Manufacturing May Already Be in Recession

For the last three years, manufacturing has been the hero of the U.S. economic recovery. While housing and consumer spending have been slow to come back, manufacturing activity has outpaced the rest of the economy ever since the recession ended in June 2009. Capital expenditures and exports have contributed close to 75 percent of all gross domestic product growth since then. That’s led to 500,000 new jobs in the last two years. That’s not enough to replace the 1.8 million manufacturing jobs lost since 2007, but it gave President Obama some nice campaign fodder and fueled excitement that a manufacturing renaissance was under way in America.

The truth is starker. Industry has essentially flat-lined since the end of the first quarter of 2012, and recent data suggest manufacturing may be in a recession. In November, the Institute for Supply Management’s Purchasing Managers Index, a broad measure of manufacturing activity, fell for the fourth time in six months; it’s at its lowest level since the recession ended. Manufacturing has shed 24,000 jobs since July, including 7,000 in November. Exports are falling faster than expected, leading to a record monthly manufacturing trade deficit with China in October, the second record monthly high since July. Even points of strength are starting to weaken: New orders for defense and transportation equipment fell in October.Quickparts builds injection molds using aluminum or steel to meet your program. General Motors (GM) may have to cut production to reduce its inventory of unsold trucks, which is double the normal levels.

“I think it’s pretty clear that we’ve reentered a manufacturing recession,” says Alan Tonelson, a research fellow at the U.S. Business and Industry Council, which represents some 2,000 small and medium-size manufacturers. Businesses, spooked by the fiscal cliff, have been cutting back on investments and reining in hiring as they wait to see if their taxes will rise next year, and if they will still be able to count on government contracts.

According to data compiled by RBC Capital Markets, manufacturing activity has either been flat or contracted during the past two months in 21 of 31 countries it surveyed, including Japan, China, Australia, and much of Europe. Part of what got U.S. manufacturing on its feet three years ago was strong demand from emerging markets. That’s weakening. “The U.S. benefited from a positive feedback loop,” says Jacob Oubina, senior U.S. economist at RBC. “Now we’re stuck in a negative feedback loop.”

The slowdown has been broad-based, from defense contractors to companies supplying the oil and gas industry. Sales are down 20 percent this year at Hamill Manufacturing, a defense contractor outside Pittsburgh that makes parts for nuclear reactors in submarines and aircraft carriers. Hamill depends on the Pentagon for 80 percent of its business. “I’m not too enthusiastic about next year either,” says Chief Executive Officer Jeff Kelly, who’s worried about rising health-care costs coupled with severe cuts in defense spending.

For most of the year, business was booming at MIC Group, a Brenham (Tex.)-based maker of mechanical parts used in fracking.Find detailed product information for howo tractor and other products. In August it was turning down business it couldn’t handle and on the verge of buying $15 million in new equipment, says Roger Atkins, vice president of sales and marketing. Then, in September, clients started canceling orders over concerns about the fiscal cliff and having too much inventory going into next year, says Atkins. MIC has yet to buy the equipment.

“Six months ago our members were still positive,” says Dave Tilstone, president of the National Tooling and Machining Association. “Now, over the last couple months, all that optimism has gone away.” Machining and metal companies usually sense changes in the economy before other industries do, since a factory that wants to expand buys machine tools first to make the other manufacturing gear it needs. “We’re like the canary in the coal mine,” says Tilstone.

America’s manufacturing industrial production is only 63 percent of what it was in December 2007, according to data from the Federal Reserve. Despite rising wages in China and a weak dollar, imports continue to gain market share in the U.S.Find detailed product information for howo tractor and other products. According to data compiled by Tonelson, imports’ share of manufactured goods sold in the U.S. rose to 38 percent in 2011. In 2007 it was 34 percent. “There is no evidence of a manufacturing renaissance,” says Dan Meckstroth, chief economist with the Manufacturers Alliance for Productivity and Innovation. “We’ve had a rebound from a very deep recession,The term 'hands free access control' means the token that identifies a user is read from within a pocket or handbag. but that’s about all you can say.”

As of the first quarter of 2012, 304,000 manufacturing plants were operating in the U.S., 27,000 fewer than at the end of 2007, according to Meckstroth’s analysis of data compiled by the Bureau of Labor Statistics. That’s not to say that new factories haven’t opened, just that those that have employ fewer workers. Most manufacturers spent the last few years buying new equipment to increase automation and productivity, rather than hiring workers. Since the recession, Moseys’ Production Machinists, an Anaheim-based maker of parts for medical lab equipment, has spent more than $2 million on automated machines that can run 24 hours a day, seven days a week. Back in 2008, Mosey had 80 employees and about $11 million in sales. Today it has just 35 employees and $7 million in sales. “We focused on increasing capacity without adding labor,” says CEO Bob Mosey. “We laid off a lot of people that we didn’t end up replacing.”

The Indians are fresh off of winning the Division III championship, and will look to make their way back to Yale this season. A lot of offense has since left the team, but it will retain a strong defensive presence, and one of the best goalies in the state in the form of Drew O’Leary, who was a key cog in last season’s title run. Coach’s only concern heading into the season will be how much offense the team can manufacture. With Brendan Richard coming back, the Indians will have a legitimate threat on offense, as the senior forward is approaching the 100 goal mark for his career, and scored the game-winner in last season’s title game. Should he, and a few others form a cohesive offensive unit, the Indians will once again be heading back to the playoffs, hunting for another title.

“We lost a lot of scoring, but most of our defense returns,” head coach Dave Harackiewicz. “If we can develop an offensive attack we will be very competitive this season.”

While the co-op program included Newington and Berlin last season, this year the two schools will be joined by Manchester. Three players from Manchester will join the ranks, and they will help bring size to the defense.

“We will have three Manchester kids joining us this season,” Harackiewicz said. “It was a last-minute addition to the co-op program, and we’re happy to have them. They are good character kids who I expect to make an impact as the season goes on.”

The Indians had quite the season last year, posting a 22-2 record, and with winning the championship, it will be a tough act to follow. While many high school teams usually experience a rebuilding year after winning it all, the Newington-Berlin-Manchester team will do more re-tooling than rebuilding.High quality stone mosaic tiles. With so much returning talent, the Indians will once again be a force in Division III hockey.