Weekly Industry Crib Sheet: Midsized Manufacturers Expect Continued Revenue Gains This Year

September 16, 2013


Wind Energy Expected to Surge Through End of 2013

Producer Prices Rose 0.3 Percent Last Month

Export Prices Continue to Fall, But Imports Hold Steady

Jobless Claims Fall Due to Computer Error

Midsize manufactures are optimistic about revenues and employment for the rest of the year, according to buying consortium Prime Advantage. The group's 12th semi-annual Group Outlook Survey reveals that businesses are gaining confidence, despite concerns about federal regulations and fiscal policy uncertainties.

The vast majority of respondents -- 97 percent -- reported they expect revenues to be better than or equal to the first half of the year. Forty-two percent anticipate revenue growth will be higher in the second half of the year. Most attribute this to a surge in customer demand (55 percent) and new product launches (48 percent).

Capital expenditures are expected to increase at one-third of companies in the second half of the year. In addition, 47 percent expect to hire in the next six months -- the highest percentage since the recession. Fewer than 3 percent are planning layoffs.

Still, the majority of respondents (62 percent) believe fiscal policy uncertainties have had a negative impact on their business and the overall economy. Legislative and regulatory pressures are a concern for 47 percent of respondents. Of particular concern is the Conflict Mineral Rule, which 15 percent said was already impacting their business.

Wind Energy Expected to Surge Through End of 2013

Following record-breaking installation of more than 13 GW of new capacity last year, new wind installations fell drastically in the first half of the year. But industry experts expect that to change before the year's end, according to business intelligence firm SNL Financial LC.

Tom Kiernan , CEO of American Wind Energy Association, said at an AWEA seminar last week in New York that new production faced a "a horrendous drop-off" as a result of uncertainty regarding the renewal of the federal production tax credit at the end of 2012. "The pipeline dried up ... and that led to that dramatic drop-off in the first half of 2013," he said.

Only 5,000 MW of capacity have been installed since the start of the year.

However, the combination of a one-year extension of the PTC in early 2013 and new start-construction and "safe harbor" standards has many wind energy proponents optimistic of a rebound through the end 2013, continuing through 2015.

Phil Dutton, senior vice president of engineering services for GL Garrad Hassan, North America, said some are predicting an additional 13 GW of new capacity over the next two years.

But a lack of policy stability could perpetuate the boom-bust cycles that have plagued the industry of late. Kiernan told attendees that he does not have faith in Congress to pass substantial tax reforms this year. As such, AWEA will work to boost demand focusing on state renewable energy portfolio standards, while also fending off attacks from groups trying to chip away at the renewable power requirements, he said.

The group also plans to partner with other renewable energy trade groups in executing coordinated lobbying efforts.

Producer Prices Rose 0.3 Percent Last Month

The Producer Price Index

(PPI) for finished goods rose a seasonally adjusted 0.3 percent in August, according to a report released by the U.S. Bureau of Labor Statistics (BLS).

The reported August figure bested the median forecast of 0.2 percent by Bloomberg

, among other outlets, though the core measure, which excludes food and fuel costs, was unchanged. The BLS cited slow growth abroad for the bumpy PPI performance this year. The PPI experienced no change in July after rising 0.8 percent in June.

The PPI is one indicator the Federal Reserve uses to estimate inflation. Noting that the PPI result signifies low inflation for 2013, David Sloan, senior economist at 4Cast Ltd. in New York, told Bloomberg the numbers could rise if conditions improve. "We may see some modest pickup next year assuming the economy gains some momentum."

The Federal Reserve will meet Wednesday to decide if it needs to act in response to these figures.

Export Prices Continue to Fall, But Imports Hold Steady

U.S. export prices dropped again in August while prices largely held steady, showing weakness in global demand and in the American economy.

The U.S. Labor Department said on Thursday that export prices fell 0.5 percent, the sixth consecutive month of decline. The drop was largely due to a sharp decline (4.3 percent) in volatile agriculture prices, but non-agricultural exports also saw losses.

Economists polled by Reuters had expected export prices to rise 0.1 percent last month, buoyed by an improving European economy.

Import prices also defied analysts' expectations by remaining flat. Economists in the Reuters poll had expected a 0.4 percent gain.

Import prices rose 0.1 percent in July, but have trended lower most of the year. Petroleum import prices rose 0.5 percent, while non-petroleum prices dipped 0.2 percent, the seventh straight month of declines.

Jobless Claims Fall Due to Computer Error

The number of Americans filing for jobless benefits fell below 300,000, the first time since 2006. But the U.S. Labor Department said the sharp dip was the result of computer problems, and not a sudden reduction in layoffs.

Initial claims for the week of Sept. 7 hit 292,000 -- a 31,000 drop, the Labor Department said Thursday. But the department later noted that two states, which it did not identify, were in the process of upgrading its computer systems, which caused some claims to not be processed in time.

The Wall Street Journal

reports that a Nevada Department of Employment, Training, and Rehabilitation spokeswoman confirmed that her state sent in partial data, and that the California Employment Development Department was upgrading computer systems over the Labor Day weekend.

Most are expecting the figure to jump next week. Unemployment remains at 7.3 percent and the GDP grew at only 2.5 percent in the second quarter.


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