ONLINE EXCLUSIVE: IDC Cites Encouraging Signs for Manufacturing
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Jeannette Spalding, contributing editor
In presenting its top manufacturing predictions for 2012, IDC Manufacturing Insights experts also reported on positive movement in manufacturing revenue and in spending growth for specific sectors of manufacturing value chains. The IDC projections were drawn from International Data Corporation (IDC) and IDC Manufacturing Insights studies, industry contacts, and IDC’s own industry experience.
Signs of Optimism
“The global performance index is our database of 850 manufacturing companies,” said Bob Parker, group vice president of IDC Manufacturing Insights and IDC Retail Insights. “Last year, we talked about net profiit margins getting back to pre-global financial crisis levels, while revenue remained off peaks. You can see revenue returning to pre-recession peaks, and margins are holding up, despite upward pressure in materials prices. The performance of manufacturing companies has been quite good.”
Parker also reported that consumer confidence has recovered and is now up to 64.1, based on the December Reuters/University of Michigan Index of Consumer Sentiment. Unemployment also has shown some improvement, he noted.
“If we look at where we think the economy is going, specifically how the manufacturing companies are going to do, we believe there is this renewed promise,” Parker said. “It is a different market, but we have seen a solid capital goods recovery. Innovation leadership and consumer resilience is there.”
Activity has been up and down in purchasing new equipment, specifically mining, oil, and gas in emerging regions, he said. Talk is circulating in the industry about energy coming from natural gas reserves, mitigating some energy cost disadvantage that some mature economies have, specifically the United States. In terms of skill, the talent war is on. It is a real challenge for manufacturers to find qualified people to do the work.
“Manufacturing companies are sitting on a lot of cash and starting to decide that they have to stop doing stock buy-backs and really start investing in things,” Parker said. “We are seeing investing not necessarily in capacity, but in capital. There’s a nuance there, but it is not just about being able to produce more. It’s about being able to produce more broadly.”
Value Chain Spending Growth
Parker also reported spending growth projections in specific segments of individual value chains — asset-oriented, brand name-oriented, engineering-oriented, and technology-oriented.
“We are seeing good overall growth for the asset-oriented value chain; chemical in particular is doing well,” he said. “You can see some established segments in the brand-oriented value chain, such as food and beverage, projected to experience excellent growth. In engineering-oriented value chains, we are going to see a lot of research coverage around service delivery. We also are seeing healthy growth in the technology-oriented value chain as well.”
The percentages represent spending growth projections for 2012 compared to spending in 2011 within the four value chains:
Asset-Oriented Value Chain (AOVC)
Chemical – 6.8 percent
Metals – 5.4 percent
Pulp/paper – 4.8 percent
Other processes – 4.9 percent
Brand-Oriented Value Chain (BOVC)
Health/beauty – 7.9 percent
Food/beverage – 7.4 percent
Apparel/footwear – 6.3 percent
Overall, including additional (BOVC) segments – 6.8 percent
Engineering-Oriented Value Chain (EOVC)
Farm construction and industrial machinery – 6.6 percent
Auto – 5.6 percent
Aerospace – 4.8 percent
Total, including additional (EOVC) segments – 6.3 percent
Technology-Oriented Value Chain (TOVC)
Components – 5.6 percent
Equipment – 6.1 percent
Other high tech – 6.4 percent
Mixed Bag Internationally
On the international front, Pierfrancesco Manenti, head of research practice for Europe, Middle East, and Africa (EMEA), IDC Manufacturing Insights, reports that the forecast is differentiated by global regions. Emerging economies do continue to flourish, led by China, which is expected to grow by approximately 9 percent. Nevertheless, many of these emerging economies are showing signs of imminent slowdown, he noted. There are particularly troubling signs in Europe.
“We are at a critical economic juncture in Europe with the Euro currency crisis, and there is evidence pointing to a new recession around the corner,” he said. “This depends on how the crisis is managed. The Eurozone is expected to grow only 0.6 percent in 2012, compared to the U.S. GDP growth expectation of 1.9 percent.”
