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Manufacturing & The Economy

Leading Economic Indicators Rise 0.7% in April

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.7% in April to 122.3, following a 0.4% increase in March, and a 0.2% decline in February.

“April’s sharp increase in the LEI seems to have helped stabilize its slowing trend, suggesting the paltry economic growth in the first quarter may be temporary,” said Ataman Ozyildirim, economist at The Conference Board. “However, the growth of the LEI does not support a significant strengthening in the economic outlook at this time. The improvement in building permits helped to drive the index up this month, but gains in other components, in particular the financial indicators, have been somewhat more muted.”

Manufacturers Who Embrace Smart Technology Experience Growth

According to the results of the ASQ 2014 Manufacturing Outlook survey, only 13% said they use smart manufacturing within their organization. Of those organizations that claim to have implemented smart manufacturing however, 82% say they have experienced increased efficiency, 49% experienced fewer product defects and 45% experienced increased customer satisfaction.

Of the organizations that reported using smart manufacturing, cost was the primary challenge, followed by access to necessary infrastructure and overcoming resistance from employees. Thirty-three percent have applied them at the plant levels, and 29% have integrated smart manufacturing across all levels of the organization. Of the manufacturers that have not implemented smart manufacturing, interest, cost and resistance from management continue to stifle deployment, according to the survey. 

Manufacturing PMI Eases to 16-Month Low in May

At 53.8 in May, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) fell from 54.1 in April and signaled the weakest improvement in overall business conditions since the start of 2014. Slower new order growth was a key factor weighing down on the headline index in May, while faster job creation was the main positive development since the previous month.

Latest data indicated that overall new business growth softened for the second month running and was the weakest since January 2014. Moreover, new export sales decreased marginally in May, with a number of manufacturers noting that the strong dollar had a negative influence on competitiveness in external markets. In terms of domestic demand, survey respondents noted that energy sector investment spending remained a key area of weakness in May.

Manufacturing output growth eased further from March’s six-month high, which firms largely attributed to softer new business gains. The latest increase in output volumes was the slowest recorded so far in 2015, but still broadly in line with the post-recession average. 

Goldman Sachs Forecasts Crude at $50 a Barrel By 2020

“Goldman Sachs is out with a note this morning titled New Oil Order predicting oil will stay at lower levels for the rest of the decade,” Bloomberg is reporting.

“The note is meant to predict what companies are poised to do well in an environment with lower oil prices, but the call for $50 just by itself is notable. Other market analysts have made predictions for oil to move at least slightly higher over the longer term, as they forecast that non-OPEC related supply will start to shrink. Goldman, on the other hand, reckons that the shale boom will continue even as OPEC refuses to cut back on production.”

U.S. Industrial Production Contracted in April

In April, U.S. industrial production decreased 0.3% for its fifth consecutive monthly loss, the Federal Reserve reported on Friday. Manufacturing output was unchanged in April after recording an upwardly revised gain of 0.3% in March. In April, the index for mining moved down 0.8%, its fourth consecutive monthly decrease; a sharp fall in oil and gas well drilling has more than accounted for the overall decline in mining this year. The output of utilities fell 1.3% in April. At 105.2% of its 2007 average, total industrial production in April was 1.9% above its year-earlier level. Capacity utilization for the industrial sector decreased 0.4% in April to 78.2%, a rate that is 1.9% below its long-run (1972–2014) average. 

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