Plus: Factory Orders Climb, Unemployment Drops and New Law has Supply Chain Implications.
U.S. Automakers Report Strong 2011 Sales
American automakers posted strong sales in 2011, finishing the year with healthy profits as consumer confidence reached an eight-month high in December. According to AutoData Corp., U.S. auto sales rose 10 percent to 12.8 million in 2011, the best year since 2008, when General Motors Co. and Chrysler Group LLC sought U.S. bailouts.
“Automakers ended 2011 with a bang in December as most major automakers reported sales increases for the month, putting the industry on track for a 10 percent sales increase,” the Detroit Free Press reports. “Auto executives said consumers once again flooded showrooms towards the end of the month, especially after Christmas, giving the industry confidence that a broader industry recovery will continue well into 2012.”
Chrysler Group posted a 26 percent year-over-year sales increase for 2011, while Ford Motor Co.’s sales climbed a more modest 11 percent. GM saw its sales rise more than 13 percent for the year, according to Autodata, and Nissan North America’s sales rose nearly 15 percent, its best year ever.
“But Japanese automakers Toyota and Honda didn’t share in the good news, as they struggled with inventory shortages in 2011 after devastating natural disasters disrupted supply chains,” the Houston Chronicle notes. “Both companies posted sales declines of about 7 percent for 2011.”
According to the latest annual forecast from Edmunds.com, car sales are expected to improve to an estimated 13.6 million vehicles in 2012.
“With annual sales still far below the level achieved prior to the last recession, there’s plenty of indication that pent-up demand is far from spent,” Dr. Lacey Plache, chief economist at Edmunds.com, said in a statement. “Improved selection and loosening credit conditions are helping to entice the millions of buyers that are waiting to jump back into the market.”
Factory Orders up in November
New orders for U.S. manufactured goods increased 1.8 percent in November, following a 0.2 percent decrease in October, according to the U.S. Department of Commerce last week. The total value of new orders rose by $8.2 billion to a total of $459.2 billion, largely due to surging demand for aircraft and other transportation products.
“The first increase in three months boosted hopes that a recovery in manufacturing will help support growth in the overall economy,” TheStreet.com reports. “New orders for both durable and non-durable goods increased, supported by higher demand for transportation equipment and energy products, including coal and petroleum.”
New orders for manufactured durable goods, up four of the last five months, rose 3.7 percent to $207.1 billion in November, following a 0.1 percent increase in October. Transportation equipment posted the largest gain, climbing 14.7 percent to $54.4 billion. Orders for primary metals increased 4.6 percent to $27.6 billion, while machinery orders rose 0.4 percent to $31.8 billion. Orders for non-durable goods climbed 0.3 percent to $252 billion.
Goods shipments, up six consecutive months, increased $0.1 billion to a total of $455 billion, led by primary metals. Despite these gains, demand for capital goods (excluding transportation and defense equipment) declined by 1.2 percent in November, following a 0.9 percent decrease in October and marking the largest drop in 10 months.
“An Obama administration tax credit may have contributed to an increase in business equipment demand in the months before the end-of-the-year deadline,” Bloomberg News explains. “A provision allowed companies to depreciate 100 percent of capital outlays in 2011 and 50 percent in 2012. [The latest] factory order report showed that effect may be waning.”
Unemployment Drops to 8.5 Percent
The U.S. labor market added 200,000 non-farm jobs in December, driving the national unemployment rate down from 8.7 percent in November to a nearly three-year low of 8.5 percent, the U.S. Department of Labor reported Friday. December marked the fourth consecutive month of decreases in unemployment.
“The increase in jobs last month — the fourth biggest gain of 2011 — suggests the U.S. is entering the new year with renewed vigor,” MarketWatch notes. “Faster hiring puts more money in the hands of consumers and usually leads to an increase in spending. That’s a big deal since consumer spending accounts for as much as 70 percent of economic growth.”
The largest gains last month were in the transportation and warehousing industry, which gained more than 50,000 jobs, while professional and business services added 42,000 jobs. Manufacturing grew by 28,000 jobs in December, following four months of relatively little change in employment.
More than 1.6 million jobs have been added to the U.S. labor market over the past 12 months, averaging 142,000 new jobs each month since June. However, the economy needs to grow by at least 250,000 per month for several years in order to push the unemployment rate down to pre-recession levels.
“Analysts cautioned that big risks remained in front of the long, slow jobs recovery, including tensions with Iran over its nuclear problem, which could lead to higher oil prices, and Europe’s public debt crisis that has pushed the 17-nation eurozone to the brink of recession,” Agence-France Press reports. “Both could hamper U.S. growth.”
Defense Authorization Act to Have Supply Chain Effects
When President Obama signed the 2012 National Defense Authorization Act on Dec. 31, the bill passed into law new rules that will affect suppliers and others throughout the supply chain, including a requirement that suppliers to the Department of Defense (DoD) and the Department of Homeland Security (DHS) detect and avoid counterfeit parts in the military supply chain.
“The bill establishes guidance for defining and dealing with fake electronic parts in the supply chains of weapons systems and related defense IT, and puts suppliers and contractors on the hook,” Supply & Demand Chain Executive explains. “The DoD must adopt policies and procedures for detecting and avoiding counterfeit parts in its own direct purchases, and for assessing and acting upon reports of counterfeit parts from DoD officials and DoD contractors.”
The new law also requires debarment of contractors who fail to detect and avoid counterfeit parts or who do not exercise adequate due diligence.
“Contractors are now prohibited from charging the DoD for the costs of rework or corrective work to remove and replace counterfeit parts,” according to Material Handling & Logistics. “Moreover, defense contractors are now responsible for the remedies required after the use or inclusion of counterfeit components they may have accidentally supplied, regardless of where the counterfeit entered the supply chain.”
In its analyses, Federal Computer Week uncovered nine ways the 565-page bill could affect defense IT and acquisition communities — “in some cases, quite profoundly.” For example, the defense bill has a number of measures targeting cyber security, including training and education, and also calls for the use of “trusted suppliers” whenever possible.