Manufacturing sector, thus laser industry, on the rise

Manufacturing is on the rise around the globe except in China. The March 1st Institute for Supply Management’s February factory index rose to 61.4 from 60.8 in January, the highest since May 2004 (readings greater than 50 signal growth). In the Euro region, manufacturing grew to 59 last month, the highest since June 2000. In the UK report, Markit Economics, the index held at 61.5 last month, the highest since 1992.The PMI in Japan was up to 52.9 in February from 51.4 in January. But in China the HSBC China Manufacturing PMI fell to 51.7, a seven month low as that country’s central bank raised interest rates three times in four months in an effort to cool-off inflation.

These statistics, even including those from China, are good news for the world’s industrial laser equipment suppliers. First it supports the very positive news generated by pubic company’s quarterly and annual reports. And for those counting on sustained manufacturing health to meet the guidance they issued for the next quarter, it produces an overall sigh of relief. The only tempering news is the price of oil rising to record heights as a consequence of the political turmoil in several oil-producing nations.

Industrial lasers are, for the most part, tied to the fortunes of the world’s manufacturing economy; proof of this is aptly shown by the speed with which the industrial laser revenues tanked at about the same time as manufacturing did. This is a dramatic change from the days when laser sales lagged manufacturing cycles by about six months. Part of this can be attributed to the side effects of today’s lean manufacturing practices where scheduling is tight and buying decisions are made on much shorter lead times.

The message is that laser equipment suppliers need to be paying closer attention to the MPI numbers so they do not get sandbagged as they did in December 2008 when order cancelations flowed in at an alarming rate, not allowing the suppliers time to reorganize and adapt.

Except for any lingering effects of the sky-high oil prices, it looks like clear sailing for the laser industry through the first half off this year. Several key suppliers have backlogs booked well into the second half from industries that made it through the recession in relatively good shape and therefore are well positioned to continue in that mode for several months.