BY JEFF REINKE
Those reliant upon the health of U.S.
manufacturing have learned (with good
reason) to be cautiously optimistic when
any positive economic news for this sector
is unveiled. So although the PMI remains
steadily above 50, purchasing concerns still
linger due to issues ranging from commodity pricing to healthcare costs.
Perhaps this is why, according to
Helmuth Ludwig, CEO of Siemen’s U.S.
Industry Sector, American manufacturers
are sitting on a historic $1.7 trillion in cash
reserves. So as reports and projections continue to reinforce growth and opportunity
in the industrial marketplace, distributors
can arm themselves with some of the
following data in providing commensurate
products and services.
MAPI: GDP and Manufacturing
Production Will Grow
The Manufacturers Alliance for Productivity and Innovation (MAPI) is predicting that
inflation-adjusted gross domestic product
will expand 2. 6 percent in 2014 and 3. 2
percent in 2015. These increases present a
lower level of growth than previous years,
but with less fluctuation moving forward.
Manufacturing production is expected
to fare better than the overall economy,
with anticipated growth of 3.1 percent in
2014 and 4.1 percent in 2015. In examining the five-year horizon, GDP growth
is expected to average 3.0 percent from
2014 to 2018 and manufacturing production should accelerate at a 3. 4 percent clip.
This growth, in part, will come from a
surge in the housing market. MAPI also
expects industrial equipment expenditures to advance 9. 6 percent in 2014 and
7. 8 percent in 2015. Aiding both of these
forecasts are projections for a steadily decreasing unemployment rate that will be
under six percent by 2018. In addition to
housing, MAPI identifies electric lighting
and aerospace as areas with the strongest
Innovation Driving Growth
A congressional report authored by the
Joint Economic Committee found that:
• Manufacturing exports are up 38 percent
in value since 2009.
• Manufacturing accounts for 12 percent
of the nation’s gross domestic product,
and nearly 12 million jobs.
• The manufacturing sector has added jobs
in 36 of the last 45 months.
ELFA: Investments Will Reach
The Equipment Leasing and Finance
Association (ELFA), which represents the
$827 billion equipment finance sector, is
projecting investment in equipment and
software to hit an all-time high in 2014.
According to a release highlighting the
association’s projections for 2014, “…
replacement demand will continue to drive
investment. Stronger economic growth will
boost businesses’ confidence and appetite
for capital expenditures. Until businesses
find they need to expand their capacity to
meet operational demands, their equip-
ment investment will be in replacing exist-
ing, aging, or obsolete equipment.”
ELFA also feels that overall economic
growth will help spur industry sectors like
housing, construction, transportation,
and energy. Manufacturers’ investment
plans will be supported by access to less
expensive, more rapidly available supplies
of oil and natural gas that are now being
sourced from within the U.S. This not
only keeps gasoline and heating prices in
check, but lowers the costs of producing
the petrochemicals and plastics used in a
variety of components, chemicals, coat-
ings, and other products.
In a continuing trend, ELFA is projecting
that seven out of 10 businesses will use
at least one form of financing to acquire
equipment, with those wanting to conserve cash taking advantage of continued
low short-term interest rates until 2015.
Although the Federal Reserve’s policy
agenda for 2014 will likely result in raising
long-term interest rates, they will remain
low enough by historical standards to
keep financing as an attractive option.
Automotive: Slower, But Stable
There have been a plethora of reports detailing the improved health of GM, Ford,
and others over the last couple of years.
Growth in the automotive sector continued in 2013, as can be seen by:
• An overall production increase of more
than 1.1 million vehicles, with total U.S.
sales of more than 15. 6 million. This
represents an increase of 7. 6 percent over
2012, and is the fourth straight year-over-year increase for the industry. These totals
are the best since 2007 when automakers
used big discounts to sell 16.1 million
• Governor Rick Snyder stating Michigan
manufactured more than two million cars
last year — a nation-leading number that's
more than double the 2009 total and the
most since 2005.
• A General Motors U.S. sales increase of
seven percent; Mercedes-Benz improved
by 14 percent.
• Chrysler finishing 2013 with an overall
sales increase of nine percent en route to
its best annual numbers in six years.
• Ford boasting its best numbers since
2006, with total sales up 14 percent.
• Toyota’s best year since 2007, with just
over two million vehicles sold in the U.S., a
7. 4 percent increase over 2012.
While all of this momentum could lead
many to believe that 2014 will be another
record-setting year for the automotive
sector, Jim Lentz, Toyota’s North American
CEO, explained in a recent press release
that the growth of at least one million
vehicles a year for four straight years was
driven by pent-up demand from people
who held on to their vehicles through the
recession. As that demand dries up, so will
these huge gains.
Analysts are expecting total U.S. sales
of between 16 – 16.5 million for 2014.
Most feel that this returns the industry
It’s said that numbers don’t lie. If this holds true then the industrial sector – especially the automotive and
chemical segments – will continue to provide opportunities for distributors in 2014.