- 06 February 2007 -
Key Economic Indicators Point in the Right Direction

The surface finishing industry is primed for another good year, based on newly released economic indicators. What amounts to mostly positive news caps off a month of reports showing the economy is bouncing back from last year's slowdown without an accompanied surge in prices.

On the labor front, U.S. employers added more than 100,000 workers—evidence of an economy growing at the moderate pace predicted by the Federal Reserve. The increase followed a 206,000 rise in December that was larger than previously estimated, the Labor Department reported. On the down side, the unemployment rate climbed to 4.6%, the first increase in three months.

Separate reports, however, showed factory orders and consumer confidence on the rise. More jobs are helping boost U.S. consumer confidence, which last month approached a five-year high, according to the Conference Board. The proportion of Americans who said jobs were plentiful was the highest since August 2001.

Consumer spending, which accounts for about 70% of the economy, propelled a rebound in growth last quarter. According to published reports, the economy grew at a 3.5% annual rate in the final three months of 2006, up from a 2% pace in the prior three months, as spending rose the most since early 2006.

The spike in consumer spending is being felt at the manufacturer level, as orders placed with U.S. factories rose more than forecast in December. This movement is based on higher demand for business equipment, motor vehicles, and aircraft, a sign manufacturing may weather its current slump, Bloomberg News reports. The 2.4% increase followed a revised 1.2% hike in November that was more than previously reported, according to the Commerce Department.

Rising orders signal that manufacturers may expand production in early 2007 after automakers and other goods producers slashed inventories, detracting from growth at the end of 2006. This is another sign of firmer economic growth.
Automotive, a key end-use market for metal finishing, took a hit last month following reports that U.S. car sales dipped nearly 5% in January, as domestic producers slashed low-profit sales to rental companies. While Ford and GM reported big sales declines, the silver lining—some analysts say—is the Big Three domestic automakers are finally getting their production in line with demand. That demand continues to shrink, as the three Detroit-area U.S. automakers' share of the market fell to 50.6% from 55.7% a year earlier, according to a published report.

Overall, these findings represent mostly good news for our industry. Most economic indicators appear to be pointing in the right direction, a clear sign that 2007 is shaping up to be a good year for the metal finishing sector.
-Greg Valero, g.valero@elsevier.com