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Confident Manufacturers Hitting on All Cylinders

July 20, 2018 By Young Research

By Kev Llewellyn @ Shutterstock.com

American manufacturing is growing again, with the favorable winds of tax cuts and regulatory reform at their back, manufacturers are confident and busy. Sarah Chaney and Bob Tita report in The Wall Street Journal:

For now, the long U.S. expansion, now in its 10th year and being further fueled by recent business and individual tax cuts, appears to be paying dividends for American plants that churn out cars, appliances and business equipment.

“Activity right now is hitting on all cylinders. Demand is up, production is up, [and there’s] really robust hiring overall,” said Chad Moutray, chief economist at the National Association of Manufacturers.

Surveys show businesses feel confident in the economic outlook. Global growth, while slowing in some pockets, remains solid. Also, business investment has risen, a sign companies are spending to increase productivity. In the first quarter, investment in structures rose at a 16.2% seasonally adjusted annual rate, while investment in equipment climbed at a 5.8% rate.

Strength in business investment owes much to the rebound in the price of oil. Oil prices stopped falling in early 2016, then began to move higher, resulting in increased investment from energy firms that rippled throughout the U.S. economy.

Many larger industrial companies and manufacturers are expected to report strong second-quarter results in the next two weeks. Companies that sell parts and supplies to manufacturers are also benefiting from the improvement in the sector.

“A strong economy consumes our stuff more rapidly,”  said Holden Lewis, chief financial officer for Fastenal Co. , a distributor of screws, work gloves and other industrial supplies used at factories and construction sites.

Fastenal’s second-quarter sales rose 13% from a year earlier, and net income increased 42%. Fastenal’s customers typically don’t maintain large inventories of the company’s products, making it a bellwether of current demand.

Read more here.

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