MAPI: Information for Manufacturers

9/2/2010

MAPI European Industrial Outlook: Growth in Production But Pace of Expansion to Slow in 2011

The European economy is recovering from the severe recession of 2009, albeit gradually and slower than anticipated, according to the semiannual Manufacturers Alliance/MAPI European Industrial Outlook: 2010-2011 (ER-705), a report that analyzes 14 major industries.

The report separately analyzes two distinct regions: Western Europe and Central Europe. The former generally comprises the 16 countries that form the currency union (Eurozone), while the latter includes the three largest economies of Central and Eastern Europe (CEE3): the Czech Republic, Hungary, and Poland. All forecasts are based on a proprietary MAPI model.

Kris Bledowski, Ph.D., Manufacturers Alliance/MAPI Economist and report author, notes that forecasts for gross domestic product (GDP) oscillate around 1 percent growth for the Eurozone for 2010, and for approximately 2 percent growth in 2011. GDP growth in the non-euro economies should reach upward of 2.5 percent, led by Central Europe.

“Despite the headwinds of financial turmoil centered on refinancing sovereign bonds of southern European states, demand and production are on the mend,” he writes. “Robust growth in Asia and North America has underpinned European exports while selected stimulus programs reinforced domestic demand. Still, the financial sector is reluctant to lend and investors are weary of supplying fresh equity capital in the wake of the uncertain political economy of the European Union. European industry generally relies more on bank financing than do firms in the United States. Labor conditions continue to lag behind the recovery in production, spelling sagging productivity and a corresponding drag on competitiveness.”

In the Eurozone, the report predicts 10 of 14 industries will show growth in 2010, led by motor vehicles at 19.5 percent. Six of 14 industries are anticipated to grow in 2011, with machinery and equipment leading the way at 5.9 percent. Three industries—wood and products, nonmetallics and construction—are expected to decline in both years, although all will likely rebound from significant declines in 2009.

In Central Europe, 12 of 14 industries are expected to show growth in 2010, and 10 of 14 should expand in 2011. Computers and electronics production will experience some volatility in the next two years, advancing by 31.8 percent in 2010 but followed by a 2.1 percent decline in 2011. Electrical equipment is predicted to be the lead sector in 2011 with 11.2 percent growth.

Bledowski reports that six industries are in the accelerating decline (either early recession or mid-recession) phase of the business cycle in the Eurozone, while eight industries are in the decelerating decline phase (late recession or very mild recession). None is in the accelerating growth (recovery) or in the decelerating growth (expansion) phase of the cycle.

In Central Europe, eight industries are in accelerating growth; one industry, petroleum and coke, is in accelerating decline; five industries are in decelerating decline; and none is in the decelerating growth phase.

“While downside risks grew recently our forecasts are predicated on the absence of a double-dip recession in Europ,e so the resultant industrial recovery emerges as weak yet durable,” Bledowski said.

To purchase the report click on the link highlighted above.

Posted at 3:43 PM by 37584 | Category: Economic Forecast & Analysis | Permalink | Email this Post

9/1/2010

MAPI Analysis on ISM Index: Manufacturing Continues to Outperform General Economy

The following is an analysis from Daniel J. Meckstroth, Ph.D., Chief Economist for the Manufacturers Alliance/MAPI, regarding the Institute for Supply Management (ISM) Index for August 2010. The ISM Index was 56.3 percent, an 0.8 percentage point improvement over July 2010:

“Manufacturing has consistently outperformed the pace of growth in the general economy during this recovery,” he said. “For example, GDP increased only at a 1.6 percent annual rate in the second quarter of 2010 but manufacturing industrial production expanded at a 7.9 percent rate. Amidst evidence that the general economy is slowing to a crawl, this report indicates that manufacturing activity continues to grow at a healthy pace. Industrial firms are building inventories that were depleted during the recession and exports are surging in machinery and equipment and material industries.

“The strong growth in manufacturing production is partly catch up for a substantially more severe recession in the industry than the overall economy,” he added. “Also, the depth and length of the previous downturn built pent up demand for replacing big ticket consumer goods and repair and replacement in business. We expect manufacturing production to decelerate in the near term but still grow faster than overall GDP.”

Posted at 1:56 PM by 37584 | Category: Commentary | Permalink | Email this Post

8/30/2010

MAPI 2010 Fall Meeting Dates, Locations for Council Program

The Manufacturers Alliance/MAPI is pleased to announce the fall 2010 schedule for its peer education Council program. MAPI Councils provide a forum for the frank exchange of best practices across industry lines. Nearly 2000 senior executives currently participate in this valuable peer interaction network, from a wide range of manufacturing and related service companies.

This fall, our Councils will discuss a variety of topics, including:
• Best Practices for Grooming and Retaining High Potentials
• Making Sustainability Real to Your Employees at Ingersoll Rand
• M&A and the Empowered Business Unit Leader at Illinois Tool Works
• Coordinating a Global Supply Chain Strategy Across Multiple Business Units
• Latest ERM Initiatives and Developments at Air Products & Chemicals
• Data Privacy Controls at Harley-Davidson

For more information on our fall 2010 meeting series please click here, or contact Dave Augliera, Director of Sales at 703.647.5131 or daugliera@mapi.net.

Posted at 11:58 AM by 37584 | Category: Council News | Permalink | Email this Post

8/25/2010

MAPI Analysis on Durable Goods: ‘Disappointing’ Report and Rough Month

The following is an analysis from Daniel J. Meckstroth, Ph.D., Chief Economist for the Manufacturers Alliance/MAPI, regarding the durable goods report for July 2010:

“The advance durable goods report for July is disappointing, like most other statistics reported for last month,” he said. “Although total durable goods orders increased 0.3 percent, when transportation equipment orders are removed, orders fell 3.8 percent. A very large gain in new orders for civilian aircraft in July accounted for more than all the gain. Major declines in new orders for machinery, computer, and electrical equipment (including appliances) were disappointing. A primary indicator of equipment expenditures is nondefense capital goods excluding aircraft. New orders for this segment fell 8 percent in July, wiping out previous gains in May and June. Nevertheless, thanks to a fast start to the year, the indicator’s cumulative orders are almost 16 percent above year ago levels in the first seven months of 2010.

“Statistical evidence for July clearly show that the U.S. economy is decelerating in its pace of growth,” he added. “Business spending continues to grow at a faster rate than the overall economy due to strong profitability and excessive capital spending restraint during the recession. With the initial return to growth, aided by an inventory swing, there was immediate need for repair and replacement equipment. Now that it seems clear that the recovery is moving at a slow and uneven pace, the need for equipment is less pressing and the impetus for growth switches to one of enhancing productivity to cut costs.”

Posted at 11:37 AM by 37584 | Category: Commentary | Permalink | Email this Post

8/19/2010

MAPI Quarterly Economic Forecast: Recovery Weakens Amid Softer Economic Data

The U.S. economy has decelerated to a “slow growth mode,” primarily driven by consumers continuing to deleverage and rediscovering the need for thrift, according to a new report.

The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP) will expand by 2.9 percent in 2010, followed by 2.6 percent growth in 2011. The forecast is down slightly from the previously estimated 3.3 percent and 2.9 percent, respectively, in the May 2010 quarterly report. By supplying major assumptions for the economy and running simulations through the IHS Global Insight Macroeconomic Model, the Alliance generates unique macroeconomic and industry forecasts.

“There is a somewhat bleaker outlook amid weaker economic data and it clearly indicates a slow growth mode,” said Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist. “For instance, the numbers for June retail trade, inventories, and foreign trade have all come in weaker than the Bureau of Economic Analysis had estimated in the preliminary estimate of second quarter GDP growth. The homeowners’ tax credit has expired. Consumers are not spending as much. They are saving more and repaying debt, which is good for the long run but not the near term. The inventory swing is over and the benefits of the stimulus have basically run their course.”

There remain, however, positive economic signs, and the manufacturing sector should continue to hold its own.
“Expenditures are rapidly growing for business equipment, as are exports,” Meckstroth added. “Manufacturing will grow faster than the general economy as it relies less on consumer spending while disproportionately benefitting from strong demand for business equipment, exports, and basic materials.”

Manufacturing production growth is expected to show 5.7 percent growth in 2010 and an additional 4.7 percent growth in 2011.

Production in non-high-tech industries is expected to increase by 5.1 percent in 2010 and by 4.3 percent in 2011. High-tech manufacturing production is anticipated to improve at a much higher rate, with impressive 14.5 percent growth in 2010 followed by solid 13 percent growth in 2011.

The forecast for inflation-adjusted investment in equipment and software is for 14.2 percent growth in 2010 and for 11.6 percent growth in 2011. Capital equipment spending in high-tech sectors will also continue to improve. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by 12.7 percent in 2010 and by 7 percent in 2011.

MAPI expects industrial equipment expenditures to advance by 7.3 percent in 2010 before surging by 18.8 percent in 2011. The outlook for spending on transportation equipment is for a robust 54.6 percent increase in 2010 and 25.5 percent growth in 2011. These figures should compensate for the 51.5 percent decline in 2009.

Spending on non-residential structures is the lone GDP expenditure category expected to decline in each of the next two years, falling by 14.3 percent in 2010 and decreasing by 3.2 percent in 2011.

Exports and imports will both see gains. Inflation-adjusted exports are anticipated to improve by 12.5 percent in 2010 and by 8.1 percent in 2011. Imports are expected to grow by 11.8 percent in 2010 and by 6.7 percent in 2011. MAPI forecasts overall unemployment to remain high, averaging 9.6 percent in 2010 and 9.4 percent in 2011. Manufacturing is expected to see a hiring increase, albeit less than previously anticipated. The sector is forecast to add 277,000 jobs in 2010 and 373,000 jobs in 2011, although the numbers are down from 400,000 and 500,000, respectively, in MAPI’s May report.

The price per barrel of imported crude oil is expected to average $74.50 in 2010 before heading to $78.00 per barrel in 2011, well above the $59.40 per barrel in 2009.

Posted at 10:15 AM by 37584 | Category: Economic Forecast & Analysis | Permalink | Email this Post

8/18/2010

MAPI Renews Sponsorship to Issue Continuing Professional Education (CPE) Credits

The Manufacturers Alliance/MAPI has been approved through May 31, 2001, to continue its participation as a sponsor on the National Registry of CPE sponsors.

Status as a registered sponsor affirms MAPI’s commitment to adhere to standards for the delivery of high quality continuing professional education.

Founded in 1993, MAPI serves more than 500 member companies and its network of nearly 2,000 Council members through its core mission of executive education and practical economic research. MAPI’s Council program remains unique in its focus in its emphasis on peer-to-peer learning often led by its membership of senior level corporate and operations executives in best practices management.

In addition, MAPI publishes a number of annual benchmarking surveys and produces an exhaustive range of economic and legal research. Consequently its work is increasingly recognized and widely respected by its members, business analysts and national opinion leaders.

Posted at 3:28 PM by 37584 | Category: Council News | Permalink | Email this Post

8/17/2010

MAPI Analysis on Industrial Production: Strong Factory Sector Sidesteps Shaky Overall Economic Recovery

The following is an analysis from Cliff Waldman, Economist for the Manufacturers Alliance/MAPI, regarding the industrial production report for July 2010:

“While signs of slowing in both the general economy and in manufacturing have become apparent in recent months, the industrial production report for July shows that the shaky U.S. economic recovery has yet to fully impede the strong factory sector rebound,” Waldman said “The 1 percent increase in total industrial production for July was powered by a 1.1 percent increase in manufacturing output after a 0.5 percent contraction in June. The July output gain was given a sharp boost by nearly 9 percent growth in automotive product output, partially a result of dealer incentives and modest improvement in financing conditions. Industry data beyond the often volatile auto sector are reflective of the current dissonance between strong capital spending and weak consumer spending.

“Output growth in the broad business equipment category showed a gain of 1.8 percent powered by 1.1 percent growth in information processing equipment output,” he added, “but consumer non-durable production activity was flat, with significant contractions in such essential industries as food and clothing. As the fiscal stimulus fades and the sizable inventory adjustment moderates, the weakness in key categories of demand, particularly consumer spending and residential investment, has made prospects for continued economic recovery especially uncertain.

“ If U.S. and global economic growth slips below the pace needed for at least moderate job growth and sustainable demand then the strong factory sector recovery in the U.S. will certainly slow,” he concluded, “impacting many key trading partners in North America and elsewhere whose economic prospects are, to some extent, tied to U.S. manufacturing.”

Posted at 10:56 AM by 37584 | Category: Commentary | Permalink | Email this Post

8/16/2010

MAPI Latin America Outlook: Brazilian Factories Are Leading Strong V-Shaped Rebound

Latin America’s economies are showing a sharp V-shaped recovery from last year’s recession and, while growth is seen across the board, the drivers for the rebound differ, according to the Manufacturers Alliance/MAPI Latin America Manufacturing Outlook (ER-704e), a biannual analysis that examines the latest trends and provides a near-term forecast for 16 major industries.

The report, authored by Fernando Sedano, Ph.D., MAPI Economic Consultant, focuses on Latin America’s three largest economies—Brazil, Argentina, and Mexico—as these countries are responsible for more than 80 percent of the manufacturing output in the region. MAPI forecasts that overall manufacturing output in Latin America will grow 8.3 percent in 2010, a significant increase from the 5 percent advance forecast in the December 2009 report. The report anticipates that manufacturing production will decelerate to 3.7 percent growth in 2011.

In developing its forecast, MAPI utilizes data from national statistical agencies, assigning weighted average annual production indexes for each industry. The weights are determined by a country’s sector value added in U.S. dollar terms, using MAPI’s proprietary econometric model.

Brazil’s manufacturing production is expected to surge a sizable 11.5 percent in 2010, underpinned for the most part by vigorous internal demand, and to a lesser extent by robust exports. In Mexico, manufacturing production will increase a more moderate 5 percent in 2010. Sedano writes that a U.S.-driven manufacturing upturn in Mexico is leading to immediate job creation with positive potential implications for consumer spending, raising the odds for a stronger rebound than previously anticipated. Argentina’s manufacturers are expected to increase their output levels by 6.8 percent in 2010 as its economy benefits from higher commodity prices as well as strong economic activity in China and Brazil.

The report anticipates that during 2010 manufacturing production in Latin America will surpass pre-crisis levels.

“The performance of the automotive sector, which accounts for a large share of Latin America’s manufacturing, remains key to the outlook,” Sedano said. “Production is ramping up across countries and stimulating growth in a broad number of sectors. Food and beverages production continues holding up well and is in line with expectations. Machinery and equipment production—a major drag during last year’s downturn—is soaring as companies are investing to expand capacity to keep up with rising demand. As a result, industries such as basic metals and fabricated metal products, which supply the machinery and equipment and automotive sectors, are also expanding.”

The report sees growth in 15 of 16 industries in 2010 and growth in all 16 industries in 2011. Three industries—food and beverages; motor vehicles; and machinery and equipment—account for roughly 40 percent to 45 percent of the region’s manufacturing and, therefore, are most important to the forecast.

Food and beverages production, the largest industry in the region and one of the most stable, should grow by 4.3 percent in 2010 and rise by 3.6 percent in 2011. The automotive sector is forecast to improve by 22.5 percent in 2010 and further grow by 5.7 percent in 2011. The machinery and equipment industry should increase production by 26.7 percent in 2010 and by 5 percent in 2011.

Posted at 2:25 PM by 37584 | Category: Economic Forecast & Analysis | Permalink | Email this Post

8/12/2010

MAPI Introduces New Forecast Model for Manufacturing Outlook in India

The Manufacturers Alliance/MAPI has developed a new model to forecast annual output growth in 16 major Indian manufacturing sectors.

In The Manufacturing Outlook in India—Introducing a New MAPI Model (ER-703e), economist Cliff Waldman includes five input drivers taken from Consensus Forecasts (a product of Consensus Economics, London, United Kingdom), entered as assumptions to simulate the new MAPI model: growth in gross domestic product (GDP), investment, exports, imports, and industrial production.

After 10.7 percent Indian manufacturing growth in fiscal year 2009, MAPI anticipates a deceleration to 8.1 percent growth in FY 2010 (April 2010 to March 2011) before accelerating to 8.4 percent growth during FY 2011.

Fourteen of 16 sectors should show growth in 2010 and 2011, including three which are expected to show double-digit gains in both years: transportation equipment and parts by 17 percent and 15 percent, respectively; machinery and equipment by 12 percent and 10 percent; and beverages and tobacco by 11 percent in 2010 and by 12 percent in 2011. One other industry, paper and paper products, is expected to post a double-digit gain in 2011, by 10 percent.

“The machinery and transportation equipment sectors are expected to be the strong performers, partially catalyzed by India’s current intensive effort to engage in much-needed infrastructure development,” Waldman writes, “and after being flat in 2009, beverages and tobacco output is expected to resume the double-digit growth rate seen since 2004 as multinational beverage manufacturers continue to mine the Indian market.”

The report notes that over the short term, the Indian economy and its manufacturing sector confront a number of challenges. While the country has diversified its export markets away from the advanced economies and toward developing Asia, almost one-third of Indian exports are still sold in the United States and the Eurozone, two regions with shaky and uncertain economic recoveries. In addition, India is confronting a difficult inflation problem, possibly forcing the central bank to accelerate monetary policy tightening. This creates a downside risk for economic and manufacturing growth.

“Over the longer term, India shows much promise as a manufacturing and trade power,” Waldman said. “Its gross domestic savings as a share of GDP is approaching 40 percent, creating a strong domestic capital base to support investment-led growth which, in tandem with accelerating foreign direct investment, should support long-term industrial strength.

“As India augments its competitiveness in global goods markets, rebalances its sources of growth away from consumer spending, and makes a strong push in infrastructure improvement,” he added, “its growing manufacturing strength will likely be supported, at least over the next five to 10 years, by capital goods output.”

Posted at 1:23 PM by 37584 | Category: Economic Forecast & Analysis | Permalink | Email this Post

8/10/2010

MAPI Publishes Benchmark Survey of the Corporate Risk Management Function

A new benchmarking survey focuses on key aspects of the organization and operation of, and the challenges facing, the corporate risk management function today. The 76-page Manufacturers Alliance/MAPI Survey of the Corporate Risk Management Function (S-132) is a refinement and extension of a similar effort performed in 2006, and tracks the evolution of this increasingly important corporate responsibility. Information is based on survey responses from 91 companies.

Information is presented on the function’s structure, staffing, and budget as well as on related topics such as the involvement of the board of directors in risk management matters, risk analysis and qualification techniques, and the use of technology in the risk management department. In addition, the survey addresses the emerging topic of enterprise risk management program design and implementation. Finally, the report details respondent views on outsourcing certain aspects of the risk management function, the development and use of risk management metrics to evaluate function performance, and the hurdles facing such performance at present.

The survey is available (hard copy only) to MAPI member company executives for $75 each and to other purchasers for $150. To order, click on the link above or contact Jasmine Hopwood, Administrative Assistant, at 703.647.5132 (jhopwood@mapi.net).

Posted at 10:57 AM by 37584 | Category: New Survey | Permalink | Email this Post

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