TPT March 2020

G LOBA L MARKE T P L AC E

G LOBA L MARKE T P L AC E

Manufacturing industry reflects on 2019 In late December 2019, the US National Association of Manufacturers published details of the year’s fourth quarterly Manufacturers’ Outlook survey of its 14,000 members. Industry sentiment continued very much as it was reported in the third quarter, with around 68 per cent of manufacturers feeling positive for the future of their businesses. The inability to attract and retain a “quality workforce” was as much an issue as for the last two years, with almost 64 per cent reporting it as their top concern. The results were reported with the caveat that the survey was taken before the announcement of the US-Mexico- Canada Phase One agreement with China, and before the reauthorisation of the Export-Import Bank, both of which are expected to influence manufacturing mood through 2020. Commenting on the survey, NAM president and CEO, Jay Timmons, said: “In just the past week, our leaders have taken major steps toward bolstering manufacturers’ optimism and confidence,” adding, of the recruitment concern: “To tackle manufacturers’ number one challenge, the NAM is supercharging [its] workforce strategy in 2020 through Creators Wanted, our nationwide… campaign to inspire a new generation of modern manufacturing workers.” The latest US Bureau of Labor Statistics’ Job Openings and Labor Turnover (JOLT) survey showed that manufacturing averaged 483,500 open jobs during 2019, with a record number of 515,000 in June and 477,000 in October. The NAM’s “Creators Wanted” fund is a campaign to inspire students, and others, to consider a career in modern manufacturing. The campaign’s aims include a cut of 600,000 workers in the skills gap by 2025; to increase by 25 per cent the number of students enrolling for technical and vocational courses; to increase by 25 per cent the number of students enrolling in apprenticeships and re-skilling programmes; and to increase the number of parents who encourage their children to pursue a career in manufacturing – currently believed to be only 27 per cent. US business spending remained steady A review of industry analyses showed that new orders for US-made capital goods hardly rose during November 2019, while shipments fell, and, despite the recent slight easing of tensions with China, some regional US manufacturing surveys showed business confidence further subdued in December. Oren Klachkin, a US economist for Oxford Economics in New York, said: “We expect industrial momentum will remain

muted in 2020 amid an environment of sluggish global growth, persistent trade policy uncertainty, and subdued corporate profitability.” The US Commerce Department said orders for non-defence capital goods (excluding aircraft) was up by 0.1 per cent in November, with a surge in demand for electrical appliances and components offsetting a drop in machinery orders. Core capital goods orders rose 0.7 per cent on a year-on- year basis in November, but shipments of core capital goods dropped 0.3 per cent. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product (GDP) measurement. Core capital goods shipments rose by 0.7 per cent in October, a weak result which, economists felt, posed a risk to fourth quarter GDP growth. Third quarter results showed an increase in the economy of 2.1 per cent, and analysts’ estimates ranged between 1.5 per cent to 2.3 per cent for the final quarter of the year. Better news for the housing market, which recorded a steady rise fuelled by three interest rate cuts by the Federal Reserve. The Commerce Department said new home sales were up 1.3 per cent in November, with particular activity in the northeast and west regions. However, new home sales are drawn from only a small sample of houses selected from building permits. “We expect housing activity to remain supported, with lower mortgage rates… but don’t expect a further substantial pick- up in activity into 2020,” said Veronica Clark, a Citigroup economist. Business investment contracted for two straight quarters, with weak spending on equipment and non-residential structures, such as gas and oil wells, contributing to a manufacturing decline that stands to be exacerbated by Boeing’s decision to halt its 737 MAX production. Economists estimate that the “knock-on” disruption to the supply chain could cut first- quarter 2020 gross domestic product growth by at least half a percentage point. Overall shipments of durable goods were up 0.1 per cent in November, and durable goods inventories for the 16 th time in 17 months increased by 0.4 per cent. November’s orders for transportation equipment dropped 5.9 per cent, after October’s 0.1 per cent increase, though the end of the General Motors workforce strike increased orders for motor vehicles and parts by 1.9 per cent. Orders for non-defence aircraft and parts fell 1.8 per cent. The US Congress ended the year with the passing of a huge increase of defence spending which, said Chris Low, chief economist at FHN Financial Economists: “ensures defence spending will be robust next year.”

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MARCH 2020