Manufacturers must address 3 emerging global trends.
Press Release Summary:
According to Dr. Chris Kuehl, economic analyst for FMA, U.S. manufacturers must factor in 3 trends to position themselves for post-recession economic growth. First is cautious consumer, which may limit automotive, appliance, and major electronics sectors. Second relates to consolidations taking place in various industries, making it mandatory for manufacturers to have footholds in Asia and Latin America. Third is movement toward unsettled financial market that carries over into other sectors.
Original Press Release:
Manufacturers Must Address 3 Emerging Global Trends When Recovery Begins, Says Industry Economist
Cautious Consumer, Consolidations, Unsettled Markets Cited
ROCKFORD, ILL., June 15, 2009 - U.S. manufacturers must factor in three emerging global trends to best position themselves for growth when the economy starts to emerge from a recession, which may begin as early as fourth quarter 2009, says the economic analyst for the Fabricators & Manufacturers Association, International (FMA).
"Admittedly, analysts are having a hard time settling on what the news of the day might mean," says Dr. Chris Kuehl in the latest FMA economic update newsletter Fabrinomics. "The latest data shows manufacturing levels in Britain have started to improve -- albeit by just 0.2 percent -- while the export data from Germany continues to decline. China is back on pace to grow by 7.5 percent, but Japan saw a slump in industrial production not seen in 20 years. The United States witnessed a spike in activity with the ISM index and there was a bump in durable goods orders, but at the same time there has been a continued slowdown in industrial demand.
"The question is whether we are transitioning to a solid growth period or to something flatter," Kuehl adds. "The best that can be predicted at the moment is that three trends are emerging."
The first trend is really a continuation of one that has dominated the past several months - a cautious and wary consumer, according to Kuehl.
"The recession may have started to fade in the past couple of months, but there has been considerable financial damage and it will be a while before the consumer jumps back in," he explains. "This limits the advance of many sectors - automotive, appliances, major electronics, furniture, and so on. It may be well into 2010 before the consumer really comes back to life."
The second trend relates to the consolidations taking place in various industries. "It hasn't been automotive alone that has seen this reduction and distribution," says Kuehl. "Major industries are no longer centered in the United States and Europe. This means that the pivot points are now in Asia and, in some cases, Latin America. That makes it mandatory for manufacturers to have footholds and contacts in these markets. That is a big challenge for larger companies, and a very complex situation for smaller ones."
The third trend is movement toward a more unsettled financial market that carries over into other sectors. "The banks and investment groups are getting back on their feet, but they will be changed institutions when they do recover," Kuehl says. "The old-school banker will be back in vogue, and that banker will have a host of government agencies looming over his shoulder. This means that capital flow will be inhibited, making it harder to expand and invest to accommodate the two previously described trends.
"Cash will remain king for a while longer, and there will be more growth through mergers than from organic expansion."
For manufacturers, the implications vary, all depending on where a company sits within a given sector, Kuehl concludes. "This is the dangerous moment when competitors make their moves and a company without some strategic sense of how to organize often finds itself constantly on the defensive - reacting to attacks by competitors. "Manufacturers are in a more challenging position, as they also have to puzzle out what their consumers are thinking if they want to keep servicing them."
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.
