The most recent monthly Industrial Heating Equipment Association’s (IHEA) Executive Economic Summary released in June shares that there are pessimistic and optimistic readings of the data at every turn. While companies seem to be a little confused about whether to expect constriction or growth, the report rightfully notes that "[the] reality is that the U.S. economy is diverse and at any given moment there are sectors that are growing and shrinking – especially in the manufacturing community." Today's summary highlights the diversity of what to expect in the economy.
A quick aside: The dominant factor influencing global economics is war in the Ukraine. The direct effects of Ukrainian agricultural product disruptions -- like wheat and corn -- is compounded by sanctions on Russia which leads to a decreased supply of oil. This stress in the energy market has triggered global inflation that everyone has experience with. For manufacturers, the price of steel and aluminum is rising fast. "There is nothing especially surprising about this fact," the economic summary reads, "but the impact on operating costs can’t be underestimated."
75% of manufacturers are small businesses, which means they will experience the smallest economic changes very keenly. So, while capacity utilization numbers are growing and have just reached into the acceptable utilization zone -- that is, between 80% and 85% where there is relatively low downtime and few bottle-necks -- many small operations businesses will take longer to adjust to new machinery purchases or employees.
To gauge whether or not to prepare for a recession, one should look at the order activity and employment habits of manufacturers. If order activity is stable or increasing, this is a good indicator that manufacturers expect to be able to fulfill more orders and grow with demand. Similarly with employment, when manufactures hire and keep a stable number of workers instead of laying off or decreasing the number of workers, this is also a good indication of a growth economy. Both of these conditions are shown to be true, reports this month's economic summary.
To end on an encouraging note, there isn't reason to believe that most manufacturers are concerned about a recession. With 55.1% expecting business growth and 31.1% expecting business stability, manufacturers remain on track with their capital investment plans to handle these positive expectations. Part of this is linked to the shortage of workers with the right skill set; so expect manufacturers to continue investing in technologies and robots to meet this lack.
Executive Director
IHEA
Check out the full report to see specific index growth and analysis which is available to IHEA member companies. For membership information, and a full copy of the 11-page report, contact Anne Goyer, executive director of the Industrial Heating Equipment Association (IHEA). Email Anne by clicking here.
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