FMA lists economic factors that matter most to manufacturers.
Press Release Summary:
According to Dr. Chris Kuehl, economic analyst for FMA, manufacturing executives should monitor 5 key indicators to best plan their companies' growth strategies. Factors include actions of Federal Reserve, employment trends, manufacturing orders for durable goods, consumer expectations about economy's performance and their own actions, and inflation. Economist also noted it is important to look at wage-driven inflation, as this is the most dangerous type.
Original Press Release:
What Economic Factors Matter Most To Manufacturers?
FIVE INDICATORS CRITICAL, SAYS INDUSTRY ECONOMIST
ROCKFORD, IL, August 1 - Manufacturing executives bombarded with the constant barrage of business assessments, financial forecasts and economic minutia should especially monitor five key indicators to best plan their companies' growth strategies, asserts an industry expert.
"Much of the information serves little function other than to confuse," says Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association, International (FMA). In the current FMA economic update newsletter Fabrinomics, Kuehl suggests companies cut through the clutter and basically focus on:
1. The actions of the Federal Reserve. "Review all actions, not just its decisions about what the interest rate should be," Kuehl says. This includes items such as the Fed's determination of member banks' reserve ratios, measurement of real money supply and decisions made about bank access to capital.
2. Employment trends. This means not just the jobless rate, but the distribution of jobs in terms of growth sectors, shrinking sectors and demographics. "The unemployment rate tends to be a blunt instrument for measuring the economy, as it fails to provide information about who is getting work, and where," he says. "The information needed is deeper than that, as 95 percent of the eligible population is employed. What makes up the ineligible and where are they?"
3. Manufacturing orders for durable goods. These are the goods that last longer than three years and are also referred to as capital goods. According to Kuehl, the purchases of these products are better indicators of where people and businesses think they will be in the future, as it often takes a long time to pay for them and thus they become investments in the future.
4. Consumer expectations about the economy's performance and their own actions. "Given that 80 percent of the U.S. economy is fueled by consumer spending, the attitude they have is critical to projecting what happens next," he says. "The consumer is notoriously fickle and changeable, and rarely answers questions accurately or honestly, so it becomes important to focus on actions as opposed to words."
5. Inflation - both the headline rate and the core rate. "The headline rate is the one we all confront every time we buy gas or groceries these days, but this isn't the rate that determines the actions of the Fed or other policy makers," Kuehl adds. "The price of food and fuel are too volatile to plan around and are thus eliminated when looking long term. The key inflation rate is the core rate - one that eliminates the highly changeable prices to see what the long-term trends might be."
The economist also noted it is important to look at wage-driven inflation, as this is the most dangerous type of inflation and the hardest to deal with. Wage-driven inflation is what saddles an economy with stagflation if left unaddressed.
Based in Rockford, Ill., the Fabricators & Manufacturers Association, Intl. (FMA), is a professional organization with more than 2,300 members working together to improve the metal forming and fabricating industry. Founded in 1970, FMA brings metal fabricators and fabricating equipment manufacturers together through technology councils, educational programs, networking events, and the FABTECH International & AWS Welding Show. FMA also has a technology affiliate, the Tube & Pipe Association, International (TPA), which focuses on the unique needs of companies engaged in tube and pipe producing and fabricating.
