Tuesday, April 3, 2012

Manufacturing a spring recovery

Memo to economists: What part of the supply/demand principle don't you understand?

I just put down my morning paper after reading an Associated Press news item, "Factory output, hiring go up," in which the good news is tempered by a separate report on construction spending showing that building activity declined again, "disappointing economists." On the same page, directly below, was a New York Times story, "Investors eye tons of homes," describing the investment opportunity to be gained from the massive inventory of pre-owned homes.

Really, economists? You know (or should) that excess inventory unbalances the supply/demand curve. So why would anyone invest in building new homes until that inventory is worked down?

On a more pleasant note, that AP article and one in the Washington Post trumpet the growth and health of the U.S. manufacturing sector, now at 32 straight months of expansion. The Post says slowdowns in China and weakness in European manufacturing are drags on those and world economies. Meanwhile, the U.S. perks along with an ISM (Institute of Supply Management index) of 53.4 for March and employment reaching 56.1 on the ISM index. Any ISM score above 50 shows expansion.

Next month at the AKL 12 meeting in Aachen, Germany, I will present my view of the U.S. market for industrial laser processing systems. I'll show my audience that while the US is in third place among the industrial laser installation sectors, we are serving a half-dozen key industries that have shown resilience in and after the Great Recession, and which offer great opportunities for continuing success in the near term. I'll back up my position with data such as that quoted above.

So economists: Wake up, smell the spring flowers, and rejoice a little in this Easter season. U.S. manufacturers understand supply and demand, so watch what they do, not just the new housing industry.

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