Plus: Economic Indicators Look Promising, Conveyor Orders Increase and OSHA Releases Crane Compliance Guidance for Small Biz.
Japan Crisis Ripples through Global Supply Chain
The scale of the disaster still unfolding in Japan is stunning and will cause major problems for the country for a considerable period. Looking at the global picture, supply chains are disrupted for many firms, yet a new report “does not expect a significant impact on headlines economic data.”
“It is still too early to tell what the full impact of the March 11 earthquake, tsunami and growing nuclear crisis on Japan’s infrastructure, industrial base and economic growth will be — let alone the broader global impacts,” according to IHS Global Insight last week. “Nevertheless, past natural disasters and disruptive events [...] give us some idea of the likely economic effects (and timeline) of this horrific event.”
Japan’s slow economic growth over the past several years means the global impact from the earthquake and tsunami earlier this month could be relatively minor, Nariman Behravesh, IHS chief economist, wrote in his analysis.
Most disruptions will be related to trade flows, but because Japan’s exports and imports comprise a small share of gross domestic product, the impact will likely be limited.
Given the halt in Japanese industrial activity, the effect on global supply chains could be significant, particularly in the automotive and electronics sectors.
“One of the crucial areas is that Japan remains a major source for automotive electronics, even for cars built in the U.S.,” the Los Angeles Times says, and “auto factories and semiconductor plants are huge users of electricity and don’t like power interruptions.”
On Thursday, General Motors Co. became the first U.S. automaker to close a factory because of the crisis in Japan, temporarily shutting down a truck plant in Louisiana because it could not get enough Japanese-made parts. “That it was G.M. — rather than one of the Japanese automakers, which depend on many parts from their home country — that succumbed first to the shortage shows how much the industry depends on far-flung suppliers,” the New York Times explained on Thursday. “But Toyota and Honda have shut their plants in Japan until next week as they try to repair damaged facilities, assess the state of their suppliers and determine how to restart production safely.”
However, some Japanese manufacturers are reporting progress in restarting their plants, the Wall Street Journal says (subscription required). Auto manufacturers expected to begin reopening facilities Thursday through Monday, although a number remained damaged.
In addition, “Japan’s grip on the global electronics supply chain is causing particular concern,” Reuters explains. According to CLSA Asia-Pacific Markets (via Bloomberg BusinessWeek), Japanese factories produce about one-fifth of the world’s semiconductors and 40 percent of its electronic components.
Early estimates suggest the overall negative impact on global growth in 2011 will be between 0.1 percent and 0.2 percent, with a correspondingly small boost to growth next year, according to Behravesh.
Leading Economic Indicators Improve Again
The Conference Board’s leading economic index (LEI), a forward-looking gauge of U.S. business activity, improved again in February, increasing 0.8 percent to 113.4 following a 0.1 percent uptick in January and a 1 percent gain in December. Released last week, the latest figures suggest that most segments of the economy are strengthening at an increasing pace, offsetting losses in other areas.
“With February’s large gain, the U.S. LEI returned to the strengthening upward trend that began last September,” Ataman Ozyildirim, an economist for the Conference Board, said in an announcement of the findings. The LEI is pointing to an economic expansion that should gain more momentum in the coming months. In February, improvements in labor markets, financial components, and consumer expectations more than offset falling housing permits.”
Eight of the 10 indicators tracked in the LEI improved last month, led by the interest rate spread, labor market conditions and consumer confidence. Only two indicators declined in February: new housing permits, which lowered the LEI by 0.22 percent and new manufacturing orders, which lowered it just 0.04 percent.
Meanwhile, The Conference Board’s coincident economic index — a measure of current business activity through payrolls, incomes, sales and production — rose 0.2 percent to 102.5 in February. The gain followed 0.3 percent increases in both January and December. The lagging indicators index, which tracks business lending, unemployment, service prices and other factors, rose 0.2 percent in February after a 0.3 percent decline in January and a 0.2 percent gain in December.
The LEI “has grown relatively steeply since mid-2010. Although this index implies that the U.S. economy should continue to expand at a moderate pace, it doesn’t take into account a big negative shock from March: Japan’s natural disaster,” the Atlantic reports. “The question isn’t really whether it will have a negative impact, but how significantly it will dampen economic activity. Moreover, if tensions in the Middle East continue to push up gasoline prices, then consumer sentiment may also fall, which would also hurt the recovery.”
Conveyor Orders up in 2010
According to a report this month from the Conveyor Equipment Manufacturers Association (CEMA), North American conveyor shipments in 2010 were up 9.6 percent over the previous year, climbing to $6.64 billion from $6.06 billion in 2009.
The association estimates that the value of new orders rose to $6.85 billion in 2010, a 19.96 percent increase over orders in 2009. Representatives from CEMA member companies expressed optimism about 2011, forecasting an 8 percent increase in conveyor shipments this year.
CEMA also reported that its Booked Orders Index for January dropped 18 points, an 11 percent decrease from December’s index reading of 159. However, conveyor orders for the month remained 41 percent above the level for January 2010, when the index stood at 100.
Booked orders in January totaled 239 for bulk-handling equipment and 108 for unit-handling equipment, while the 12-month index for booked orders rose to 136, a 3 percent increase from December’s 132.
Crane and Derrick Compliance Guidance Available for Small Biz
The Occupational Safety and Health Administration (OSHA) has issued the Small Entity Compliance Guide for Cranes and Derricks in Construction to help businesses comply with the recently published Cranes and Derricks in Construction Final Rule.
OSHA published the rule last August to reduce worker injuries and deaths associated with the use of cranes and derricks in construction. The new small business guide, issued this month, is divided into chapters that correspond to sections of the standard, and accompanies other OSHA compliance materials on crane-related topics available on the agency’s website.
“Over the past four decades, we’ve continued to see a significant number of worker injuries and deaths from electrocution, crushed-by and struck-by hazards while performing cranes and derricks operations,” David Michaels, assistant secretary of labor for OSHA, said in a statement. “This guide will help employers understand what they must do to protect their workers from these dangerous, sometimes fatal incidents.”