month of growth in imports. Ten industries reported an increase in imports in Amy, namely, in order: Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Machinery; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Chemical Products; and Computer & Electronic Products. The only industry reporting a decrease in imports during May is Plastics & Rubber Products.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI  was at 49.8 percent in May, up slightly from April’s 49.0 reading. Manufacturing production was in fact up in May for the first time in four months.  The Canadian automotive sector, however, is on track for its best year ever, with May’s sales, at 193, 397 cars and light trucks, the highest monthly figure ever recorded. Canada’s crude steel output for April 2015 was 1.03Mt, up 3 percent y-o-y.

Mexico saw its manufacturing PMI for May fall slightly from April’s 53.8 percent reading to 53.3 percent. Export sales, mostly to the U.S. and South America, were close to the three-year high seen in April, but domestic demand is growing more slowly, representing the slowest overall improvement in business conditions since October 2014. At the same time the job creation rate is up slightly from April’s. Mexico produced 1.51 Mt of crude steel in April 2015, down 2.6 percent y-o-y.

III.  U.S. FORGING INDUSTRY:  AMERICAN FORGING – ADVANCED MANUFACTURING – FORGING EQUIPMENT.

Forging anvil As a follow up to a previous article on American Forging and Advanced manufacturing, this article will deal with the present state of the actual forging equipment, equipment that is both controlled and advanced.

In days of yore it was the operator who was King of the forge. He it was who used his judgment and experience to make adjustments to the forging process. He controlled the energy going into each hammer blow, knew when to hit it hard and when to be relatively gentle. He surely had very little idea about the properties or the grain flow he was imparting to the piece, and the operator who took over from his shift might have had his own, different way of making the same part.

 

Today computerized energy controls are available on hammers to help the operator control the actual forging process. Shift-to-shift variations are a thing of the past, and programmable hammers are repeatable to about 1 percent of the requested energy. Today we know what the forging process does to mechanical properties and microstructure, and to obtain these properties we design our forging equipment and its controls accordingly.

MANUFACTURING TALK RADIO

mfgtalkradio-mtrWe want to encourage all our listeners to complete our survey and tell us about your reaction to the show.  During May, Manufacturing Talk Radio broadcast four shows and introduced a Senior International Correspondent.

On May 5, Brad Holcomb, committee chair for the ISM’s Manufacturing Report on Business® presented the April Purchasing Manager’s Index number of 51.5 and the details behind the report where Manufacturing Talk Radio broadcast live from the 100th Anniversary Conference in Phoenix, Arizona.

There is a substantial depth of information in each section of the Manufacturing Report on Business®, some of which is covered in Section I of this newsletter.  Mr. Holcomb is also a contributing author, along with Mr. Bruce Zagaris, of Business Ethics: A Guide to Surviving Storms, Challenges and Ethical Risks, a book by Professor Adriana Sanford, a clinical associate professor in the Department of Management for ASU’s W. P. Carey School of Business. Specializing in law, international management, leadership, and business ethics for managers, Sanford also teaches in W. P. Carey’s Supply Chain Management department.  This show can be heard at mfgtalkradio.com.

Dr. Sanford is also ASU’s Lincoln Professor of Global Corporate Compliance and Ethics to 85,000 students (as well as staff, and faculty, and the broader local and global community). Sanford is an APB Speaker for American Program Bureau: A Global Speaker, Celebrity & Entertainment Agency, as well as a Senior International Correspondent for Corporate Compliance and Ethics for Manufacturing Talk Radio who will make regular appearances on the live radio show.  Her previous shows can be heard at http://mfgtalkradio.com/category/prof-sanford/.

On May 12, Manufacturing Talk Radio broadcast live from MetLife Stadium, home of the New York Giants and New Jersey Jets, at the CFO Innovation Conference hosted by CFOStudio. Lives shows and a panel discussion on The Evolution of Manufacturing: Machine to Machine Technologies, Predictive Analytics, and More moderated by Greg Libertiny, Senior Vice President, Finance and Business Operations for Theorem, with panelists  Michael Eldredge, Founder of American Sensor Technologies, John W. Kennedy, NJMEP Chief Executive Officer, Ned Mavrommatis, I.D. Systems Chief Financial Officer and Treasurer, and Rob Weingartz, Arrow Fastener Vice President of Finance.

The third segment of Manufacturing Talk Radio’s 5-part series on Aerospace Across North America was broadcast on May 19 with Steve Colantuoni, Vice President of Marketing for The Tecma Group of Companies, Aldo Rodriguez, Director at Noranco, Inc. in Mexico, and Gale Thompson, renown industry expert and retired Vice President of International Operations for The Offshore Group who discussed Mexico’s vibrant and growing aerospace industry, the return of maquiladoras and Mexico Shelter Manufacturing Partnerships. To learn more, listen to the show here.

Senior International Correspondent Adriana Sanford also contributed to a May 19 discussion about how the confluence of international law and data privacy can impact U.S. companies doing business overseas or sourcing overseas, and multinational corporations conducting business globally.  This special segment can be heard here.

On May 26, Susan Lavrakas, Consultant to the Aerospace Industries Association (AIA) on Workforce Issues, Kevin Wolfe, General Manager of Powill Manufacturing and Michael Chrobak, Executive Vice President of Lead Generation for TexasOne participated in Part 4, Aerospace in the Southwest of the Aerospace Across North America series with hosts Tim Grady and Lew Weiss.  That show can be heard here.

V. EUROZONE

european economyMarkit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for May, at 52.2, was slightly up April’s 52.0 reading. There was growth in most nations, with Spain, the Netherlands, Ireland and Italy leading the way, and Germany and Austria showing modest expansion. Both France and Greece are still in contraction.

There was a modest accelaration in the expansion rate of the eurozone manufacturing sector. Manufacturing production expanded again in May, extending the current growth sequence to 23 months, and the rate of increase among the fastest seen in the past year. Trends in new orders and new export business both improved and output growth should be sustained in the coming months. Employment in the eurozone is up for the ninth consecutive month.

Production and new orders in Spain are rising at the quickest pace since 2007 and new export business showed its strongest gain in 15 years. Production and new orders in Italy are at their best in over four years. Solid job creation is taking place in Spain, the Netherlands, Italy and Ireland.

The downturn in production at French manufacturers went to 12 months in May, with decreases also in new orders and employment. There was a slight upturn in new export orders.

PMI High/low
Ireland 57.1 (55.8) 3-month high
Spain 55.8 (54.2) 97-month high
Netherlands 55.5 (54.0) 17-month high
Italy 54.8 (53.8) 49-month high
Germany 51.1 (52.1) 3-month low
Austria 50.3 (50.1) 9-month high
France 49.4 (48.0) 12-month high
Greece 48.0 (46.5) 1-month high

 

Crude steel production in Germany in April 2015 was at 3.6Mt, down 1.9 percent y-o-y; in Italy 1.9Mt down 8.5 percent y-o-y; in France 1.3Mt, down 9.9 percent y-o-y and in Spain 1.3Mt, up 6.4 percent y-o-y.

Russia’s crude steel production for April was at  6.1Mt, up 3.2 percent y-o-y, Ukraine’s was 1.9Mt, down 24.9 percent y-o-y.

There were two fewer sales days for automobiles in Western Europe in May, with new registrations in Germany at 256,400, down 6.7 percent y-o-y, but up 4.0 percent when adjusted for the days. Germany’s YTD registrations are up 3.6 percent to 1.3 million. France registered 143,059 cars in May 2015, down 4 percent y-o-y, but up 7.3 percent when adjusted. France’s YTD registrations are at 791,143 units, up 3.8 percent. Spain has resumed its government-backed scrappage  scheme, and in May registered 94,030 units, up 14 percent y-o-y. Under this scheme, owners who scrap their cars and buy a new one get 2,000 euros, half from the government, half from the car manufacturer. Spain’s YTD registartions are at 443,888 units, up 22 percent y-o-y.

The UK saw its Markit PMI at 52.0 percent in May, effectively the same as April’s figure. Manufacturing output was up, but based on a solid domestic demand for consumer goods, offsetting a rather dismal export performance. The current manufacturing expansion is now in its 27th month. New orders were up in May.

New car registrations are up 2.4 percent in May to 198,706 units, representing the 39th month of growth. YTD registrations are 1,119,072 units, a 5.7 percent y-o-y increase.

The JP Morgan Global Manufacturing PMI – a composite index produced by JP Morgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was at 51.2 in May, slightly up on April’s 21-month low figure of 51.0.. The rate of expansion in global manufacturing production speeded up slightly in May, based on a response to an improvement in new orders. The U.S. economy and those of a number of European countries were instrumental in this improvement, and Japan’s  production went into expansion following April’s decline.

VI   ASIA OUTLOOK

ChinaCrude steel production in Asia for April 2015 was at 92.457Mt, with China producing 68.9Mt, down 0.7 percent y-o-y; Japan 8.4Mt down 6.1 percent y-o-y; India 7.40Mt, up 2.1 percent y-o-y and  South Korea 5.80Mt, down 6.6 percent y-o-y. Taiwan produced 2.0Mt in April, up 8.0 percent y-o-y.

The HSBC China manufacturing PMI for May was up slightly to 49.2 from April’s reading of 48.9. The manufacturing output contracted for the first time in 2015 thus far, with total new business down for the third consecutive month. There is reduced overseas demand and new export work is down at the fastest rate since June 2013.

This is the third consecutive monthly deterioration in the health of China’s manufacturing sector, but the rate of deterioration remained only slight. Employment was down again in May, bringing the current sequence of job shedding to 19 months.

In April  2015, passenger vehicle sales in China gained (only) 6 percent to 1,565,588 units, and year-to-date sales gained 10 percent to 6,559,084 units. Just over 40 percent of sales are of locally-made models, with combined Japanese, German and U.S. models representing 50 percent of total sales.

In Japan, the Markit manufacturing PMI went from April’s 49.9 reading to 50.9 in May. There was an improvement in Japan’s manufacturing operating conditions, as witnessed by a resumption of growth in both production and new orders, following April’s contraction. Employment growth was sustained for the second straight month following a rise in customer demand, but new export order growth was weak.

All in all, there was improvement in the Japanese manufacturing sector.  Light passenger vehicle registrations in Japan for the first four months of the year, at 1,894,113 units were down 11.7 percent y-o-y.

India’s manufacturing (HSBC) PMI went from April’s 51.3 figure to 52.6 in May, a four-month high. The upturn gathered momentum in May, with production and new orders up at the fastest rate since January 2015. Manufacturing output is up for the 19th consecutive month, with consumer goods particularly strong, but there are also good results for capital and intermediate goods production. There is in fact improved demand from both the domestic and export markets.

In spite of the noted improvements, there has been no increase in employment. It seems that firms are not convinced that the upturn will be sustained.

VII.  SOUTH AMERICA

south-americaBrazil’s crude steel production for the month of April 2015 was 2.9Mt, a 4.4 percent y-o-y increase.  The  manufacturing PMI in Brazil dropped very slightly further from April’s 46.0 reading to 45.9 in May, the lowest reading since September 2011. There has been a deterioration for four consecutive months.

May saw a fall in new business, tough economic conditions, and the fourth consecutive monthly drop in new orders.  Brazil is suffering from high inflation. May saw the largest drop in employment for six years, and even a drop in exports (in spite of a devalued real.)

There may be a (Chinese) knight in shining armor coming to Brazil’s rescue: see below in The Manufacturing Scene.

VIII.  THE MANUFACTURING SCENE : THE INFORMATION GAME, OR WHO’S MAKING WHAT, WHERE, HOW MUCH, AT WHAT COST AND HOW MANY JOBS?

ManufacturingThere’s never been so much information disseminated about so much. From all corners of the globe come daily online bulletins about which company is putting up a factory in which corner of the planet to manufacture vacuum cleaners, kitchen sinks, forgings for myriad parts of an automobile, aluminum plants to make aluminum slabs, to make aluminum sheet, to bend and draw to put into trucks, 3D printing processes that are threatening to do almost anything and everything – hold it, they’re working on 4D printing already –  and about Mercedes making a car that will sell for a million dollars. The stream of information is endless, and what’s more it’s repeated again and again on website A through to website Z. And all the websites are falling over themselves to be the first to get you the information. But of course unless you’ve got nothing better to do than look for new information for the sake of looking for new information, then most of the stuff online will fly right past you. Here’s just a sample of some of the info that came through on just a few websites in the month of May:

  • Airbus and Boeing are both saying a lot about their new generation LEAP engines, how these engines will improve fuel efficiency, how many they will make before 2020, how many both Airbus and Boeing will need, etc. They told us everything except what the acronym stood for. They told us Toulouse was in France: where’s Philadelphia? A trip to Google tells us that LEAP stands for Leading Edge Avaiation Propulsion. What a comedown, such an ordinary turn of phrase.   Let’s face it, Airbus and Boeing are in an ongoing fight to be the biggest and the best.
  • Airbus recently came out and admitted an “assembly quality problem” was responsible for the crash of the A400M last month.
  • 3D Printing, additive manufacturing if you will, seems to be a panacea that will revolutionize not just manufacturing but life as we know it.  A recent French publication mentioned the manufacture of houses in China from recycled material for $5,000. Imagine what that would do to the world’s construction industries.
  • Manufacturing in the U.S. may not represent the percentage of GDP it did some decades ago, but it is still a very dominant world economic force. It has connections to services, suppliers, customers and governments, and even though many (low-knowledge) jobs have gone overseas, the U.S. keeps on generating innovation and innovative ways to do things. Companies and individuals must continue to be agile and flexible in gaining new skills, running experiments to improve methods and products and to move forward faster.
  • MAPI (Manufacturers’ Alliance for Productivity and Innovation) has regularly something to say about manufacturing and its place in the U.S. economy. They say the manufacturing outlook is still optimistic, but less than initially predicted. The collapse in oil prices, the strong dollar, excess inventory and a late 2014 surge in consumer spending (that depleted fuel savings) has prompted a changed forecast. Daniel J Meckstroth, PhD, MAPI’s chief economist, has lowered the group’s forecast for manufacturing growth from 3.7 percent down to 2.5 percent, compared to the 3.5 percent of 2014. The forecasts are now for growth rates of 2.5, 4.9 and 3.1 percent for 2015, 2016 and 2017 respectively.
  • MAPI suggests that modest big-ticket spending has resumed after a very weak first quarter. Industry sectors that coordinate with multiple supply chains such as primary and fabricated metals as well as machinery, all logged significant gains in April after ‘disquieting’ contractions in the early months of the year.
  • A Successful Apprentice Program is being conducted by  Siemens at its plant in Charlotte NC. The program is based on that used in Germany, and it sponsors about ten students each summer for six weeks training. Six or seven of these students go on to a full four-year apprenticeship program of 6,400 hours of on-the-job training and 1,600 hours of course work at a Community College.
  • Susan Helper – such an appropriate name – Chief Economist at the U.S. Department of Commerce, is to give manufacturing a priority and wants to ‘look after the little guys.’ It seems that 42 percent of the manufacturing supply chain is for companies with less than 500 employees. The word from Ms Helper is to pay the little guys what they’re worth to do the jobs they do so well.
  • ArcelorMittal, the world’s largest steelmaker, has opened a Memorandum of Understanding (MoU) with SAIL, the Steel Authority of India, to undertake the construction of an automotive steel producing unit under a joint venture agreement.
  • General Motors is to invest $1 billion in a Warren Technical Center, with the creation of 2,600 jobs, and a further $1.2 billion in its Fort Wayne truck plant.
  • Volvo plans to build its first U.S. plant in South Carolina, with first production in 2018, and a capacity of 100,000 cars per year. Long-term employment is estimated at 4,000. The company sold a record 466,000 vehicles in 2014.
  • China is set to do a lot of business with Brazil. Beijing will spend $1 billion plus on passenger jets from Brazil’s Embraer.  China will invest tens of billions of dollars in Brazil in energy, mining, aviation and the upgrading of dilapidated infrastructure. A further grand project involves China constructing a railroad over the Andes to the ports of Peru, thus avoiding the Panama Canal. China already has experience in this field, having built a railroad from Beijing to Lhasa, the capital of Tibet, which is to date the world’s highest railroad. Lhasa looms over 13,000 feet above sea level.
  • Brazil slipped from being the world’s fifth largest auto producer to the eighth, as sales plummeted and layoffs were announced in the industry.
  • Mexico is set to become an important automobile producer as General Motors, Ford, Toyota, Nissan, Mercedes and Audi invest a total of $11 billion in the industry. With this will come OEMs, Aerospace, Heat Treat shops and  Foundries and Forges. The number of vehicles produced in Mexico will increase by over 50 percent from 2014’s level to 5 million vehicles in 2022.
  • ABB, a large Swedish engineering company, will become the first automation company to open a robot manufacturing operation in the U.S., in Auburn Hills, MI. ABB has invested over $10 billion in the U.S. since 2010 on capital expenditure, acquisitions and local R&D. It has taken the local employment level from 11,500 to 26,300.
  • Meanwhile, Millenials are telling Managers….we need more training and development and position changes faster.

IX.  THE FINAL WORD

The rebound in both the U.S. and Europe looks real for the moment. There are always those who will want to talk down this recovery, so it has always been. The consensus seems to be that things have turned up, but that caution is in order.

The situation in China is a little more difficult to read, since we have less access to the hard data. China seems determined, however, to continue spreading its global influence, viz its recent forays into Brazil, a country desperately in need of help. Latest news is that Chinese hackers may have breached the records of four million former and current U.S. government employees. We might ask the question ‘What does China really want?’ Regardless, we can’t afford to ignore it.

The latest figures coming out of Asia suggest that India will, given time, become a manufacturing force. How much time will depend to a very large extent on the country pulling up its own socks.

GALLUP’s U.S. Economic Confidence Index averaged -7 for the month of May, down from -3 in April..  The Gallup Job Creation Index, just in, reached a new high of +32.

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