U.S. manufacturing is strong, improving
U.S. manufacturing economy is strong and getting stronger, according to the “The Global 2017 Economic Outlook & Forecast” at the 2017 A3 Business Forum in January.
The U.S. manufacturing economy is strong-we are closing in on a record high (which occurred right before the Great Recession of 2008).
And overall economic output (gross domestic product, GDP) will be strong through the middle of 2018, according to Alan Beaulieu, economist and president of ITR Economics. His presentation at the 2017 A3 Business Forum in January was titled "The Global 2017 Economic Outlook & Forecast."
Growth and new capabilities of machine vision, industrial interoperability from the sensor to the cloud, and machine learning's advantage for robotics were among other highlights at the conference, which had record attendance of more than 525 attendees and showed record growth for constituent associations of A3 for robotics, vision and imaging, motion control and motors.
Robotics, vision, motion
Based on results from the recent quarterly survey by A3's daughter organization Robotic Industries Association (RIA), the first nine months of 2016 was a record-breaking period for the automation industry. A total of 23,985 robots valued at $1.3 billion were ordered from North American companies in this period, an increase of 7% in units and 3% in dollars over the same period in 2015. The record sales were driven primarily by a 14% increase in orders by automotive OEMs and component suppliers. The food and consumer goods also industry ordered 40% more robots compared to last year. And RIA estimates North American factories now use 269,000 robots, third only to China and Japan.
Similarly, the Motion Control and Motor Association (MCMA) quarterly survey showed that motion control shipments increased 5% in the same period. Sales to date have been driven by strong demand for actuators/mechanical systems (14% to 423 million), electronic drives (12% to $451 million), and motion controllers (6% to $119 million).
Quarterly results from AIA (the A3 association for vision and imaging technologies) showed that, while the vision market contracted in the first nine months, Q3 represented a notable increase in performance with cameras gaining 3%, lighting 5%, software 5%, and smart cameras 24%. In total, sales for machine vision components and systems in North America increased by 7% to $574 million in Q3.
Beaulieu presented eight key metrics, noting accuracy of 96.6% to 99.8%. He charts trends, using rolling averages.
The U.S. Manufacturing Production Index for 2017 is projected at 2.1% growth (see Figure 1). U.S. Industrial production also is getting stronger (Figure 2), and GDP is growing, despite claims by some that the economy is soft.
Too much debt
It's not permanently sunny, however. Beaulieu, who's also co-author of the book, "Prosperity in the Age of Decline," explained that because of mounting U.S. federal debt, lack of federal government resolve to balance the budget and reduce debt, and increasing baby boomer health-care costs, a global Great Depression is expected in 2030. That's only avoidable by annual reductions to federal debt by 2020, which is unlikely since projections show no balanced federal budget within the next 10 years (see Figure 3). (The best we can hope for, he joked, is a rapid death for baby boomers.) As debt payments overwhelm the budget, the choices are to borrow more or raise taxes possibly on the wealthy and businesses, he suggested.
Lag time; good old days now
Neither political party nor business confidence has a meaningful statistical effect on the GDP, he noted. And as for current political issues, such as immigration, tax reform, NAFTA, and the Affordable Care Act, it'll take about 18 months or more for any to have a real economic effect.
A note on math: These are the good old days. Because the economy is $18 trillion, the denominator of the fraction calculating growth is huge, compared to the $389 billion economy when Truman was president. Don't wait for consistent 4% growth again, Beaulieu said, because it won't happen with something so large. This is excellent growth for the size of the U.S. economy; the 1.9% GDP now exceeds the 1.3% average of the last 10 years and is near the 20-year average of 2.1%; the 30-year average is 2.4%. Opportunities are now.
Low-cost energy matters. Oil prices, up to $52/bbl in mid-January (Figure 4), will continue to increase, and the U.S. is in an envious position with enough oil and gas for the next 300 years. Energy, including the growing U.S. renewable base, is one reason manufacturers and people continue to come here. Also, U.S. CO2 emissions are down to levels prescribed in the Kyoto Accord, and the government forgot to tell us, Beaulieu said.
U.S., a good location
Foreign direct investment numbers show that more business is coming into the U.S. than leaving (see Figure 5). People want to set up shop here, near sourcing technologies, capital, and labor, which are all are good signs, Beaulieu said.
But the U.S. also needs strong trading partners. A trade war won't help and will slow exports. Protectionism is good for some, for some years, but it introduces inefficiencies in markets, and increases costs. Protectionism punishes some and helps others, but doesn't have a happy ending. Look at Brazil, which used to hold so much promise. Now it's more difficult to do business there than Russia or India.Business cycles and industries follow a natural trend, and some are leading indicators of others. A 10 trends graph shows where various markets are in the cycle (see Figure 6).
Unfilled manufacturing jobs
Manufacturing is the fourth largest private sector U.S. employer (Figure 7). Job openings in manufacturing are at an 8.5-year high, Beaulieu said. Changes in the purchasing manager index and capitalization utilization rates show additional improvement for manufacturing, Beaulieu suggested. With a good attitude, some skills, willingness to move to where the manufacturing jobs are in the U.S., and a passing drug test, a manufacturing job is available.
Another incorrect perception is that automation creates a net loss of jobs, but that's not so, Beaulieu said, because, if it did, then shipping more robots would decrease the number of jobs. That inverse relationship is not shown. (See Figure 8 and a related article, Control Engineering February edition, News.)
In fact, as Beaulieu suggested, many unfilled U.S. manufacturing jobs are available and unfilled. While not part of Beaulieu's presentation, the Association for Manufacturing Excellence cited 600,000 unfilled U.S. manufacturing jobs in July 2016. In addition, National Association of Manufacturers (NAM), citing Deloitte and the Manufacturing Institute, said over the next decade, nearly 3.5 million manufacturing jobs will likely be needed, and 2 million are expected to go unfilled due to the skills gap. Moreover, according to a recent report, NAM said 80% of manufacturers report a moderate or serious shortage of qualified applicants for skilled and highly-skilled production positions.
[Editor's note: CFE Media research confirms consistent year-to-year concerns about filling manufacturing positions.]
Better times, again
Even so, think again if you consider perceptions unlikely to change. Wages are going up, even adjusted for inflation, and the standard of living in 2017 is better than the 1970s, Beaulieu says, despite some public opinions otherwise. In addition, housing prices have recovered to prior 2008 crash prices.
He expects millennials, who number 86 million, will see faster wage growth with more companies competing for their technologically driven attitudes as the pace of 80 million baby boomer retirements increases.
"Perceptions change," Beaulieu observed. "In the 2030s, Millennials will be decision-makers. I'm betting they will make great decisions."
Mark T. Hoske is content manager, CFE Media, Control Engineering, firstname.lastname@example.org.
This article online includes additional information from Alan Beaulieu and other sources along with links.
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