Plus: Housing Starts Hit Four-Year High, Welding Machinery Industry to Grow through 2015, Material Handling Market Expands, and Jobless Claims Plunge to Five-Year Low.
The outlook for the global economy is improving, with major industrialized markets stabilizing and returning to growth, led by strong performance in business activity in the United States and United Kingdom, according to the Organisation for Economic Development and Cooperation (OECD).
The OECD’s composite leading indicators (CLI) of business activity among the 33 member nations climbed to a reading of 100.2 in November, with key indicators showing “signs of stabilizing economic outlook in most major economies.” The CLI is designed to flag turning points in economic activity, and has remained above the long-term average of 100 in recent months.
The strongest gains were in the U.S. and Britain. Indicators for the U.S. rose to 101 in November from 100.8 in October, while the U.K.’s CLI reading climbed to 100.7 from 100.5. The Paris-based OECD said these improvements “point to economic growth firming” in both countries.
In addition, economic indicators in China continued to edge up, reaching 99.7 in November from 99.5 in October, but still remained below the baseline average. India’s CLI climbed up to 97.9 in November from 97.8 the prior month. European economies are also posting better performance.
“Growth prospects for core euro zone countries France, Germany, and Italy as well as the bloc as a whole are beginning to stabilize…” Reuters notes. “The euro area’s indicator inched up to 99.5 from 99.4, while Japan’s reading held steady for the fourth month in a row at 100.2. The OECD says that turning points in these indicators tend to precede changes in economic activity by about six months.”
Housing Starts Hit Four-Year High
Homebuilding in the U.S. continued to rebound in December, with new housing starts for the year climbing to the highest level since 2008, which indicates better business performance for the construction industry and more hiring.
Privately owned housing starts rose to a seasonally adjusted annual rate of 954,000 last month, a 12.1 percent increase over November and 36.9 percent above the total for December 2011, according to the U.S. Department of Commerce. Moreover, December’s total is nearly twice the number of housing starts during the recessionary low in April 2009.
“A turnaround in housing is particularly significant because the sector was at the root of the nation’s financial crisis. Its return signals that a fundamental flaw in the economy may have been fixed,” the Washington Post explains. “In fact, many think the sector has already begun to help boost the nation’s output. Steady growth in home building has led to a rebound in construction hiring, allaying fears that workers who were laid off during the housing bust had become permanently unemployable.”
The number of building permits issued also rose in December, climbing to a seasonally adjusted annual rate of 903,000. This marked a 0.3 percent increase over November and a 28.8 percent gain over December 2011. For the year as a whole, builders started work on 780,000 new homes in 2012, an increase of 28.1 percent from 2011. The upward trend is expected to continue into this year.
“Spurred by record-low mortgage rates, home construction will probably keep making headway in 2013 as it recovers from the worst slump since the Great Depression,” Bloomberg News reports. “Consumers, buttressed by an improving job market, rising home prices and lower fuel costs, may also be able to move ahead even as the debate over the federal budget heats up and taxes cut paychecks.”
Welding Machinery Market to Grow through 2015
New research forecasts that the global market for welding machinery will expand considerably over the next three years, driven by the rise of wind turbine projects and off-shore and onshore oil and gas pipeline growth. The U.S. is likely to remain the world’s second-largest market for welding machinery and equipment, after Europe.
Demand for welding equipment and consumables will increase by 6.4 percent in the U.S. through 2015, according to a recent report from the Freedonia Group. Currently, the U.S. welding equipment market is valued at $5.2 billion.
The industry is rebounding after the global economic crisis led to a decline in demand by end-use markets in 2009, with aerospace, automotive, shipbuilding, and heavy machinery sectors severely affected by the weakened conditions.
The report projects that arc and resistance welding systems will be the dominant techniques through 2015 as demand for welding equipment and consumables rises. Additionally, the laser welding market will grow at a rapid pace, spurred by wider applications use and as new end-use sectors drive demand.
Healthy Year Ahead for Material Handling Industry
The material handling equipment industry is projected to have steady growth in 2013. However, looming problems with the debt ceiling and spending sequestration are causing significant concern among material handling manufacturers.
New orders for material handling equipment grew by 7.7 percent in 2012, the Material Handling Institute (MHI) reports. The market forecast projects a 6 percent growth rate in 2013 and a 10 percent growth rate in 2014, largely due to strength in housing, the automotive industry, and non-residential construction.
However, this recovery may lose momentum in coming months, as political uncertainty undermines business confidence nationwide. “We expect [U.S.] GDP growth of just 1 percent in both the fourth and first quarters,” Han Vandiver, executive consultant at MHI, told Material Handling & Logistics. “The fourth quarter [of 2012] was held back by corrections in defense spending and inventories, as well as a drag from Hurricane Sandy. The first quarter [of 2013] will be held back by the expiry of the payroll tax cut. We expect a gradual acceleration thereafter.”
Material handling trade growth took a hit last year, slowing by more than 50 percent as struggling foreign markets drove down export demand. Export growth declined from 26.2 percent in 2011 to 12.7 percent in 2012. Meanwhile, import growth dropped from 37.7 percent growth in 2011 to 18.7 percent in 2012.
Domestic demand, which grew by 10.6 percent in 2012, will grow 7 percent this year and slightly over 9 percent in 2014.
Jobless Claims Drop to Five-Year Low
New initial jobless claims fell sharply in the latest week reported, plunging to a five-year low. This suggests further improvement in the labor market, although the figures may have been somewhat skewed due to seasonal hiring factors.
According to the U.S. Department of Labor, unemployment claims for the week ending January 12 decreased by 37,000 to a total of 335,000, the lowest level since January 2008. The four-week moving average, which smoothes out volatility and provides a clearer long-term picture, dropped by 6,750 to 359,250.
“The level of claims is often quite volatile in December and January because of the holidays and seasonal hiring patterns. Economists often discount the report until the end of the month,” MarketWatch notes. “There’s been little change in the direction of claims since the fall, suggesting the nation’s labor market continues to expand at a modest pace. The U.S. has added, on average, about 153,000 net jobs a month since the start of 2011.”