In waiting mode for high demand
The economic uncertainty that existed prior to the U.S. bombing of Iraq has dissipated. Yet, an unleashing of pent-up demand has not occurred as some pundits expected. Indeed, more than half of the industries in our construction supplies index actually faced shrinking end markets in May 2003. Moreover, all but one industry (flat glass) sport end-market growth rates that fall short of the averag...
The economic uncertainty that existed prior to the U.S. bombing of Iraq has dissipated. Yet, an unleashing of pent-up demand has not occurred as some pundits expected. Indeed, more than half of the industries in our construction supplies index actually faced shrinking end markets in May 2003. Moreover, all but one industry (flat glass) sport end-market growth rates that fall short of the average growth rate experienced over the past five years. Widespread demand weakness has clearly put the kibosh on aggressive pricing.
So buyers continue to have a clear advantage when it comes to using demand-related data in a negotiation setting. But plant engineers who expect their budgets to stretch farther as they reap the benefits of this economic weakness may be in for a shock. That's because falling prices and rising costs have squeezed margins so tightly that suppliers will be ready to leap with smart price hikes as soon as demand picks up in 2004.
Consider the mineral wool industry. Makers of fiberglass insulation saw their average product prices rise only 0.2% in the 12 months ending May 2003. From a year ago, prices actually fell 0.15% while the cost to manufacture fiberglass increased a wicked 4.8%. The result: fiberglass manufacturers saw their manufacturing margins fall $2.33 for every $100 of product they sold in May. To restore margins to levels held on average over the past five years would require a 5.3% average price hike.
The flat glass industry, where end-market demand has been extraordinarily strong, faces similar margin pressures. Here, despite a 9% growth rate in the end-markets that buy glass, margins shrinkage remains a problem as cost escalation continues to outpace the rate at which producers can increase their prices.
Average Product Prices1Change, %, During 12-Mo Ending...
Direct Mfg. Costs2and Margins Grade
Growth in U.S. End Markets3Change, %, During 12-Mo Ending...
NC means data could not be computed.
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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