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Economy View
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Automation Economy: There Is Good News

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You may not know it from the media, but there is good news in the economic world.

For instance, nondefense capital goods new orders (excluding aircraft) are tracking 12.9 percent higher than last year on an annual basis. The rate of rise in the new orders trend is slowing, as we had forecast. Business-to-business spending is improving, and that bodes well for readers of Automation World. Keep the marketing and sales efforts up. The increased market share will help offset the margin erosion you may encounter next year as producer prices move higher and selling prices remain sticky.

The media reported that 80,000 jobs were created in October in the civilian labor force (non-farm, seasonally adjusted) and the news was referred to as “disappointing” and “dismal.” It was hardly that. The number quoted was seasonally adjusted, which is not our first choice. We prefer the un-adjusted figures, but we’ll get back to that. The 80,000 is a 0.06 percent increase from September—the average October sees a 0.9 percent increase. The 0.06 percent increase matches 2005 and 2007 (recovery years) and is better than 2006, 2008 and 2009. The number is not “dismal,” but actually encouraging.

Even more important is that 883,000 jobs were created on an un-adjusted (not seasonally adjusted) basis. That’s a steeper-than-normal 0.67 percent increase from September. Other than last October’s increase of 0.75 percent, this year’s increase was the best since 2004.

ON THE WEB:  Find more content from Alan Beaulieu and other economists via AutomationWorld.com. Visit bit.ly/ab_econview

September is usually a weak month for retail sales and you might expect sales to be down. Not so. The United States experienced the second strongest August-to-September rise in seven years, exceeded only by 2010. The seasonal trend is running within a normal historical range, providing a very good sign in terms of ongoing general economic activity in the United States. The National Retail Federation is projecting 2.8 percent growth this Christmas, slightly better than the 10-year average. Our fourth quarter projection is for a gain of 2.9 percent over the same quarter last year. Make sure you keep inventories lean; use strategic pricing rather than sporadic sales promotions; understand your local market; and increase your web/social media presence.

Industry news

Chemicals and chemical products production is at a 29-month high, up 1.7 percent from the same period last year (annual year-over-year basis). Production is anticipated to maintain its rising trend through 2013, with the pace of rise quickening in early 2012. The recent nine-year low in natural gas prices has led to a wave of relocation proposals in the chemical industry. Numerous chemical and fertilizer companies have announced plans to construct new facilities in the United States that use natural gas as a raw material, creating an abundance of additional capacity. With the drop in gas prices, American manufacturers are in a prime position to build new plants and expand production.

Food production declined slightly in September, but the overall trend remains flat. While production is not expected to slip below year-ago levels, the rate of growth will slow considerably by the end of 2011 to the more sustainable rate of 1.0 percent. Accelerating growth will take hold by mid-2012.

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The durable goods new orders data trend is moving higher, but the pace of the rise continues to weaken. Annual New Orders currently stand 9.7 percent above last year. Orders are expected to grow at a slower pace over the next two quarters but will remain above the year-ago level. Expect a stronger rate of growth to return by the second quarter of 2012.

Alan Beaulieu, [email protected], is president of the Institute for Trends Research (ITR). His weekly radio show, “Make Your Move,” can be heard at www.voiceamerica.com every Monday at 4 p.m. (Eastern time). Podcasts are available through voiceamerica and through iTunes. The ITR blog can be found at www.itreconomics.com/blog.

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