Demand down, but prices up

The end markets that purchase factory equipment and tools are slowing (or falling) noticeably now. For instance, in the 12-month period ending June 2001, end markets for welding apparatus (SIC 3548) fell 2.6%.With demand slowing so sharply, one would expect to see price inflation for equipment and tools slowing as well.

09/01/2001


The end markets that purchase factory equipment and tools are slowing (or falling) noticeably now. For instance, in the 12-month period ending June 2001, end markets for welding apparatus (SIC 3548) fell 2.6%.

With demand slowing so sharply, one would expect to see price inflation for equipment and tools slowing as well. Not this time around. Among 19 industries that comprise our equipment and tools price index, only four reported a slowdown in inflation for their industries' product prices. Overall, the equipment and tools price index rose 0.5% in the second quarter of 2001, up from a 0.1% rate in the final quarter of 2000.

The rationale for price hikes varies from industry to industry, and factory buyers shouldn't accept every price increase without question. For example, consider process control instruments. This industry (SIC 3823) pushed through a 1.3% price increase in the 12-month period ending June 2001. Looking at just one month, buyers saw average industry prices edge down 0.1% between May and June.

And when we look at prices for specific product lines, we see plenty of inflation. In June, average prices for float and displacement instruments and associated elements increased 4.5%, while controllers for pressure measuring instruments logged a 2.3% price hike.

Inflation-adjusted margins in SIC 3823 remain almost exactly equal to their long-run norm and are above a year ago. That suggests buyers of process control instruments shouldn't be bashful about pressing for discounts. Indeed, tags in SIC 3823 would have to fall as much as 7.74% in order to duplicate the margin experience of six years ago.

Price/cost/demand roundup

Average Product Prices1Change, %, During 12-Mo Ending...

Direct Mfg. Costs2and Margins Grade

Growth in U.S. End Markets3Change, %, During 12-Mo Ending...

Industry

SIC

Mar 01

June 01

Costs are...

Grade

Mar 01

June 01

Other hand and edge tools

3423

0.98

0.99

Stable

A

3.30

2.01

Hand saws and saw blades

3425

0.29

0.09

Stable

C

2.37

1.00

Other hardware

3429

1.65

1.57

Stable

B

0.25

-1.14

Other power transmission equipment

3568

1.03

1.35

Stable

A

3.56

0.15

Conveyors and conveying equipment

3535

1.39

1.58

Stable

A

6.08

3.88

Hoists, cranes and monorails

3536

1.93

1.96

Stable

A+

4.75

3.50

Industrial trucks and tractors

3537

1.53

1.83

Stable

A+

6.73

4.14

Metal-cutting machine tools

3541

0.75

0.85

Stable

C

15.57

10.34

Machine tool accessories

3545

1.30

1.45

Stable

B

8.38

4.03

Power driven hand tools

3546

0.71

1.35

Stable

B

2.25

1.29

Welding apparatus

3548

2.09

2.11

Stable

A

-0.35

-2.56

Pumps and pumping equipment

3561

1.84

1.85

Stable

A

2.26

0.63

Air and gas compressors

3563

1.17

1.61

Stable

A+

2.26

0.63

Speed changers, drives and gears

3566

2.25

2.25

Stable

B

3.56

0.15

Transformers

3612

1.57

0.08

Stable

D

30.02

22.68

Motors and generators

3621

0.30

0.46

Stable

F

19.79

15.71

Process control instruments

3823

1.16

1.29

Stable

C

-3.58

-4.79

Fluid meters and counting devices

3824

2.63

3.11

Stable

D

-3.58

-4.79

Instruments to measure electricity

3825

1.31

1.10

Stable

F

49.65

34.55

1 Average product price changes are calculated from the producer price index for each 4-digit SIC (standard industrial classification) 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 Industry Cost Escalation (ICE) 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 from the ICE model and 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: 360-452-6159; e-mail: ebaatz@ice-alert.com).





No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
2017 Lubrication Guide; Software tools; Microgrids and energy strategies; Use robots effectively
Prescriptive maintenance; Hannover Messe 2017 recap; Reduce welding errors
Safety standards and electrical test instruments; Product of the Year winners; Easy and safe electrical design
Infrastructure for natural gas expansion; Artificial lift methods; Disruptive technology and fugitive gas emissions
Mobility as the means to offshore innovation; Preventing another Deepwater Horizon; ROVs as subsea robots; SCADA and the radio spectrum
Future of oil and gas projects; Reservoir models; The importance of SCADA to oil and gas
Diagnostic functions for system safety; Specifying industrial enclosures; Effective decision support for a crisis
Transformers; Electrical system design; Selecting and sizing transformers; Grounded and ungrounded system design, Paralleling generator systems
Natural gas for tomorrow's fleets; Colleges and universities moving to CHP; Power and steam and frozen foods

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
Featured articles highlight technologies that enable the Industrial Internet of Things, IIoT-related products and strategies to get data more easily to the user.
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
Maintenance Manager; California Oils Corp.
Associate, Electrical Engineering; Wood Harbinger
Control Systems Engineer; Robert Bosch Corp.
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me