Weekly Industry Crib Sheet: Optimism among Industrial Manufacturers Rises

Plus: Factory Orders Drop, Job Growth Slows and Fracking to Boost Water-Treatment Market.

Factory Orders Drop in March

New orders for goods produced in United States factories dropped 1.5 percent to $460.5 billion in March, the largest decline in three years, as demand for transportation equipment and a range of other goods slumped, the U.S. Department of Commerce reported last week.

The median projection of 61 economists in a Bloomberg News survey called for a 1.6 percent decline.

Transportation equipment, down two of the last three months, tumbled 12.6 percent in March on weak orders for civilian aircraft; non-defense aircraft orders plummeted 48 percent. Orders for motor vehicles and parts were flat in March after rising 1 percent in February. Excluding transportation, new orders increased slightly, marking the sixth increase in seven months.

Factory inventories rose 0.3 percent in March, and manufacturers had enough goods on hand to last 1.33 months at the current sales pace, the same as in February, according to the Commerce Department. Unfilled orders edged up 0.1 percent to $930.6 billion after a 1.2 percent increase the prior month.

Shipments, up 10 consecutive months, increased 0.7 percent to $466.2 billion in March. This followed a 0.1 percent gain in February.

Optimism among Industrial Manufacturers Rises

U.S. manufacturers were more optimistic in the first quarter of 2012, according to PricewaterhouseCoopers (PwC) last week. In its latest quarterly Manufacturing Barometer report, PwC reports that industrial manufacturers expect the U.S. economy to continue rising in 2012, with optimism about the global economy also improving moderately.

Based on interviews with 60 senior executives of large, multinational U.S. industrial manufacturers, optimism about the U.S. economy’s prospects over the next 12 months rose 40 points among industrial manufacturers, from 30 percent in Q4 2011 to 70 percent in Q1 2012. The gain follows considerable fluctuation in sentiment during the past year, including the historically low level of optimism of 5 percent, recorded in last year’s third quarter.

According to the PwC Manufacturing Barometer, optimism about the world’s economic prospects also increased, rising from 16 percent in Q4 2011 to 44 percent in Q1 2012. However, 45 percent of respondents remain uncertain and 11 percent are pessimistic.

“The positive gains in sentiment, primarily in the U.S., have been buttressed by higher forecasts for own-company revenue in 2012, as well as perceived decreases in barriers to growth,” Barry Misthal, global industrial manufacturing leader for PwC, said in an announcement of the findings. “Moreover, margins remained positive, aiding confidence levels and supporting plans for hiring and investment.”

Reflecting the overall rise in sentiment, more companies plan to hire employees in the year ahead, while a majority forecast increased investment spending. Moreover, companies are reporting improved profitability and lower concerns regarding barriers to growth, despite volatile oil and energy prices worldwide and ongoing concerns about legislative/regulatory issues.

Job Growth Slows in April

The U.S. had another month of slow job growth, adding 115,000 positions in April, according to the U.S. Department of Labor last week. Meanwhile, the unemployment rate edged down to 8.1 percent from 8.2 percent in March.

The U.S. was expected to add 163,000 jobs in April, according to a survey of economists polled by MarketWatch.

“The 115,000 jobs added in April were fewer than the 154,000 jobs added in March, a number the government revised up from its earlier estimate of 120,000. It also marked a sharp decline from December through February, when the economy averaged 252,000 jobs per month,” the Associated Press explains. “The percentage of adults working or looking for work has fallen to its lowest level in more than 30 years. Many have become discouraged about their prospects.”

Although the nation’s unemployment rate ticked downward, the 0.1 percent drop wasn’t necessarily a healthy sign for the job market. The rate fell mainly because more people gave up looking for work. Approximately 342,000 people dropped out of the labor force to mark the second consecutive decline, according to the Commerce Department. People who aren’t looking for jobs aren’t counted as unemployed.

According to separate hiring findings, Automatic Data Processing, Inc.’s latest National Employment Report found that private-sector employment rose by 119,000 jobs from March to April, with all of the growth coming in the service sector. Employment in the service-providing sector rose by 123,000 last month, while employment in the goods-producing sector dropped by 4,000 during the same period. Manufacturing employment fell by 5,000 positions, the first drop since last September.

Fracking to Boost Water-Treatment Market

Hydraulic fracturing (aka “fracking”), the controversial process of using high-pressure water to extract shale gas, will contribute to nine-fold growth for the water-treatment industry by 2020, Lux Research reported last week.

The water-treatment industry is expected to grow 28 percent annually to $9 billion over the next eight years as the field develops new technologies to treat fracking wastewater, according to the technology research and advisory firm’s new Risk and Reward in the Frack Water Market report (registration required).

While this expansion will likely spur “technology innovation and novel thinking” about water disposal and reuse, rapid overcrowding in the field is creating significant risk for new entrants, Lux Research suggests.

“Fracking represents a significant water treatment challenge – hydrocarbons, heavy metals, scalants, microbes and salts in produced and flowback water from shale gas wells represent a water treatment challenge on par with the most difficult industrial wastewaters,” Brent Giles, Lux Research analyst and the lead author of the report, said in a statement. “While the opportunity is large, only a few companies are really positioned to profit. Meanwhile, nearly every start‐up we talk to is going after frack water, regardless of their technology, and many of them are going to come to grief.”



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