Price inflation affects limited area

Pressure to hike prices remains relatively low. In the 12-month period ending March 2002, product price inflation accelerated in only four industries from the PLANT ENGINEERING factory equipment and tools roundup. Average prices for other hand and edge tools rose 5.6%, tags for pumps grew 2.7%, welding apparatus prices rose 1.

06/15/2002


Pressure to hike prices remains relatively low. In the 12-month period ending March 2002, product price inflation accelerated in only four industries from the PLANT ENGINEERING factory equipment and tools roundup. Average prices for other hand and edge tools rose 5.6%, tags for pumps grew 2.7%, welding apparatus prices rose 1.9% while average air and gas compressors tags grew 2.7%. All four of these industries, along with five others, enjoyed an A margin grade. That means manufacturing-related margins are near record-level highs, and buyers have some negotiation room to push for lower prices.

A widespread resurgence in inflation for basic metals may begin to threaten the bottom line. In March 2002, prices for aluminum increased 2.7%, while prices for steel mill products rose 2%. Tools producers, however, are being aggressive about protecting themselves. Consider air and gas compressors. Here, increased spending on basic metals helped push per-unit spending on raw materials ahead by 0.13% from February to March. But producers countered this increase with a 0.8% price hike. The cost/price inflation disparity added 39 cents to the bottom line for each $100 of product sold. Margins in the air and gas compressors industry now stand just six cents short of their 1986-2002 record high.

Returning manufacturing-related margins to their 5-yr average level would require air and gas compressor manufacturers to lower average prices by 2.5%. Other industries that can afford to lower prices (and their 5-yr average price targets) include: other hand and edge tools (-4.4%), other hardware (-3.6%), other power transmission equipment (-4.7%), conveyors (-4.3%), hoists and cranes (-3.5%), welding apparatus (-3.5%), and pumps (-3.6%).

Price/cost/demand roundup

Industry SIC Average Product Prices Average Product Prices Direct Mfg. Costs Direct Mfg. Costs Growth in U.S. End Markets Growth in U.S. End Markets

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.

Other Hand and Edge Tools34232.923.57risingA-0.90-2.31
Hand Saws and Saw Blades3425-0.56-0.70risingC-1.68-1.59
Other Hardware34291.811.79stableA-2.28-2.04
Other Power Transmission Equipment35681.881.88stableA-6.94-6.69
Conveyors and Conveying Equipment35351.661.55stableA-3.31-5.53
Hoists, Cranes and Monorails35361.651.30stableA-0.77-1.93
Industrial Trucks and Tractors35371.250.91stableA-3.55-5.45
Metal-Cutting Machine Tools3541-1.97-3.62stableF--6.59-9.17
Machine Tool Accessories35451.941.87stableC-6.28-6.71
Power Driven Hand Tools35461.971.91stableC-0.60-0.79
Welding Apparatus35481.731.91stableA-4.66-3.59
Pumps and Pumping Equipment35612.402.72stableA-2.58-3.18
Air and Gas Compressors35631.942.12stableA-2.58-3.18
Speed Changers, Drives and Gears35662.081.80stableA-6.94-6.69
Transformers3612-1.07-1.42risingD-4.66-8.64
Motors and Generators36210.410.29stableD-1.93-4.77
Process Control Instruments38231.481.42stableB-4.39-2.56
Fluid Meters and Counting Devices38241.140.49stableC-4.39-2.56
Instruments to Measure Electricity38250.610.64stableF-4.46-10.08





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