At Industrial Heating, we like to talk about the good news. We take our job of informing you very seriously, however, and that means that what we have to say is not always good. This month’s editorial is focused only on good news, so I felt we should use the words as a framework.
G is for growth. The latest news from my favorite economist, Jeff Thredgold (www.thredgold.com), is that the U.S. economy is “now showing more signs of self-sustaining growth. In the final quarter of 2010, the American economy (GDP) grew at a 3.2% real (after inflation) annual rate.” Thredgold indicates that this growth is not the artificial type experienced as a result of massive government stimulus.
In a recent U.K. engineering-publication editorial, the editor quoted optoelectronics pioneer Prof. David Payne as saying, “The best thing government can do is help create an environment in which innovation can thrive and then stand well back.” Whether in the U.S. or the U.K., we can’t agree more.
O is for orders. The Purchasing Managers Index (PMI) registered a New-Orders Index of 67.8% in January, which is an increase of 5.8% when compared to December’s 62%. This is the 19th month of growth in this index. The PMI index itself in January was the highest rate since May 2004. The report indicates that “capital equipment sales are building, especially in areas like mining and drilling equipment, industrial machinery and aerospace.”
Our own economic report – IH Economic Indicators – showed the change in the number of orders to be the highest since May 2007.
O also signifies output. Manufacturers hit hard by the “great recession” added 136,000 jobs in 2010. While this is a small number compared to the losses in 2008 and 2009, manufacturers have managed to boost output in recent years. This means that operations are more efficient – lean and mean. Now, they also have an order backlog, which will likely push companies to add workers. In our industry, automotive might be “driving” this output increase because sales rose significantly in January. GM and Chrysler saw sales increases of 23%, and Ford experienced a gain of 9%.
D is for direction. One of the important things the PMI report shows is the direction of the various metrics. Including the summaries, there are 13 different measures in the report. Every measure except inventories is in a “growing” direction. As things are picking up, it makes sense that inventories are decreasing. This will encourage even further growth as companies try to beef up their depleted inventories.
N is for news. In our magEzine newsletter, we recently reported that a U.K.-based heat treater expected business to be up by 25% in 2011. Based on the fact that the Metals Service Center Institute recently reported a 20.6% increase in 2010 steel shipments over 2009 and a 25.8% increase in aluminum, the U.K. prediction is not too hard to believe. Especially in light of the automotive numbers reported in January, business growth of 20% or higher would not be unexpected in 2011.
E stands for employees. What have you done for them lately? Unfortunately, difficult business conditions often leave employees feeling the pain. Are you planning to bring back benefits that were necessarily cut in the downturn? Check out December’s editorial in our archives for some ideas of how to bring employees back into the action.
W is for winter. I was considering a number of things for “W,” and most would have built on what we already discussed. Walking into work today with a temperature of 12°F and Chicago digging out from a massive snowstorm of 2 feet or more, the best news I could think of is that winter is almost over!
S stands for steel. As one example of where the industry is headed, I thought I’d take a look at the five companies in the steel industry with the highest sales growth. Admittedly, these are all smaller companies, but your company is probably also a small company. Universal Stainless & Alloy had year-over-year growth of 105.1% during the last quarter. Cliffs Natural Resources saw 102.5% growth, and Olympic Steel experienced 72% year-over-year sales growth. Schnitzer Steel Industries reported year-over-year sales growth of 71.2%, and Mechel came in at 68%.
We hope this good-news-only editorial helps you focus on the positive business outlook ahead in 2011. If you’re not seeing it yet, remember that our industry tends to lag the economy by six months or so. We believe that better times are just around the corner! IH