Jobless claims climb in latest report
MAPI forecasts slowing global growth in 2005
Semiconductor industry to slip in 2005
Factory orders climb in November
NAM asks manufacturers to visit Washington, D.C.
Parker Hannifin sells Wynn Oil to Illinois Tool Works
ISM: PMI increases again in December
Manufacturing trade association competition increases
Business concerns mix with growth predictions
Durable goods report signals expansion in 2005

Jobless claims climb in latest report
Initial claims for unemployment insurance surged 43,000 to 364,000 for the week ended Jan. 1, according to the Labor Department. The four week moving average of jobless claims increased 750 to 333,000.

The four-week moving average is generally considered by economists to be the more reliable of the two because it smoothes out week-to-week volatility. Both rates remained below 400,000, which is the level economists use to define a weak labor market and a stable one.

Continuing claims for unemployment insurance increased 61,000 to 2.8 million for the week ended Dec. 25. Continuing claims are those older than two weeks.

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MAPI forecasts slowing global growth in 2005
Recent dramatic shifts in currency and commodity markets, weaker-than-expected data in key industrialized regions, and continuing questions about the near-term outlook for the Chinese and Indian economies portend an uncertain forecast for the global economy.

Still, a new Manufacturers Alliance/MAPI report predicts global growth will rebound in 2006 following a slowdown in 2005.

In the MAPI Quarterly Forecast of U.S. Exports, Global Growth, and the Dollar (2004 Through Fourth Quarter 2006), economist Cliff Waldman expects a near-term softening of both industrialized and developing country growth rates over the next year before resuming a modest acceleration.

Waldman concludes that growth in the industrialized countries, which include Canada, the Eurozone, and Japan will slow from a projected 2.75 percent in the fourth quarter of 2004 to a low of 2.45 percent in the third quarter of 2005, before picking up to 2.9 percent by the end of 2006. The fluctuation will be due primarily to slowing events in the Eurozone and Japan along with the worldwide impact of continuous slowing in China.

Growth in the developing countries, which include China, India, Latin America, Mexico, and the Pacific Rim (excluding Japan) is expected to fall from an estimated 4.1 percent in the fourth quarter of 2004 to 2.9 percent in the fourth quarter of 2005, before gradually recovering to 3.9 percent by the fourth quarter of 2006.

The report projects that the dollar will decline by 5 percent against the industrialized countries’ currencies through the first quarter of 2005, then remain flat before resuming a 5 percent to 7 percent decline throughout 2006.

The alliance expects a modest depreciation of 1.5 percent in the dollar against developing countries’ currencies through the fourth quarter of 2005 before resuming a more accelerated 5 percent decline throughout 2006. This assumes that China takes definitive steps to liberalize the peg of the yuan against the dollar.

Waldman concludes that U.S. exports will slow from 8.3 percent annualized growth in 2004 to 8 percent in 2005 as decelerating global growth more than offsets any stimulation from the declining dollar, which can take more than a year to positively impact export activity.

As the economies in China, India, the Eurozone and Japan gain traction, and as the dollar decline begins to take hold, he sees an acceleration of U.S. export activity to 9.6 percent in 2006.

“While the spreading global slowdown should mute export growth in 2005, the dollar’s decline, presuming that it continues in an orderly fashion, along with a resurgence of steadier growth in China, India, the Eurozone and Japan, should create an acceleration in U.S. export growth in 2006,” said Waldman.

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Revenue may decline by 5.7 percent to $199.3 billion, a downturn that comes on the heels of 2004 annual revenue growth of 27 percent, and annual revenue of $211.4 billion, a new record.

“This downturn will be far less severe, because it is taking place within a relatively strong worldwide economy, an economy which is expected to grow by 4.3 percent in 2005,” said Frank Dickson, publisher of In-Stat's Microprocessor Report. “There are risks to the economy, however, such as petroleum prices remaining high, Middle East tensions not easing, and/or interest rates rising too rapidly. These risks could result in slower economic growth and a deeper and/or longer semiconductor downturn.”

In a recent report, In-Stat also found that:
• growth is expected to resume in 2006 and continue through 2008, before the industry suffers another mild downturn in 2009;
• new, mostly consumer-oriented products are diverse, and no single new product is expected to drive the industry to the extent that PCs and mobile phones have in the past; and
• greater diversity in markets will tend to make industry revenues more stable.

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Factory orders climb in November
New orders for manufactured goods increased $4.5 billion in November, or 1.2 percent, to $377.4 billion, according to the Department of Commerce.

Factory orders have been up six of the last seven months. The November increase followed a 0.9 percent October increase.

New orders for durable goods increased $2.7 billion, or 1.4 percent, to $198.2 billion, in November, revised from the previously published $3.1 billion increase.

Transportation equipment had the largest increase, $4.6 billion, or 8.8 percent, to $57.3 billion, due to non-defense aircraft and parts, which increased $3.8 billion.

Industrial machinery orders declined 33.5 percent in November, compared to a 2 percent increase in October. This volatile sector increased 15.4 percent in September, as well.

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NAM asks manufacturers to visit Washington, D.C.
Join manufacturers and their allies as they gather in the nation’s capital to promote a pro-growth policy agenda for U.S. manufacturing. The Manufacturing: Making America's Future forum and fly-in are sponsored by the Coalition for the Future of Manufacturing and the National Association of Manufacturers (NAM).

The forum and fly-in are timed to have the maximum impact on the 2005 legislative and political calendar.

The goals include educating lawmakers about the importance of manufacturing to their districts and states, and encouraging them to enact policies that:
• reduce costs;
• level the international playing field;
• promote innovation and investment; and, 
• ensure an adequate supply of skilled workers for our manufacturing base.

The forum and fly-in will be held in conjunction with the NAM’s Manufacturing Week in Washington: 72 Hours to Educate and Celebrate, a three-day event that revolves around the NAM’s biennial award reception that honors winners of the NAM Award for Manufacturing Legislative Excellence.

For more information on this event, visit www.nam.org/72Hours.

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Parker Hannifin sells Wynn Oil to Illinois Tool Works
Parker Hannifin Corp. divested its Wynn Oil automotive specialty chemicals business unit to Illinois Tool Works Inc. for an undisclosed amount. The divested business had annual revenues of approximately $110 million.

Based in California, Wynn Oil develops and manufactures chemical car care products and maintenance equipment for the automotive industry. The business was acquired with Parker's July 2000 purchase of Wynn's International, a producer of seals and sealing compounds.

"Wynn Oil is a strong and profitable business, with a very hard-working and talented staff," said Parker chairman and CEO Don Washkewicz. "Our goal was to find a strategic partner for Wynn Oil that could grow the business and better serve customers, employees and distributors, and ITW is a great match."

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ISM: PMI increases again in December
Economic activity in the manufacturing sector grew in December for the 19th consecutive month, while the overall economy grew for the 38th consecutive month, according to the nation's supply executives in the latest Manufacturing Institute for Supply Management (ISM) Report On Business.

The PMI for December registered 58.6 percent, an increase of 0.8 percent compared to the November reading of 57.8 percent.

"December's PMI, driven by a significant increase in the New Orders Index, is very encouraging as growth has accelerated for the second consecutive month," said Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee. "This completes a strong year for manufacturing based on the ISM data, as the overall index averaged above 60 percent for 2004. While there is continuing upward pressure on prices, the rate of increase is slowing and definitely trending in the right direction."

Comments from respondents this month focused on inflation, margins and seasonal issues. While many manufacturers are enjoying strong sales, there is concern that inflation is taking its toll on margins, thus reducing profits. While energy and basic commodities are the drivers behind the higher prices, the responses this month show signs of a peak in some commodities.

"December continued a trend of strong growth in the manufacturing sector as 2004 closes with significant momentum going into the first quarter of 2005," said Ore. "The sector struggles with inflationary pressures, but strong demand is a consolation. Manufacturing inventories have grown in five of the last seven months; however, those respondents increasing their inventories indicate that current and expected demand requires higher inventory levels."

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Manufacturing trade association competition increases
A new survey showed an increasingly competitive environment for manufacturing trade associations, increased government relations activities, and increasing outsourcing of core functions due to changing business demands and the advent of Sarbanes-Oxley.

The Manufacturing Associations Practices 2004 Survey was conducted by the Council of Manufacturing Associations (CMA), a division of the National Association of Manufacturers (NAM), representing more than 200 associations including more than 100,000 firms and companies.

“We’re seeing a rapidly shifting landscape in manufacturing trade associations due to increased competition and the demands of a global business environment,” said CMA executive director Stephen Gold, who is also a vice president of the NAM. “Trade associations are proliferating, creating competition that forces them to respond faster to their members and to the issue environments in which they operate.”

"It’s no longer ‘What have you done for me lately?’" said lead researcher Michael Sherman. "It’s ‘What did you do for me today?’” 

Roughly seven in 10 of those surveyed now consider e-mail their primary means of communicating with their members. More than 85 percent use online services to distribute association and industry news, and three-fourths make their member directories available electronically.

Two of the most common new activities among manufacturing associations are product R&D and industry advertising and marketing. Six out of 10 associations are involved in global cooperative ventures with other associations; 55 percent provide export information; and half participate in trade shows outside the United States. Asia is the most popular focal point for international activities.

More than 100 associations representing most of the Fortune 100 participated in the study. The average participating association had a budget of slightly more than $5 million and 23 staff.

“Companies may be joining more small associations to achieve representation on specific issues,” Sherman said. “But the small associations often join together to approximate the clout of larger, broader organizations.”

Roughly half of those surveyed say their government relations activities have increased over the past two years.

“There is more global competition in business, and increasing need to stay abreast of government activity that affects the bottom line,” said Gold.

Trade associations in the survey saw revenues increase 8 percent between 2002 and 2004, while expenses increased 5 percent. Virtually all manufacturing associations now outsource specific staff functions with payroll and Web design being the most common.

Nearly three in five now have audit committees and more than seven in 10 say their top executives must now verify the accuracy of association financial statements, due to Sarbanes-Oxley legislation.

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Business concerns mix with growth predictions
At a time of year when many reflect on past performance and look toward the future, there is an increasing sense of concern shared by global business leaders on their outlook for profitable growth and competitive advantage during the next five years.

This is according to a new survey released by Bain & Co., a global business consulting firm.

Those business leaders anticipate that major changes will reshape their companies over the next 10 years, with:
• three-quarters acknowledging the need to redefine their core business;
• nearly 70 percent seeing a need to add a major core capability; and,
• two-thirds admitting that relationships with core customers require redefinition.

In spite of the fact nearly half of the global leaders surveyed project growth rates of more than 20 percent over the next five years, those leaders overwhelming believe it will be more difficult to sustain profitable growth.

Bain's survey analyzed beliefs about growth, competition and business challenges among senior executives of 261 companies in North America, Europe and Asia-Pacific. Survey findings were consistent across regions and were based on in-depth interviews conducted with executives in October 2004.

"Executives are increasingly distressed over their organization's ability to compete globally," said Chris Zook, head of Bain's Global Strategy Practice and author of the study. "With shrinking reaction times, growing sources of cheap labor and increasing attacks from different and more aggressive global competitors, many executives are asking: What do we do?"

For the manufacturing and automotive sectors, "more rapid globalization of competitors" was most frequently identified as a "major factor" in maintaining a competitive edge (68 percent), followed by "global sourcing as an equalizer" (58 percent).

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Durable goods report signals expansion in 2005 
The National Association of Manufacturers (NAM) and the Manufacturers Alliance/MAPI welcomed a favorable report on durable goods from the Commerce Department.

The $3.1 billion, or 1.6 percent, increase during November was a fine way to end the year, the two groups agreed.

NAM president John Engler characterized the report as good news at the end of the year that promises good things in 2005.

“Though there’s certainly much work to do in the New Year to make sure our recovery and expansion continue, this is a great way to end the year,” said Engler. "U.S. manufacturing finally shook off its extended recession in 2004 and is poised to lead overall economic growth again next year."

Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, said the increase shows the industrial expansion will continue at a moderately strong pace.

“The recent decline in the value of the dollar should accelerate the growth in U.S. manufacturing exports and hold down the rate of increase in imports," he said. "A drop in commodity prices, particularly oil, has been a welcome relief and should take some pressure off of profit margins."

Meckstroth added: “This favorable business environment will encourage firms to buy capital equipment, an important generator of growth in the manufacturing sector."

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