Speed changers, drives and gears buck trend
Staff -- Plant Engineering, 6/1/2005
Price, demand and margin trends moved in the same direction for most of the 19 industries in our factory tools and equipment market basket. First of all, average product prices accelerated. The strained budgets that plant engineers manage can testify to that. Only three bucked this inflation trend: saw blades and handsaws, pumps and pumping equipment, and instruments for electrical testing.
Second, end-market strength for the industries that buy factory equipment continued to improve. From December 2004 to March 2005, 17 of 19 industries in the PLANT ENGINEERING factory equipment index saw their end markets pick up. Demand headed the wrong way for only two — motors and fluid counting devices. But even then, the shift was so miniscule as to be barely noticeable.
Third, the cost to manufacture either outran or kept pace with prices. As result, production margins were little changed or improved a bit from three months ago. The mechanical power transmission equipment and the speed changers, drives and gears industries were the two exceptions where failing margin grades becoming C and B grades, respectively.
Consider speed changers, drives and gears where average product prices exploded 2.9% from February to March. That was the biggest one-month jump in at least 10 years. Plus, margins got a big boost as industry spending on manufacturing activities fell $1.39 per $100 of market-valued product sold. All told, suppliers have done a good job of passing along inflation woes. For each 1% hike in manufacturing costs, industry prices have increased 0.86%. The portion of costs that hasn't been passed through to buyers has been more than offset by productivity gains and reductions in overhead.
| Factory Equipment & Tools | Average Product Prices (1) % Change During 12 Months Ending | Direct Manufacturing Costs (2) and Margins Grade | Growth in U.S. End Markets (3) % Change During 12 Months Ending | |||
| Industry | 3 months ago | Current month | Costs are | Grade | 3 months ago | Current month |
| Hand & edge tools (except saws) | 0.70 | 1.32 | stable | F | 2.01 | 2.67 |
| Saw blades & handsaws | -0.14 | -0.41 | rising | F | 2.93 | 3.34 |
| Metal hardware | 1.34 | 2.07 | rising | F | 3.74 | 3.82 |
| Mechanical power transmission equip. | 2.13 | 3.49 | rising | C | 12.77 | 12.92 |
| Conveyors & conveying equipment | 1.71 | 3.01 | rising | F- | 6.20 | 6.76 |
| Cranes, hoists & monorail systems | 1.35 | 1.73 | stable | A | 2.33 | 3.40 |
| Industrial trucks (forklifts) & stackers | 1.29 | 1.70 | rising | F | 2.09 | 2.72 |
| Metal cutting machine tools | -0.23 | 0.34 | stable | F | 6.53 | 6.89 |
| Cutting & machine tool accessories | 0.49 | 0.63 | stable | F | 8.16 | 8.67 |
| Power-driven handtools | 0.31 | 0.49 | stable | F- | 3.52 | 3.98 |
| Welding & soldering equipment | 1.35 | 2.60 | rising | D | 5.57 | 5.91 |
| Pumps & pumping equipment | 3.56 | 2.63 | stable | B | 4.60 | 5.05 |
| Air & gas compressors | 0.95 | 1.38 | stable | D | 5.69 | 6.26 |
| Speed changers, drives & gears | 1.92 | 2.57 | rising | B | 12.77 | 12.92 |
| Power & specialty transformers | 0.18 | 0.81 | rising | D | 4.21 | 4.22 |
| Motors & generators | 0.47 | 0.97 | rising | D | 6.69 | 6.51 |
| Industrial process controls & equip. | 1.97 | 2.06 | stable | A | 12.62 | 13.45 |
| Fluid registering & counting devices | 2.44 | 2.72 | stable | B | 2.98 | 2.93 |
| Instruments for electrical testing | 0.23 | 0.22 | stable | A | 6.82 | 7.69 |
| (1) Average product price changes are calculated from the producer price index for each 6-digit NAICS (North American Industry Classification System) industry from the U.S. Bureau of Labor Statistics. (2) Analyses of each industry's direct manufacturing cost changes are from Thinking Cap Solutions Inc.'s proprietary Leveraged Metric Intelligence (LMIQ) economic model. The "grade" indicates that recent price/cost changes have produced record high (A+) margins to average margins (C) to record low (F-) margins for the average producer in an industry. Grades of A to A+ mean plant engineers may be able to strike a better bargain with suppliers and better control plant costs. (3) Growth in U.S. end markets data are estimates of output for the domestic end markets which purchase a given industry's products. All data prepared and presented by Thinking Cap Solutions, Inc., Port Angeles, WA (telephone: 360-42-6159; e-mail: ebaatz@ice-alert.com). |
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