Durable Goods

IHEA Monthly Economic Report: Two Sides of the Same Coin

/ HEAT TREAT ECONOMIC NEWS

The monthly Industrial Heating Equipment Association (IHEA) Executive Economic Summary released in June provides some bad news and some good news about the U.S. economy status. Referring to the Leading Economic Indicators, the nation is in one of the lowest spots it has been for 23 years. A silver lining: This low point is not as low as other drops (2000-2001, 2007-2009, and 2020).

While this certainly shows the nation in a difficult spot, the report continues with some encouraging news. Even better, the heat treat industry can find positive impacts with the U.S. continuing to increase reshoring efforts as well as labor shortages helping with job security and job availability for industry workers.

The economic indices demonstrate that "[t]he majority of the data . . . shows solid performance and even the declines are relatively minor."  There are drops in these sectors:  Steel Consumption, Metal Pricing, Purchase Managers Index, Capital Expenditures, and Transportation Activity. Five indices show increase or at least holding steady: New Home Starts, Industrial Capacity Utilization, New Auto & Light Truck Sales, Durable Goods, and Factory Orders.

In New Auto and Light Truck Sales, the numbers are looking good. The report indicates this comes as a surprise, but it's good news for those manufacturing new vehicles.

"Consumers are still in a good mood, unemployment numbers are still low, car loans are still cheap and getting cheaper as interest rates fall."
Source: IHEA

The Steel Consumption index shows lots of ups and downs. Certainly there are still some supply chain issues, and the demand for construction of office space has been low during/since the pandemic. Growth stems from the reshoring movement as well as in construction for manufacturing facilities.

"The good news for steel is that manufacturing has been the driving sector for construction due to this investment in new technology that needs upgraded facilities."
Source: IHEA

The Purchasing Managers' Index measures industrial purchases for manufacturers. The PMI is going to drop if the purchase managers feel that the economy is slowing. Raw materials and other purchases are slowing down here, as the data shows.

"Right now, there are twenty nations registering under 50 and the US is now back among them at 48.4."
Source: IHEA

Conversely, Durable Goods is staying strong. Vehicles, appliances, even electronics are selling. Putting the PMI and this Durable Goods data together shows the two sides of the coin very clearly. Maybe the nation is just in economic slowdown, not entering dangerous recession.

The level of durable goods activity has been remarkably stable given all the turmoil in the overall economy."
Source: IHEA

Anne Goyer, Executive Director of IHEA

IHEA's report points out, "the U.S. is a country so large and diverse that it can easily host both recession and growth." With the majority of the indices holding steady or, at worst, seeing minimal drops, the coin toss of economic future doesn't seem too extreme in either positive or negative directions.

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 IHEA. Email Anne by clicking here.

 

 

Find heat treating products and services when you search on Heat Treat Buyers Guide.com

 

IHEA Monthly Economic Report: Two Sides of the Same Coin Read More »

IHEA Monthly Economic Report: Elephants and Mice

/ FEATURED NEWS, HEAT TREAT ECONOMIC NEWS

The monthly Industrial Heating Equipment Association (IHEA) Executive Economic Summary released in April starts with an analogy of current world events compared to a scene from the animal kingdom. The statement, "when elephants fight it is the mice that suffer," is used to describe the "elephants", the U.S. and China. There's not a lot of good that comes when two major world economies continue to disagree all while still depending on each other for supplies and material goods.

How does this analogy include the heat treating industry? Heat treaters come under the "mice" category, and there are definite hardships that continue to plague supply chain, production, and demand; as the "elephants" battle. China is putting up all sorts of obstacles on their exports, and now the U.S. is dealing with the Biden administration's push for the automotive industry to convert electric vehicle production. "How does the U.S. manufacturer avoid becoming the mouse that gets trampled by this fight between elephants?" the IHEA report questions. "The simple assertion is that the U.S. has to find alternative sources for the materials and commodities that have been provided by China. This may be simply stated but accomplishing this will be anything but simple."

An examination of the economic indices shows how the tension between nations seems to be affecting numbers. A majority of the sectors see drops: Steel Consumption, Industrial Capacity Utilization, Metal Pricing, Capital Expenditure, Durable Goods, and Factory Orders. However, 4 indices show, if not improvement, steady progress: New Auto/Light Truck Sales, New Home Starts, Purchase Managers Index, and Transportation Activity.

Good news for heat treaters in the automotive sector is that demand for cars and light trucks is still high. This is tempered with banks that are becoming more guarded in offering car loans since large numbers of people are not keeping up with their loan payments. Another concern creeping in is the future of traditional vehicles since the push for EVs is becoming apparent. The "mice" have a lot to think about for the future of automotive sales.

 

"The most recent factor [for volatility in this market] is the push to force adoption of the electric vehicle through putting severe limits on traditional vehicle mileage performance."
Source: IHEA
The 3-pronged influences in the steel industry - construction, vehicle manufacturing, and oil and gas pipeline - are declining overall. The report says that 2024 could be even worse than the current year.

"Oil and gas demand [one of the 3 relevant sectors] has started to improve as the daily commute resumes and that will spur more demand for pipelines."
Source: IHEA
This decline in PMI seems to be common around the world, as the U.S. is only 1 of  over 20 nations that are seeing a downturn. The slight uptick for the month might be due to the U.S. seeking different sources for supply chain; Mexico and India are filling the gap with available resources.

"The data is still not back to the expansion zone above 50 but it is headed in the right direction and is only slightly below that cut-off line."
Source: IHEA

Heat treaters know that durable goods include things like appliances and equipment. This sector is staying strong due to demand in markets like defense, multi-family housing, and machinery.

"There was a slight dip this month but overall, the sector is still solid."
Source: IHEA

"The transportation sector is often a leading indicator. . . .There is no reason to book a truck or plane or rail car unless there is something to move," states the IHEA report. Not only does this index rise when actual goods are being moved to demand, but the need for transportation comes when there is "anticipated demand." These numbers are encouraging, still staying on the positive side.

"Trucking and rail are still down from their past levels but it is worth noting that these numbers are still in positive territory."
Source: IHEA

Anne Goyer, Executive Director of IHEA

The mice are depending on the elephants to make some decisions that will benefit all. While the U.S. is still dealing with China, the report encourages making decisions based more on economical reasons rather than political clout. It seems the writing is on the wall to consider alternative nations from which to source supplies and raw materials. Within the U.S., there are raw materials that can be sourced; so maybe it is time to focus on those resources.

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 IHEA. Email Anne by clicking here.

 

 

Find heat treating products and services when you search on Heat Treat Buyers Guide.com

 

IHEA Monthly Economic Report: Elephants and Mice Read More »

IHEA Monthly Economic Report: Progress in the Face of Setbacks

/ FEATURED NEWS, HEAT TREAT ECONOMIC NEWS

The monthly Industrial Heating Equipment Association (IHEA) Executive Economic Summary released in March came out a little later than usual in order to incorporate recent global banking events. Even with bank failures, heat treaters can see the economy being part of an overall forward, albeit slow, recovery from the big recession during the pandemic.

Some of the banks to collapse were Silicon Valley Bank along with others such as Signature Bank and Republic Bank as well as Credit Suisse in Europe. The continual raising of rates, by the Feds, to fight inflation exposed weaknesses in banks that were already struggling. In the aftermath of this collapse, the report states uncertainty in how the Fed will respond to inflation in the future.

While the following report shows current stability in the economic indices, there is uncertainty following the banking collapse about how the economic future will unfold. The report states, "the industrial sector is still expected to decline although the speed of that decline has slowed
a bit. The projected readings are far below the trend line . . . but has started to show some very slow recovery." Only time will tell how the banking collapse will affect the future trends.

As a first example of continuous supply chain improvement, new automobile and light truck sales are up. New cars are being produced more consistently, and people are attracted to new vehicle purchase over the high-priced used vehicle market.

"Now that the supply chain crisis has started to recede the new cars are available again."
Source: IHEA

New home starts have about the same data as last month's report with the need still great for multi-family units are needed. The durable goods chart will be shown next since a good portion of that manufacturing is feeding into the new home builds.

"The good news for the manufacturer is that appliance demand is far higher with multi-family homes."
Source: IHEA

"There have been major gains in sectors such as vehicle manufacturing and aerospace..."
Source: IHEA

Another economic trend for heat treaters is the steel consumption sector. Construction is going strong, but know that this could drop when current projects get finished. There is hesitation in construction to embark on new projects because of financing concerns. As mentioned before, automotive is still doing well.

"Most of the big projects have started to get closer to completion and the economic environment is causing delays in starting new efforts."
Source: IHEA

Similarities can be seen in the industrial capacity utilization and the factory orders scenes. When the panic due to supply chain problems hit, companies bought up as much as they could. Now, there is the opposite problem of overstock. Inventory is going to have to be sold before these numbers will start working their way up again.

"Until these excess inventories are dealt with there will be slack reports."
Source: IHEA

"The dip in commodity pricing has already passed for the most part..."
Source: IHEA

Raw metal pricing saw a huge dip with the bank failures, and the report shows this is due to investor panic. Already the numbers are leveling out.

Anne Goyer, Executive Director of IHEA

Overall, the report is showing on-trend charts and indices. Even with the bank scares recently, the economy is not radically dropping and changing. Things are straightening out - slowly, slowly - as the recession moves more and more into the rearview mirror.

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 IHEA. Email Anne by clicking here.

 

Find heat treating products and services when you search on Heat Treat Buyers Guide.com

 

IHEA Monthly Economic Report: Progress in the Face of Setbacks Read More »

IHEA Monthly Economic Report: Certain Uncertainty

/ FEATURED NEWS, HEAT TREAT ECONOMIC NEWS

The monthly Industrial Heating Equipment Association (IHEA) Executive Economic Summary released in February shows that 2023 has already been forecasted in very different ways by expert analysts. Some are claiming that 2023 is just going to be terrible with rampant recession, pointing to the Purchase Manager's Index (PMI) as the true marker for what to expect. Then, there are the more moderate studies. The automotive and aerospace industries are looking up. The split forecasts might leave one spinning in confusion.

By taking a closer look at some of the specific industries, the economic summary shows that, "We don't quite know what to do with 2023 yet." The report reiterates this balance of highs and lows, with several bright spots for heat treaters, "In the more detailed breakdowns we see some significant variations – booms in automotive and aerospace but declines in machinery. Less volatility in fabricated metal and more volatility as far as primary metal is concerned."

The 10 economic indices show the aforementioned balance with almost half showing some increase, and the other sectors have a drop. A closer look below will show that even within the indices that are dropping, heat treat related markets are holding steady. Global events continue to  impact metal prices. Indices that are down include: New Automobile and Light Truck Sales, New Home Starts, Industrial Capacity Utilization, and the Transportation Activity Index. The up indices are Steel Consumption, Metal Pricing, PMI, Capital Expenditure, and Durable Goods.

High interest rates and high new vehicle prices are driving these sales down. Heat treaters, keep in mind that older vehicles are still on the road needing parts and eventually replaced.

 

"There is a threat of continued low demand."
Source: IHEA

With a look at new home starts, yes the index is down. There is a bit of a surprise within this big picture. Multi-family unit construction is actually up by 11%! This means heat treating is needed for construction components as well as appliances that go into these units. There is a relationship here with the durable goods pictured a few charts further down. Demand is high for these manufactured items.

"New homes are expensive, and loans to buy them are expensive as well."
Source: IHEA

Metal pricing reflects political events around the world - places like China and Peru where industrial metals and copper are sourced. Supply chain problems are correcting, but government conflicts continue. Currently the numbers are up, but quite a bit of uncertainty swirls.

“The sense is that prices are settling into a predictable pattern — for now.”
Source: IHEA

Durable goods are things that are supposed to last years. Appliances for the multi-family housing units shown above would be something in this category.

"A bigger demand for U.S. exports and most of these are high-value manufactured goods."
Source: IHEA

Robotics industry is booming too as is the automation sector. Durable goods also includes U.S. exports, and those are in high demand.

Anne Goyer, Executive Director of IHEA

2023, it would seem, is a year to "Keep calm, and carry on". The incredible lows due to the pandemic, and then some major highs coming out of that time are in the past. With some rising indices balanced with some low economic markers means, "companies are facing a year of unknowns after a couple of years of predictability."

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 IHEA. Email Anne by clicking here.

Find heat treating products and services when you search on Heat Treat Buyers Guide.com

 

IHEA Monthly Economic Report: Certain Uncertainty Read More »

Skip to content