SALES, RENTALS & LAYAWAYS

PROTECTING EVERYTHING THAT HAS EVER BEEN OF VALUE TO YOU

Open 24/7/365

We Have A Life-Time Warranty /
Guarantee On All Products. (Includes Parts And Labor)

A Manufacturing Recession Is Here. Now What? (#GotBitcoin?)

With the U.S.-China trade war sapping demand, companies have limited options for protecting profits. Plus, more industrial insights. A Manufacturing Recession Is Here. Now What? (#GotBitcoin?)

The escalation of U.S.-China trade tensions has pushed the American manufacturing sector to the brink of a recession and there’s little to stop it from falling over the edge. A preliminary IHS Markit gauge of factory activity released this week came in at 49.9 for August, just below the dividing line that separates an expansion from a contraction.

A regional index from the Federal Reserve Bank of Kansas City showed manufacturing order volume slumped to the weakest level since 2016, with more than half of firms surveyed expecting negative impacts from the 10% tariffs the U.S. will levy on $300 billion of Chinese goods in two stages. China retaliated on Friday with its own one-two punch of tariffs on $75 billion of American products including soybeans, automobiles and oil. President Donald Trump vowed to respond … again. So it would seem to be a better use of time to move beyond debating whether there will be a slowdown and instead think about how industrial companies are going to respond to a slowdown that’s already here and will likely get worse.

The most obvious move is to cut expenses, which will inevitably translate into layoffs. Deere & Co., Emerson Electric Co., 3M Co. and DuPont de Nemours Inc. are among those that have said they’ve stepped up cost-cutting efforts. This is tricky for several reasons. First, many big manufacturers have already aggressively cut costs after slumping oil prices brought about the so-called industrial recession in 2015 and 2016. Perhaps this prepared them to more profitably weather the next downturn; perhaps it left them with less fat to cut if margins are pressured by price cuts to spur sales. But the bigger issue is that layoffs, particularly in the manufacturing sector, are going to be political dynamite.

President Donald Trump built his campaign on revitalizing hiring at U.S. factories, and manufacturing employment is up by about a half million since he took office. He’ll be wont to relinquish those gains as he seeks re-election, especially if job losses start to affect the strong consumer demand that’s kept U.S. growth afloat. It’s much harder to issue puffball press releases about firings than it is to expound on hiring commitments, exaggerated or not.

So what about share buybacks? Some companies may already be too loaded up on debt after years of low-interest-rate borrowings. Honeywell International Inc. and Eaton Corp. are among those that have alluded to the ability to unleash billions of purchasing power to prop up earnings per share in a recession. Democratic presidential candidates including Senators Elizabeth Warren, Kirsten Gillibrand and Bernie Sanders have all criticized buybacks and proposed ways to incentivize companies to share their wealth more directly with employees. Some of these proposals have clear holes and obviously not all buybacks are evil, but public opinion is negative on this issue and any manufacturer that announces a big repurchasing push should expect backlash. The Business Roundtable sees the writing on the wall, at least as far as optics are concerned.

Member CEOs including 3M’s Michael Roman, Honeywell’s Darius Adamczyk and Stanley Black & Decker Inc.’s Jim Loree signed their names this week to an updated statement of purpose that said companies have a commitment to serve all stakeholders, not just shareholders. It was mostly fluff and there were no hard commitments behind the nice-sounding words. Still, it’s the latest sign that capitalism in its most unbridled, bloodthirsty form is being rethought.

And maybe that’s a good thing for investors, too: Bloomberg News’s Cameron Crise took a look at the GS Total Cash Return index, a collection of 50 stocks that return a well-above-average amount of cash to shareholders. He found that while those stocks have historically been winners, they’ve barely outperformed the S&P 500 in the aggregate over the past five years, with the lag over the past four months one of the most extreme since the index started in 2010. The political climate is arguably causing this industrial slowdown; it may also kneecap companies’ ability to protect their earnings from the associated damage.

Updated: 10-10-2019

Majority of Economists Say Manufacturing Sector in Recession

Forecasters’ estimates for economic growth in the second half of 2019 also ticked lower.

U.S. manufacturing is in recession, two-thirds of economic forecasters said in a survey, and overall growth in the second half of 2019 is expected to further slow.

In a Wall Street Journal economic survey conducted in recent days, 65.3% of private-sector forecasters said the manufacturing sector was in recession, or two or more consecutive quarters of contraction.

Forecasters’ estimates for economic growth in the second half of 2019 also ticked lower, with U.S. economic output to grow, on average, at a 1.82% pace in the third quarter and a 1.77% rate in the fourth quarter. Those figures are down from a September survey predicting 1.92% and 1.81% growth rates, respectively.

Respondents largely cited the uncertain trade picture, weak global growth and U.S. political developments in their comments on the economic outlook.

“It’s a laundry list of ‘shocks’ that are coming one after the other: global growth hiccups, Boeing Max fiasco, IPO market fizzle, GM strike, election cycle swoon and getting compounded by the impeachment drama,” said Georgia State University economist Rajeev Dhawan.

Manufacturing data is closely watched not just for what it says about factories, but for the signal it sends about demand in the wider economy. U.S. factory activity contracted for the second straight month in September and hit a 10-year low, the Institute for Supply Management reported earlier this month.

New orders for durable goods—products designed to last at least three years, such as computers and machinery—were down 4.2% in August from a year earlier, the Commerce Department said last month.

“But factory employment is still among the highest we’ve seen in more than a decade, so it’s premature to say it is in recession,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, in the survey.

Chad Moutray, the National Association of Manufacturers’ chief economist, said manufacturing business leaders are pushing for greater certainty on trade, including a reworked trade agreement with Mexico and Canada and a bilateral trade agreement with China.

Manufacturing makes up a relatively small slice of GDP, accounting for about 11% of total output and about 10% of total private employment. A contraction in the sector doesn’t necessarily mean the 10-year-old expansion is about to end.

Updated: 10-17-2019

Manufacturing Sputters as Broader U.S. Economy Slows

A loss of momentum in U.S. manufacturing aligns with weakening factory output overseas.

U.S. manufacturing production fell in September, adding to evidence that slowing global growth and trade frictions are weighing on the economy.

Manufacturing output, the biggest component of industrial production, fell 0.5% in September from a month earlier, the Federal Reserve said Thursday. Production at factories was in part dragged down by a strike at General Motors , but showed broad-based fragility.

Overall industrial production, which includes output at factories, mines and utilities, dropped 0.4% in September and declined 0.1% from a year earlier, the first year-over-year decrease since 2016. Mining production pulled back, helping further drag down demand for manufactured parts.

Industrial Output

Industrial production has cooled this year, dragged down by manufacturing.

For some manufacturers, the tight labor market is curtailing growth.

Brett Novosat, president at machine shop L.L. Brown Inc., said revenue is down about 5% to 10% this year as the Enola, Pa., company has struggled to replace workers who have left. Demand for metal parts is still strong, he said, but his 26-person company can’t find new workers to meet that demand.

“If I could find three, four, five machinists I would hire them right now,” he said. “We are at a limit this year for what we could do with the employees we have.”

Coatings maker PPG Industries Inc. said Thursday that it saw a notable weakening in industrial production which sent sales volume in its industrial unit down 6%.

Weakness in the U.S. economy this year has largely been contained to manufacturing and business investment, but signs suggest the slowdown could be spreading. Employers are still hiring, albeit at a slower pace than in 2018. Consumer spending has been solid, but data released earlier this week showed September was a soft month for retailers.

“The risk is that the longer the weakness in the industrial complex remains in place, the greater the risk that this diffusion takes hold across other sectors,” said Gregory Daco, chief U.S. economist at Oxford Economics.

On Thursday, the Commerce Department reported home building fell in September. After the figures were released, forecasting firm Macroeconomic Advisers kept its estimate of third-quarter gross domestic product growth at a 1.3% annual rate, down from a 2% annual pace in the second quarter.

Still, the U.S. economy is in growth mode.

“We have a situation where consumers generally are doing pretty well,” said Gus Faucher, chief economist at PNC Financial Services Group.

Federal Reserve policy makers cut interest rates this year with the goal of cushioning the economy against a slowdown in manufacturing and global growth. They will meet later this month, and a rate cut is seen on the table.

The U.S. is a service-oriented economy, meaning manufacturing accounts for a small share of gross domestic product. But the manufacturing sector is highly sensitive to swings in global demand, making it an important indicator of broader economic shifts.

One factor that weighed on manufacturing last month will likely be temporary. The GM strike accounted for a 0.7% decline in production of durable, or long-lasting, goods. That included a steep 4.2% decline in the output of autos and related parts.

“With a tentative deal in place, auto production should rebound in November and December as GM looks to make up for lost output,” Mr. Faucher said.

Still, other forces pushing down factory production, including trade tensions and slowing global growth, offer few, if any, signs of abating.

The loss of momentum in U.S. manufacturing aligns with weakening factory output overseas.

The manufacturing output index in Germany, a key export economy in the eurozone, fell to 101.5 in August from 105.8 a year earlier, Organization for Economic Cooperation and Development figures showed.

Surveys of purchasing managers across the globe pointed to deepening declines in factory activity in September. The U.S. wasn’t immune. The Institute for Supply Management’s survey of supply-chain managers showed manufacturing activity contracted for the second straight month to its lowest level since 2009.

Updated: 11-30-2019

Maersk To Eliminate Hundreds Of Jobs

Redundancies planned at Copenhagen headquarters and German shipping unit Hamburg Süd.

Denmark’s A.P. Moller-Maersk A/S will cut hundreds of jobs to cut costs as the shipping giant prepares for significantly higher fuel costs next year and plans to invest more heavily in inland logistics services.

“We have announced internally the need to save cost in our head office functions and that it will also lead to reductions both in and outside Denmark,” a Maersk spokesman said. “We do not yet know the exact extent or how many are affected, but this is something we are currently discussing.”

People with knowledge of the matter said around 200 jobs will be cut at the company’s headquarters in Copenhagen and at Hamburg Süd, the German container operator that Maersk bought in 2017.

The cuts come as Maersk is seeking to expand its business, which is largely focused on ocean container transport, to do more end-to-end logistics, particularly inland supply services such as warehousing and customs clearance.

“Maersk needs to build up our non-ocean services and this will affect ocean services,” one person familiar with the plan said.

This person said there are overlaps in jobs at the information technology department following the merger with Hamburg Süd, which originally saw its workforce cut by 200 people to around 900 after Maersk’s takeover.

Maersk Chief Executive Søren Skou said this month that he plans to invest hundreds of millions of dollars in expanding inland logistics services next year.

Maersk, the world’s biggest container ship operator by capacity according to data analyst Alphaliner, employs around 75,000 people in more than 120 countries. It has around 70,000 customers in its core ocean transport business, including a broad range of U.S. companies such as car makers and retailers.

The parent company this month reported a net profit of $520 million in the third quarter, up 30% from $396 million a year earlier.

But the Maersk Line operation faces strong headwinds in shipping markets. Analysts have sharply reduced forecasts for growth this year in container markets as big retailers and manufacturers that ship goods internationally facing weakening global economic conditions and rising trade barriers.

Maersk and other ocean carriers also face an average increase of 25% in their fuel bills when vessels will have to start using cleaner fuels as part of a regulatory mandate to cut sulfur emissions.

Updated: 1-28-2020

3M Cuts More Jobs Amid U.S. Manufacturing Slump

Adhesive maker received grand jury subpoena related to discharge from Alabama plant.

3M Co. MMM -5.82% reported lower revenue in key U.S. markets and set plans for fresh layoffs, the latest manufacturer to exhibit signs of strain at a time of weakness for the industrial economy.

3M sells its diverse array of products in a wide swath of the economy, including consumers, offices, manufacturers and hospitals. While the U.S. economy remains strong overall, the manufacturing sector has contracted for five consecutive months through December.

Slow rates of domestic car production, lower shale-drilling activity and slack demand from China have all weighed on U.S. manufacturers. Boeing Co. BA -0.47% ’s decision to first slow and then suspend production of its 737 MAX has also been working its way through the company’s vast supply chain. New orders for capital goods, a proxy for business investment, declined in December from the previous month, the Commerce Department said Tuesday.

“We continued to face growth challenges,” 3M Chief Executive Mike Roman told analysts on a call Tuesday. Shares fell 4.5% to $166.68 in late morning trade.

The maker of everything from Post-it Notes to industrial sandpaper reported a fourth-quarter revenue decline of 2.6% when excluding currency movements and acquisitions, including a 2.9% drop in the U.S. 3M said it was eliminating 1,500 jobs as part of a continuing restructuring to streamline its global operations. The company employs 96,000 people and last April said it was cutting 2,000 jobs in underperforming business lines, such as energy and electronics.

The cuts will save the company up to $120 million a year, 3M said. It booked a $134 million restructuring charge in the fourth quarter related to the cuts.

3M also said Tuesday that it received a grand jury subpoena in late December related to chemical discharges from a facility in Decatur, Ala. 3M said that chemicals may have been released from that plant into the Tennessee River, and that it was cooperating with the investigation by the U.S. attorney’s office for the northern district of Alabama.

The U.S. attorney’s office didn’t respond to a request for comment.

St. Paul, Minn.-based 3M reported that sales in China and Hong Kong grew 0.8% for the latest quarter, even as the economy slows there. As one of the largest makers of medical face masks, the company has ramped up production to meet a surge of demand due to the global outbreak of a coronavirus in China.

At the same time, 3M said extended shutdowns at factories and other businesses in China could weigh on demand for other 3M products. The outbreak gained momentum this month, so the impact to the company’s fourth quarter, which ended in December, was limited.

Sales in 3M’s safety and industrial business fell nearly 5% to $2.81 billion for the quarter, and sales in its transportation and electronics business fell 6.2%. Revenue also declined in 3M’s aerospace unit, which makes industrial glues and other products for plane makers.

The company said sales in the latest quarter rose to $8.11 billion overall from $7.95 billion a year earlier due in part to the October completion of its $4.3 billion acquisition of wound-care company Acelity Inc.

Analysts had expected revenue of $8.11 billion in the quarter, according to FactSet. 3M reported a profit of $969 million compared with $1.35 billion a year ago. Adjusted earnings were $1.95 a share. Analysts polled by FactSet were expecting adjusted earnings of $2.11 a share.

For 2020, the company said it expects earnings between $9.30 and $9.75 a share. Analysts were expecting the company to earn $9.59 a share in 2020.

Updated: 12-23-2019

U.S. Durable Goods Orders Fell in November

A drop in orders for military equipment was behind the retreat

Demand for long-lasting factory goods made in the U.S. fell in November, suggesting the manufacturing sector remained uneven last month.

Orders for durable goods—products designed to last at least three years—decreased a seasonally adjusted 2% in November versus the previous month, the Commerce Department said Monday.

That was well off from expectations. Economists surveyed by The Wall Street Journal had projected a 1.2% increase.

Declining orders for military equipment was the primary cause. Orders for defense capital goods fell 35.6% on the month. Excluding the volatile defense category, overall orders were up 0.8% in November.

A proxy for business investment only inched ahead last month. New orders for nondefense capital goods, excluding aircraft, rose 0.1% in November. Through 11 months this year, those orders were up 0.7% from the same period in 2018, or rising less than the rate of inflation.

The report covers orders placed in November, ahead of a string of economic news in recent weeks that was largely seen as positive for manufacturers. That included progress in trade talks with China, finalizing a new trade deal with Canada and Mexico and Congress passing a defense-spending bill.

Durable orders for October were revised down to a 0.2% increase from an earlier reading of up 0.5%.

Demand for durable goods had mostly trended higher since June. That was an improvement from the first half of the year, when uncertainty around trade policy and concerns about a global economic slowdown hurt U.S. factories.

However, a persistent weak spot has been the volatile civilian aircraft category. Orders for nondefense airplanes and parts fell 1.8% in November. Through 11 months this year, orders are down 38% compared with the same period in 2018.

Boeing Co. , the nation’s largest aircraft maker, has seen orders decline since its 737 Max jetliner was grounded globally in March following two fatal crashes. The company said last week that it plans to halt Max production in January.

Excluding transportation, durable-goods orders were flat in November from October.

Updated: 1-3-2020

U.S. Factory Sector Contracts For Fifth Straight Month

The ISM manufacturing index in December registers its lowest level in over 10 years.

The U.S. factory sector contracted for the fifth consecutive month in December as trade tensions continued to pressure manufacturers.

The Institute for Supply Management said on Friday its manufacturing index fell to 47.2 in December from 48.1 in November. Readings above 50 indicate activity is expanding across the manufacturing sector, while those below 50 signal contraction.

Economists surveyed by The Wall Street Journal had expected a reading of 49.0.

Friday’s data, compiled from a monthly survey of purchasing and supply executives across the U.S., was the lowest reading since June 2009.

“Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China,” Tim Fiore, who oversees the ISM survey of factory purchasing and supply managers, said in a statement.

Updated: 1-3-2020

Baltic Index Marks Worst Day In 6 Years On Depressing Demand For Dry Bulk Vessel Shipments (#GotBitcoin?)

The Baltic Exchange’s main sea freight index on Thursday posted its biggest one-day percentage decline in six years, pressured by depressing demand for dry bulk vessel segments.

* On its first day of trading in the new year, the Baltic index , which tracks rates for capesize, panamax and supramax vessels that ferry dry bulk commodities, fell 114 points to 976 points, its lowest level since May 2019.

* The overall index declined about 10.5%, posting its biggest one-day percentage drop since January 2014.

* “Some of it represents the fact that it is the first quoting for almost a week now. We expect a bit more softness to come around and we see … China as the main locomotive behind this,” said Peter Sand, chief shipping analyst at BIMCO.

* “The market as such is not strong in a fundamental way,” Sand said, adding the underlying market weakness, seen in the last few months, has seeped into 2020.

* The dry bulk index fell about 61% since touching a multi-year high of 2,518 points in September 2019 and ended the year 14% lower.

* The capesize index fell 304 points to 1,646 – its lowest since May 31, 2019.

* Average daily earnings for capesizes, which typically transport 170,000-180,000 tonne cargoes including iron ore and coal, slumped $2361 to $11,976.

* The supramax index slipped 33 points to 685.

* The panamax index rates were not available. (Reporting by K. Sathya Narayanan in Bengaluru; Editing by Maju Samuel)

Updated: 1-29-2020

U. S. Business Investment Fell In December

U. S. business investment fell in December, according to a closely watched proxy measure, providing the latest sign of softness in manufacturing.

The reading, part of a report on U.S. orders for long-lasting goods, showed that new orders for nondefense capital goods excluding aircraft fell 0.9% in December from the previous month, to $68.6 billion, the Commerce Department said Tuesday. Those so-called core capital goods orders—which set aside volatile defense and transportation orders—are widely viewed as a measure of businesses’ willingness to spend on items such as machinery, equipment and computers.

The department also said new orders for all durable goods—products designed to last at least three years—rose 2.4% in December from the previous month. The increase was driven by defense orders, and came during a month when Congress approved a boost in military spending.

“The headline durable orders gain significantly overstates the strength of the manufacturing sector,” Brean Capital economists Conrad DeQuadros and John Ryding wrote in a note to clients. “Our focus is the nondefense capital goods sector excluding aircraft, which as yet shows no signs of recovery.”

The apparent pullback in business investment last month contrasted with signs of continued strength among U.S. consumers. The Conference Board, a private research group, said in a separate report Tuesday that its index of consumer confidence increased in January from December.

Demand for military equipment surged in December after a steep decline in the prior month, with orders for defense capital goods up 90.2% on the month. New orders for transportation equipment were up 7.6%, boosted by a 168% jump in orders for defense aircraft.

Other portions of the Commerce Department’s report indicated underlying weakness, however. Excluding the often-volatile category of transportation, orders fell by 0.1% last month. Omitting defense, which also can be volatile, orders were down even further, by 2.5%.

Orders for nondefense aircraft fell sharply, which several economists attributed to the continued grounding of Boeing’s 737 MAX passenger jet. Overall orders in November were also weaker than previously estimated, revised to down 3.1%.

Recent data have indicated manufacturing remains on uneven footing. The Federal Reserve reported earlier this month that factory output increased 0.2% in December from November, but a recent survey of purchasing managers from data firm IHS Markit indicated manufacturing activity has slowed during January compared with December.

Other developments could provide a boost for manufacturing and business investment. In addition to Congress’ passage of a government-funding package, U.S. and China officials agreed to the first phase of a trade deal, which was signed into effect on Jan. 15. The deal marked an easing in trade tensions that weighed on the global manufacturing industry for much of last year.

“The phase one trade deal should eventually be a big help in cranking investment activity back up, but December was too early to have expected any notable reaction to the trade agreement,” Stephen Stanley, chief economist at Amherst Pierpont, said in a note to clients.

New durable goods orders overall decreased 1.5% for all of 2019 compared with 2018, with core orders up 0.8% on the year.

Another reading on U.S. business investment, along with a broad measure of the country’s economic output, is expected Thursday when the Commerce Department is to release its first estimates of gross domestic product for 2019’s fourth quarter and full year.

Updated: 4-1-2020

U.S. Manufacturing Activity Contracts Hits Factories Hard

Factories Cut Output, Jobs As Coronavirus Lockdown Bites

A series of business surveys paint an almost uniform picture of sharply declining production, falling new orders and contracting payrolls.

Factories across the U.S., Asia and Europe cut output and jobs at the fastest pace since the global financial crisis, a sign the global economy has entered a deep freeze as governments lock down their populations in an effort to contain the novel coronavirus and minimize mortality.

In the U.S., the Institute for Supply Management said its manufacturing index fell to 49.1 in March from 50.1 in February. Readings above 50 indicate activity is expanding across the manufacturing sector, while those below 50 signal contraction. The index has been in contractionary territory for six of the past eight months.

Pullbacks in demand, production and employment—as well as challenges in running factories during the outbreak—offer few signs of improvement ahead. “I think April’s going to be a lot worse,” said Tim Fiore, who oversees the ISM survey of factory purchasing and supply managers.

Separately, data firm IHS Markit said its seasonally adjusted final U.S. manufacturing purchasing managers index dropped to 48.5 in March from 50.7 in February.

A series of business surveys released Wednesday painted an almost uniform picture of sharply declining production, falling new orders and contracting payrolls. The main exception was China, which registered a slight rebound in activity as its economy began to thaw out, having been the first to be frozen.

Factories across the globe reported a series of challenges. Some had shut entirely as workers were forced to stay at home to meet social-distancing requirements. Some had been forced to cut output because the raw materials and parts they needed had become scarce. And others had cut back because demand had fallen as the global economy entered a downturn.

Factory output and employment is likely to fall further before it starts to rebound, although that recovery may be limited by job cuts and shutdowns that can take time to reverse. If they don’t receive help from governments and forbearance from banks, some manufacturing companies may close for good.

“Manufacturing conditions are likely to get worse,” said Rosie Colthorpe, an economist at Oxford Economics. “Increasingly strict lockdown measures, both in the eurozone and globally, will shut even more factories. Rising layoffs in the industrial sector reported in March mean factories won’t be able to immediately restore production once containment measures are lifted.”

In addition to China, there were other countries where some aspects of manufacturing activity defied the general trend. Turkish factories hired additional workers, and both the Netherlands and Taiwan just about managed to avoid a decline in overall activity in the sector.

But in most other countries the freeze has taken a huge toll on factories, overshadowed only by the toll it has taken on service providers.

In Europe, Italy has been hardest hit by the virus, and its manufacturing sector was hardest hit by the measures taken to contain it. Data firm IHS Markit’s Purchasing Managers Index, a measure of activity in the sector, fell to 40.3 in March from 48.7 in February.

A reading below 50.0 indicates a decline in activity compared with the previous month, and the measure for March points to the largest drop in almost 11 years.

“With the Italian economy effectively shut down, it is unlikely that any recovery from the significant Covid-19 disruptions will be swift,” said Lewis Cooper, an economist at IHS Markit.

Factories in Greece, Poland and the Czech Republic were also hit hard by lockdowns and other setbacks. Germany, the continent’s manufacturing powerhouse, saw the largest drop in output since the immediate aftermath of the financial crisis, although the impact was mixed across industries. IHS Markit said producers of tools and equipment, and automobiles saw the largest declines, while makers of cleaning products and protective clothing reported a pickup in output and hiring.

Food producers also reported a pickup as German shoppers stocked up on essentials, a practice known as “Hamsterkäufe,” or hamster-shopping. Figures released Wednesday showed German retail sales increased sharply in February in anticipation of lockdowns to curtail the coronavirus pandemic.

In Asia, Vietnam and the Philippines logged the largest declines in activity, the latter registering an even larger drop than Italy. But big declines were also reported in Japan, South Korea, Indonesia and Thailand. In each of those countries, factories cut jobs.

In Europe, governments have rolled out a series of measures intended to limit the rise in unemployment as large parts of the economy hibernate. They include a series of programs that pay a big chunk of the wages of workers that companies have been forced to place on reduced hours.

The German Labor Agency Tuesday said around 470,000 businesses asked staff to work shorter hours in March, a record high. Detlef Scheele, the agency’s chairman, said the number of workers on state-subsidized short-time work schemes would likely rise considerably higher than its peak during the 2008-09 financial crisis, when 1.4 million workers took advantage of the program.

Continental AG , the German automotive supplier, Wednesday said that in light of the temporary shutdown of nearly half its 249 factories, including most of its operations in Europe and the U.S., 30,000 German employees, or half the workforce in its home country, had been put on short-time work as of April 1.

“We have agreed with employee representatives to use all available options in the coming weeks to respond to this crisis in a flexible manner,” Ariane Reinhart, Continental’s executive board member for human resources. “Our mutual goal in the current phase is to protect our employees and to protect jobs. Instruments such as short-time work in Germany help us here.”

In Switzerland, takeup appears likely to be high. Its survey of purchasing managers found that more than a quarter of manufacturing companies have already applied for government help, affecting 13% of their workers on average.

Even with those schemes, the number of people without work is expected to soar in Europe during the coming months. But that rise will take place from a low level: According to figures released by the European Union’s statistics agency Wednesday, 88,000 people found work across the eurozone in February, lowering the unemployment rate to 7.3% from 7.4%, its lowest since March 2008.

Updated: 4-28-2020

Manufacturers Hit A Wall As Coronavirus Saps Demand

Caterpillar, Harley and 3M are among companies idling production and cutting costs.

Major U.S. manufacturers said some closed plants may never reopen and new product introductions could be delayed, after the coronavirus pandemic slashed demand for everything from motorcycles to industrial paint.

Caterpillar Inc. said Tuesday that its first-quarter revenue fell by a fifth, and Harley-Davidson Inc. said retail sales of its motorcycles slumped around the world during the quarter. 3M Co. said it would furlough workers and idle some factory lines apart from its booming N95 mask business, a sign of the broad economic malaise affecting even companies with a hot product.

“The impact of Covid-19 on our business has been significantly more severe and chaotic than any cyclical downturn we had envisioned,” Caterpillar CEO Jim Umpleby said on a conference call.

The hit to the companies’ earnings was lighter than some analysts expected. Shares in Caterpillar rose 1.8% to $117.31, while shares in 3M climbed 3.7% to $159.34 and Harley’s rose 11% to $20.90.

But executives offered a dark outlook for a sector of the economy that was already faltering before the coronavirus crisis sapped demand and hobbled plants and supply chains. Caterpillar, 3M, Harley and other companies have suspended their financial guidance for the year.

Big chunks of the U.S. industrial base remain closed as part of the effort to contain the virus. Other factories are closed due to declining demand or parts shortages. Caterpillar and 3M said a quarter of their factories are offline. Harley, which idled assembly plants in mid-March, said it is restarting some production. The Milwaukee-based company also said, though, that the worsening economic outlook has prompted it to reconsider when to introduce some new models it is counting on to draw new customers. Nearly two-thirds of its U.S. dealers remain closed.

“We have challenges to address that have become more apparent in this crisis, including the high level of complexity across the organization that needs to be minimized ” Jochen Zeitz, Harley’s acting CEO, said on a call.

Some factories may not come back online. Caterpillar said it was considering closing plants in Germany.

Manufacturers said the economic fallout from the pandemic has followed the spread of the virus. Demand first dropped in China early this year and then spread to Europe, mostly acutely in Italy, executives said. Demand in the U.S. started to plummet in mid-March. Manufacturing output in March fell 6.3% from the prior month, according to the Federal Reserve, the biggest drop since the end of World War II.

Minnesota-based 3M, which makes a range of products, said adjusted April sales in the Americas region were down 20% from a year earlier as factories suspended production, dentists cut back on operations and office managers bought fewer supplies for workforces now at home.

Caterpillar said it expects the current quarter to be the weakest for the global economy. “With the general economic uncertainty, we did see people defer buying machines,” Caterpillar finance chief Andrew Bonfield said in an interview.

Manufacturers said they were cutting back on investments this year to save cash. 3M said it would cut capital spending this year to about $1.3 billion; it had previously planned to spend up to $1.8 billion. Paint maker PPG Industries Inc. said it would spend up to $250 million on capital investments this year, down from $413 million in 2019.

“Never before have we experienced a crisis as broad as the Covid-19 pandemic,” PPG Chief Executive Michael McGarry said on a call.

Harley said it would restrict spending and preserve cash, including by suspending share buybacks and slashing its shareholder dividend to 2 cents a share for the second quarter from 38 cents for the first quarter.

Harley reported more than $1.09 billion in quarterly motorcycle-related revenue, down from $1.19 billion a year earlier though better than analysts expected. Profit fell to $69.7 million from $127.9 million in last year’s first quarter.

Caterpillar reported a first-quarter profit of $1.09 billion compared with $1.88 billion a year earlier. The Illinois-based company said its adjusted earnings were $1.60 a share. Analysts had forecast adjusted earnings of $1.69 a share.

3M’s revenue grew 2.7% to $8.08 billion in the first quarter, while profit rose 45% to $1.29 billion. The company posted adjusted earnings per share of $2.16, above the $2.03 expected by analysts.

Updated: 5-15-2020

April Sees Rapid Drop In Retail Sales, Factory Output

April U.S. retail sales fell 16.4% and manufacturing output 13.7%, both records.

Consumers pulled back on spending and factories cut output at the fastest pace in decades as lockdowns to contain the coronavirus pandemic hit the U.S. economy.

Retail sales, a measure of purchases at stores, at restaurants and online, fell in April by a seasonally adjusted 16.4% from a month earlier, the biggest drop since record-keeping began in the early 1990s, the Commerce Department said Friday.

The Federal Reserve separately said manufacturing output fell by 13.7% to its lowest level in records dating to 1972. A broader reading for overall industrial production, which includes mining and utility output, posted its steepest drop in records dating back more than a century.

The record declines in spending and output could represent the worst of economic damage from coronavirus-related shutdowns, economists said, although most expect the recovery will be slow.

“April was the cruelest month,” said Craig Johnson, president of Customer Growth Partners, a consulting firm. Retail spending likely bottomed out in the first week of May, he said, with spending picking up due to Mother’s Day and gradual state reopenings.

“It’s going to be less worse with each month,” said Mr. Johnson, “as people slowly come out of the foxhole and enter the mainstream of American consumerism.”

Social distancing, business closures, travel restrictions and other disruptions that started in mid-March have taken a particularly heavy toll on retail stores and restaurants, many of which remain closed or are opening gradually as states begin to reopen their economies.

Consumers spent less on vehicle purchases, gas and on food and drinks at bars and restaurants—categories that drove last month’s decline in retail sales. But nearly every other category suffered too as people lost their jobs, commuters worked from home and malls remained shut.

The exception was sales at nonstore retailers—a category that includes internet merchants such as Amazon.com Inc.—which grew 8.4% month-over-month.

Grocery stores saw a 13.2% decline in sales, while receipts at bars and restaurants were down 29.5% from the prior month as establishments kept their doors shut or switched to delivery only.

Sales were weak across a range of categories, but nonessential businesses were particularly hard hit. Sales at furniture stores dropped 58.7% and electronics fell 60.6%. Clothing sales plummeted 78.8% from March.

Year-over-year data showed the magnitude of the coronavirus-related hit to the retail industry. Overall retail spending in April was down more than 20% from the same month last year. Clothing-store sales in April were down nearly 90%, and sales at department stores, bars and restaurants, and sporting goods stores were all down nearly half.

Consumers increased online purchases this month from the same period last year, boosting online retailers by more than 20%. Sales at food and beverage stores also were up by 12% from the same month a year ago.

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output, and retail sales account for about a quarter of all consumer spending.

Friday’s report, which isn’t adjusted for inflation, didn’t track spending on most services, such as health care.

Fern Cole, a Denver bus driver, is spending less than usual and cooking at home “just because I don’t know if my paycheck’s going to be there next week.”

Ms. Cole, who lives in Westminster, Colo., said she has been limiting her outlays to roughly one visit to the grocery store a month and some online purchases of craft items and fish food.

“Every day I’m putting my life at risk, my job is to get people to and from work,” the 61-year-old said. “Now it’s really scary, you just don’t know who has [coronavirus].”

How quickly the threat from the virus diminishes and consumers regain confidence are factors in the economy turning around. A measure of consumer confidence rose in May as government stimulus checks improved consumers’ finances. The University of Michigan’s preliminary index of consumer sentiment rose to 73.7 from 71.8 in April.

The pullback in spending is hurting retailers. J.Crew Group Inc. recently became the first big chain to seek bankruptcy protection in what is expected to be a wave of defaults in the wake of the coronavirus pandemic. Luxury retailer Neiman Marcus Group Inc. last week filed for chapter 11 bankruptcy protection. J.C. Penney Co. is teetering on the edge after missing two interest payments. And restaurant chains Denny’s Corp. and Jack in the Box Inc. reported lower earnings and sales in their most recent quarters due to the pandemic.

“2020 is going to be a year of rebalancing,” said Under Armour Chief Executive Patrik Frisk during an earnings call Monday. The athletic-apparel retailer reported that about 80% of global business has been at a standstill since mid-March, and revenue may drop as much as 60% in the second quarter.

Retailers on both sides of the Atlantic are “trying to figure out how fast they can open and how fast the consumer is going to come back,” Mr. Frisk said.

Josh Wolfgang, owner of outdoor sports retailer SkiEssentials in Stowe, Vt., has been operating online only for about the past month, and said “people are looking for deals.” Bikes and Rollerblades are doing well, since “people are at home, they have their kids at home, they get a bike and go outside.”

That trend is also helping the boating industry, according to recreational boat retailer OneWater Marine Inc.’s CEO Austin Singleton. Sales “really came to a screeching halt” in mid-March, but have picked up in April and May, since boating is a leisure activity that allows people to control their social distancing and get outside.

Competition from European vacations, summer camps and festivals has been largely eliminated for this summer because of coronavirus shutdowns, and “that has driven a lot of business in our direction,” Mr. Singleton said.

Updated: 10-1-2020

U.S. Manufacturing Continues To Slow By 700,000 Fewer People Working

ISM, IHS Markit report solid demand at home and from abroad in September.

U.S. manufacturing activity continues to rebound from the sharp downturn last spring, when factories closed to contain the spread of the coronavirus.

A pair of new manufacturing surveys released Thursday shows firms saw solid demand domestically and from abroad in September, leading to backlogs of new orders.

The Institute for Supply Management said its purchasing-managers index of manufacturing activity registered 55.4 in September, indicating the fourth straight month of expansion. A reading above 50 indicates that activity is increasing, while a reading below points to a decline in activity.

Despite the gains, manufacturing activity in August remained 7.3% below its February level, according to Federal Reserve data released last month.

About 12.1 million people worked in American manufacturing in August, roughly 700,000 fewer than before the pandemic, according to the Labor Department.

Meantime, an ISM subindex of employment, at 49.6, indicated that factories continued to shrink their workforce in September, though at a slower pace than in previous months.

“The employment side, which generally lags everything, has been doing better since it troughed out several months ago,” said Timothy Fiore, who runs the ISM manufacturing surveys. “Overall everything kind of looks good.”

Data firm IHS Markit, in a separate survey also released Thursday, said its purchasing-managers index of manufacturing activity rose slightly to 53.2 in September from 53.1 in August. That survey showed a slight uptick in employment in September.

“Companies reported a marked upturn in demand for plant and machinery, which suggests firms are increasing their investment spending again after expansion plans were put on hold during the spring,” said Chris Williamson, chief business economist at IHS Markit. “Similarly, fuller order books helped drive further job creation as firms continued to expand capacity.”

The manufacturing results come amid indications that the economic recovery is losing momentum. Household spending rose 1% in August from the previous month, a slower pace than earlier in the summer, the Commerce Department reported Thursday.

Meantime, personal income fell 2.7% in August because of the expiration of expanded unemployment benefits.

Also, the Labor Department said first-time claims for unemployment remained high, at 837,000 for the week ended Sept. 26. Several major employers, including airlines, theme parks and restaurants have announced layoffs in the past few days.

The Labor Department is set to release its September jobs report on Friday. Economists surveyed by The Wall Street Journal expect it to show employers added 800,000 new jobs last month, pushing the unemployment rate down to 8.2%, from 8.4% in August. That would represent a historically strong pace of growth, albeit slower than August, when 1.4 million workers gained jobs.

Mr. Fiore pointed to several headwinds that could slow the pace of the manufacturing recovery. First, a rise in coronavirus infections this fall could prompt more businesses to shut down and workers to stay home. Second, schools’ move online could keep many parents home from work. Finally, uncertainty around the presidential election could prompt firms to postpone investments.

The picture is similar in Europe and Asia, where manufacturers continue to cut jobs even though they have recovered much of the ground lost during the coronavirus-induced lockdowns earlier this year.

Meanwhile, unemployment in the eurozone edged up in August, despite heavy government subsidies aimed at saving jobs and businesses.

IHS Markit said its manufacturing purchasing-managers index for the eurozone rose to 53.7 in September from 51.7 in August.

Much of that growth in activity was concentrated in Germany, where businesses reported a strong pickup in export sales. Germany has stood out among rich countries for the strength of its recovery, benefiting from resurgent Chinese demand for its machine tools and other investment goods.

The revival in Germany’s exports had a positive knock-on effect in economies that are closely linked with Europe’s manufacturing powerhouse, including Poland and the Czech Republic.

However, the European Bank for Reconstruction and Development lowered its growth forecasts for this year and next for 36 countries in Eastern Europe, North Africa and central and western Asia, since restrictions on activity intended to clamp down on the virus have lasted longer than expected.

Despite the revival in output and order books, manufacturers in the eurozone continued to cut jobs, although only modestly. The European Union’s statistics agency Thursday said 251,000 people lost their jobs in August, pushing the unemployment rate up to 8.1% from 8%.

Economists expect that rate to rise over the coming months as furlough plans become less generous and some businesses prepare for a slowing recovery, with fresh outbreaks of the virus continuing to damp demand.

“Globally, what we have seen is that exports of services are not recovering as fast as exports of manufactured goods,” said Beata Javorcik, the EBRD’s chief economist. “Some businesses will go bankrupt.”

Parts of Asia also saw a pickup in factory output, most notably India, where the PMI jumped to 56.8 in September from 52 in August, as export orders rose. However, even with that gain, jobs were lost.

Updated: 10-16-2020

Manufacturing Output In U.S. Unexpectedly Declined In September

U.S. manufacturing production unexpectedly declined in September, the first decrease in five months, pointing to a setback for factories as the pandemic drags on.

The 0.3% drop in output at factories followed an upwardly revised 1.2% gain in August, Federal Reserve data showed Friday. Economists projected a 0.6% increase, according to the median estimate in a Bloomberg survey of economists. Total industrial production, which also includes mines and utilities, decreased 0.6% in September.

The September decline underscores a softening in output at the end of a robust third quarter, as industrial production surged an annualized 39.8%. The figure nonetheless highlights a longer recovery period for factories amid supply chain disruptions, limited capital investment and weak export growth.

“Goods-producing industries have recovered faster than services, but activity won’t be immune from softening as the broad economic recovery loses steam,” Oren Klachkin, lead U.S. economist at Oxford Economics, said in a note. “Notably, production of goods for which demand surged in the wake of the pandemic, namely computers and autos, are losing momentum.”

At the same time, a separate report Friday showed momentum in U.S. household demand at the end of the third quarter. Retail sales in September increased a stronger-than-forecast 1.9%.

The Fed’s report showed the drop in factory output reflected weakness in production of motor vehicles and electronics. Auto production decreased 4% after sliding 4.3% a month earlier, while output of computers and electronic products fell 2.6% in September. Manufacturing excluding autos was unchanged during the month.

October Data

A pair of regional Fed reports on Thursday showed that manufacturer orders gained momentum at the start of the fourth quarter.

The manufacturing plant-use rate decreased to 70.5%, well below the 75.2% in February prior to the business shutdowns, today’s report showed. Total capacity utilization, which also includes mines and utilities, declined to 71.5% from a revised 72%.

The latest industrial plant-use rate remains below the 76.9% seen in February. Excess capacity weighs on corporate profits because capital is underutilized and it also signals business investment in new equipment will remain depressed and weigh on economic growth.

The Fed’s report showed utility output dropped 5.6%, while mining rose 1.7%, the first advance since January. Oil and gas well drilling increased 3.5%.

Manufacturing activity also accelerated in the Philippines and Vietnam, aided by an increase in export orders. But there were declines in activity in Thailand, Indonesia and Malaysia, an indication that the global economic rebound remains fragile and patchy.

 

Related Articles:

Argentina’s Economy Is In A Technical Default (#GotBitcoin?)

Trump Blames Business Setbacks On Incompetency Vs Recession He’s Causing (#GotBitcoin?)

India’s Spending Spree Slows As Debt Problems Become More Widespread (#GotBitcoin?)

Home-Price Growth Slows To Levels Not Seen Since 2008 (#GotBitcoin?)

Trump Claims “Billions” In Trade Tariffs While Diverting Hurricane Relief Funds For Border Detention

Bond Yields Sink To New Lows, Federal Deficits Skyrocket And Trump Back-Tracks On Tax Cuts

What Are YOU Doing NOW To Prepare For The Incoming Recession? (#GotBitcoin?)

Trump And Publicans Will Have Zero Chance Of Re-Election During Coming Recession

Majority Of Americans Stressed Over Being In A Mass Shooting – Trump To Blame?

As Global Order Crumbles, Risks Of Recession Grows (#GotBitcoin?)

U.S. Mortgage Debt Hits Record, Eclipsing 2008 Peak

U.S. Stocks & Treasuries Flash Recession/Depression #GotBitcoin?

Investors Ponder Negative Bond Yields In The U.S. (#GotBitcoin?)

Lower Mortgage Rates Aren’t Likely To Reverse Sagging Home Sales (#GotBitcoin?)

Financial Crisis Yields A Generation Of Renters (#GotBitcoin?)

Global Manufacturing Recession Weighs On US Economy (#GotBitcoin?)

Falling Real Yields (0.241% ) Signal Worry Over U.S. Economy (#GotBitcoin?)

Donald Trump’s WH Projects $1 Trillion Deficit For 2019 (#GotBitcoin?)

U.S. Home Sales Stumble, As Pricey West Coast Markets Suffer Declines (#DumpTrump)

Lower Rates Have A Downside For Bank’s Mortgage-Servicing Rights (#GotBitcoin?)

Central Banks Are In Sync On Need For Fresh Stimulus (#GotBitcoin?)

Weak Corporate Earnings Signal A Weak Economy (#GotBitcoin?)

Price of Gold, Indicator Of Inflation And Recession Surges (#GotBitcoin?)

Recession Set To Materialize In Approximately In (9) Months (#GotBitcoin?)

A Whiff Of U.S. Recession Is In The Air Again. Credit Trumponomics

Trumponomics Fails To Deliver As Truckers Cut Payrolls, Job Openings Fall & Tech Hiring Cools (#GotBitcoin?)

Trump Calls On Fed To Cut Interest Rates, Resume Bond-Buying To Stimulate Growth (#GotBitcoin?)

Fake News: A Perfectly Good Retail Sales Report (#GotBitcoin?)

Anticipating A Recession, Trump Points Fingers At Fed Chairman Powell (#GotBitcoin?)

Affordable Housing Crisis Spreads Throughout World (#GotBitcoin?) (#GotBitcoin?)

Los Angeles And Other Cities Stash Money To Prepare For A Recession (#GotBitcoin?)

Recession Is Looming, or Not. Here’s How To Know (#GotBitcoin?)

How Will Bitcoin Behave During A Recession? (#GotBitcoin?)

Many U.S. Financial Officers Think a Recession Will Hit Next Year (#GotBitcoin?)

Definite Signs of An Imminent Recession (#GotBitcoin?)

What A Recession Could Mean for Women’s Unemployment (#GotBitcoin?)

Investors Run Out of Options As Bitcoin, Stocks, Bonds, Oil Cave To Recession Fears (#GotBitcoin?)

Goldman Is Looking To Reduce “Marcus” Lending Goal On Credit (Recession) Caution (#GotBitcoin?)

Our Facebook Page

Your Questions And Comments Are Greatly Appreciated.

Monty H. & Carolyn A.

Go back

Leave a Reply