With the Purchasing Managers’ Index showing an increase in the manufacturing sector for the seventeenth straight month, Markit Research reporting that its tracking of expansion in global manufacturing output and new orders accelerated for the first time in six months, and the Dow staying above 11,000 for several weeks, you have to wonder if the economic worm is turning.
Sure, we all heard that the recession ended, in economic terms, more than a year ago. Though that may be true, the effects of that change were certainly not widely palpable. I’m not about to argue that I see a full-blown economic recovery on the horizon, but I have been hearing an awful lot of positive news directly from some significant industry players over the past six months … and it’s not all about how good business is in Asia.
Running counter to the torrent of horrible economic news trumpeted daily from nearly every media outlet over the past several months, my contacts across industry have been regaling me recently with tales of not being able to keep up with orders. These contacts, who have asked to remain unnamed (for obvious reasons), work for a variety of company types — electronics distributors, automation and controls manufacturers, and materials manufacturers and suppliers. The common thread across all discussions was the incredible pace of business they have been experiencing for several months now.
Now, I’m sure it’s probably crossed your mind that these folks are just blowing smoke my way because they want me, as an editor, to think nothing but positive thoughts about their company. But most of these guys are the same people who were telling me how bad things were looking last year. Many were quite concerned about their future prospects.
When asked where this surge of business is coming from, I fully expected to hear what I’ve been hearing for several years — Asia. For some time now, the responses I’ve heard about business generation have run along the track of: “The majority of our business is coming from (insert the name of an Asian country here).” Today, I’m hearing that a significant amount of business is coming from North America — and not so much Canada and Mexico — but from the U.S. Make no mistake, the lion’s share of the growth for these companies is still Asia-centric, but the resurgence domestically has taken nearly everyone by surprise.
The trick has been pinpointing the reason for this surge. Has it resulted from the federal stimulus? Are U.S. factories finally updating equipment on a larger scale? Has there been a surge in specific types of exports?
Responses to these questions seem to indicate that it’s a little bit of all the above and not a whole lot of any one particular reason.
One somewhat troubling issue I have heard frequently is that some of the difficulty U.S.-based companies have been having keeping up with orders is due to the fact that they can’t get their orders filled fast enough by suppliers. Over the past couple of years, as the U.S. retreated, China and other Asian nations forged ahead. As a result, many companies in these countries are now the primary customers for many suppliers. The pullback in the U.S., coupled with the Asian surge, has led some U.S. and Western European companies to move from being a supplier’s number one or number two customer to being number three or four. Mind you, these are not small or mid-sized companies being relegated to third and fourth place. These are major, global concerns headquartered in the U.S. and Europe.
Since the announcement in August that China had surpassed Japan as the world’s second-largest economy, this news probably doesn’t come as much of a surprise. But it does raise the question: What are we to do about it? On one hand, there really is nothing we can do to turn back the clock — economies are always in flux and no one region or country will forever be on top.
From the standpoint of a designer who creates many of the products that help drive the economy, what are your thoughts on this topic? There’s an ongoing discussion at our Product & Systems Design Engineering group on LinkedIn at http://bitly.com/DNeconomy.
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