Margin stress may mean higher prices
Plant engineers who are buying construction and maintenance supplies in the months ahead had better beware of some potentially grouchy suppliers.
Plant engineers who are buying construction and maintenance supplies in the months ahead had better beware of some potentially grouchy suppliers. That's because of the 19 construction supply industries that we track, 10 are saddled with a margin "grade" of D or F. Failing margin grades mean these industries are experiencing inflation-related distress to their margins.
Consider, for example, the general sawmills (SIC 2421) industry. Between November 1999 and November 2000, average product prices in sawmills fell 4.1%. Meanwhile, direct manufacturing costs in sawmills fell only 0.3%. Buyers of sawmill products will have a tough time mounting a cost-based argument for avoiding price hikes.
Unfortunately, the news ahead for buyers of environmental controls isn't looking too good either. Since the start of this year, producers of automatic building, refrigeration, and appliance controls (SIC 3822) have held prices in check while their per-unit manufacturing costs have increased 2.8%.
1Average 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.
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.
3Growth 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: firstname.lastname@example.org).
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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