Thursday, April 19, 2012

Too early to abandon ship

Things are not looking so good for the home team these last few days, and members of the Red Sox Nation are burning up the sports talk show phone lines as the boys of summer can't seem to get started this year, now showing a losing record. On the 100th anniversary of the Titanic sinking -- and that of Fenway Park, ironically -- the fans are lining the railings ready to abandon ship.

As I listen to callers, who must not be veteran Red Sox fans who have learned to take the good with the bad, I marvel at how quickly they seem to have thrown in the sponge, judging that this will be a losing season, after only a dozen games out of 162.

I'm sensing the same from some of the business media who comment on activity in the U.S. manufacturing sector. For some reason, some scribes seem to be obsessed with recession and downturns. One says the U.S. manufacturing sector is showing signs of vulnerability, citing those pesky housing numbers that seem to upset Wall Street every month. (I commented on this in my last blog.) Others see danger in Europe, trotting out the latest grim news from the International Monetary Fund. Specifically pointing to troubles in Spain, another quotes a banker in that country: "Many people think that austerity is going to make the economic situation worse."

A few pieces of negative information has these writers donning life jackets and climbing over the ship's rail. We are not sinking, guys -- its only three months into the year.

I will say this, however -- while there is cause for concern about the health of the manufacturing economy here in the U.S. and some sectors abroad, there is also a level of confidence among industrialists. Most have their houses in order, having played it close to the vest in terms of staffing-up as the recovery progresses and increasing their capital expenditure budgets. This caution, at that time read by some analysts as negative, is now paying off and these companies are poised to make it through 2012 in good shape, for what many think will be a return to global prosperity in 2013.

Here at ILS I decided on a conservative approach in the 2012 forecast, and took a little heat for a modest single-digit growth in system revenues. I'm tweaking that number by a couple of percent in the mid-year report I will present in a June 12th Webcast. Check for details on this.

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.