October 22nd, 2008
One of our manufacturing strengths in recent years has been the export market. I’m sure many of our local manufacturers sell their products or services to customers who export. maybe some of you, like me, export directly as well as sell to customers who in turn export. So between direct exports and indirect exports (selling to customers who export), watching what is taking place in other countries and you own customers will keep you on the leading edge of market intelligence.
A look at Foreign Trade data from the Bureau of Census; see link… http://www.census.gov/foreign-trade/statistics/highlights/top/index.html you can see how much exports have grown and how dependent we have become. From 2004 through 2007, they’ve increased by 42%; year to date through August 2008 over August YTD 2004, they’ve grown by 67%. Yes, 2008 is in for another record year.
Our Top 6 Export Markets are (in order) Canada, Mexico, China, Japan, U.K. and Germany. So far this year they make up 50.6% of the value of all exports of Goods from the U.S. You can bet that our local manufacturers are also in a high range to these same countries.
Watching this is one thing, doing something about it is another matter.
Me, I’m going to increase my market share by taking it away from my competitors.
October 22nd, 2008
Normally, I try to find the silver lining in our world of making things, but with the latest financial crises, I started looking at some of the markets that my company is involved with; here is another one. I posted an article about China yesterday. I hope that this doesn’t portend troubles for our local manufacturers and economy, but I think it’s prudent to pay attention.
Here is the story from the Guardian, U.K.
“Business optimism fell this month to its lowest in almost 30 years, leading the CBI to call for more interest rate cuts as manufacturing companies struggle to keep their heads above water during the credit crunch.
The CBI’s quarterly survey showed that optimism at British manufacturing companies tumbled to a balance of -60 from -40 in July on the back of the lowest number of new orders on companies’ books in five years.
Expectations of future output fell to -31 this month from -16, the lowest since July 1980.
The credit squeeze has hurt the manufacturing sector, with 9% of companies saying that their output was likely to be constrained by credit or finance in the coming quarter - the highest figure since 1975.
Orders for capital goods, usually considered relatively unaffected by credit conditions, has fallen for the first time since 2005. New orders dropped to -12 in October from +23 in July.
Ian McCafferty, the CBI’s chief economic adviser, said: “Finance has not been a big issue [for manufacturing companies] but for the first time, in this survey, we see conditions have become more difficult.
“The sharp falls in orders and output show the slowdown in the UK economy is now spreading to sectors previously resilient to weakness in the banking and housing markets.”
Opposition parties used the figures to criticise the government. Philip Hammond, shadow chief secretary to the Treasury, said: “This is yet more bad news for the British economy. Our manufacturing base, which has shrunk by a million jobs since 1997, is now paying the price for Gordon Brown’s failure to prepare Britain for the economic downturn.”
However, there were a couple of bright spots, with the cost of Brent crude oil falling about 33% from the previous quarter.
John Cridland, the deputy director general of the CBI, said that costs were likely to ease, while this month’s half-point interest rate cut and the government’s effort to recapitalise banks could have a positive effect in the following quarter.
Unemployment rates were not as high as anticipated. The CBI expects 23,000 manufacturing jobs to be cut in the next quarter and 42,000 in the quarter following that.
Meanwhile, more bad news arrived as a leading economic think-tank said today the British economy has entered a recession that could last until the end of 2009 and would leave the country with “permanent scars”.
The National Institute of Economic and Social Research predicted the British economy would contract by 0.9% in 2009 - the first annual fall since 1991.
The NIESR said the country entered a recession in the third quarter of this year and that it would last four quarters. However, it acknowledged there was a one-in-three chance that the recession could run until the end of next year and added that growth in 2010 would be only 0.8% per annum. Its report arrived just after Bank of England governor Mervyn King also warned that the economy was heading into recession.
The NIESR said consumer spending is expected to fall 3.4% in 2009 due to credit rationing, weak economic growth and negative wealth effects. Unemployment is expected to breach 2 million.
Inflation is on course to peak in the final three months of this year, but the NIESR expects King to have to write at least three more letters to the chancellor, Alistair Darling, explaining why inflation has continued to surpass the Bank’s target of 2%.
The institute said that there would be a global recession in 2009, with the worst recession in industrialised countries since 1982.
It called for a co-ordinated rate cut of two and a half percentage points to “partially offset the output decline in the US and the UK”. It added that US interest rates would have to drop to zero to have a significant impact.
The NIESR said property prices would drop 9% in 2009 but would pick up in 2010.
The government said yesterday that UK housing transactions dived 53% in the year to September. HM Revenue & Customs reported that 59,000 residential properties worth more than £40,000 were sold in September, against 126,000 in the same month last year.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: “While this was only marginally below the August figure on a seasonally adjusted basis, it is more than 50% down on the level of a year ago.
“This is now having a meaningful impact on consumer spending and jobs. It has, as a result, played a large role in pushing the economy to the brink of recession.
“There are some signals that housing market activity could be close to hitting a floor but there is a danger that a sharp rise in unemployment could precipitate a further round of fear on the part of buyers.”
