U.S. consumer spending is picking up — at last people seem to be spending their cheap-gas dividend — and that is helping give an uptick in manufacturing as the first quarter of 2016 winds down.
But what about the rest of the year? And the rest of the world? China's rate of growth is slowing. Europe remains pretty stagnant. Japan's economy is shrinking; they're issuing bonds with negative interest rates.
If you follow the financial reports of U.S. industrial companies, you'll see lots of expressions of uncertainty about the future in 2016. Readers of Plastics News saw this first hand this in our coverage of Milacron Holdings Corp.'s year-end results.
Two executives — Tom Goeke, president and CEO, and Bruce Chalmers, vice president of finance and chief financial officer — both talked about the how the crystal ball is cloudy for the second half of 2016, in a conference call with financial analysts on March 1.
“I think ‘cautious' is the word,” Goeke said. “There are a lot of projects in the pipeline, but until they close you don't have an order. So stay tuned.”
Chalmers said: “The difficulty that all of us have in the industry is just lack of visibility as to what the second half of the year looks like. So we're approaching the year cautiously, and really focused on making sure that we're taking costs out as quickly in the business.”
Chalmers' comment is revealing. It reflects a broader uncertainty — not just from Milacron — about the third and fourth quarters of this year.
The strong U.S. dollar makes exports from the United States more expensive. That hurts multinational companies.
To be sure, there are some positive signs. The key automotive sector remains robust, as sales this year could even surpass the 2015 number of 17.5 million light vehicles. And U.S. manufacturing is stabilizing.
The Institute for Supply Management reported March 1 that its index of manufacturing activity rose in February to 49.5 percent, up from 48.2 in January. A reading below 50 does indicate the factory sector is contracting, but the number has been rising in the last several months.
Bradley Holcomb, chairman of ISM's Manufacturing Business Survey Committee, told the Wall Street Journal that the stronger picture “is largely driven by domestic orders and that's driven by consumer spending, ultimately.” Manufacturing could go back into expansion mode “in the next month or two,” he told the newspaper.
And at the Plastics News Executive Forum Feb. 15-17 in Naples, Fla., machinery executives in a panel discussion said U.S. shipments of injection presses could top 4,000 again in 2016, repeating the strong performance of 2015.
So the U.S. economy, and U.S. manufacturing, appear to be fairly healthy.
But there is one other major visibility killer: President Trump. Could it happen? At this point who knows, but the prospects of the shoot-from-the-hip Donald Trump becoming the leader of the most powerful country on earth is unnerving to many people, needless to say.
You hear about how major elections cause plastics processor executives to pull back investment, to wait and see what happens. But normally the U.S. presidential election barely registers a blip on the radar screens of most business people.
Well these are not normal times. The controversy keeps heating up — and frankly, threatens to fracture the Republican Party, considered the party of business interests. America itself is fractured, and a country seemingly in love with reality TV and entertainment could be about to get a reality TV Republican presidential candidate.
Business hates uncertainty. Will manufacturers sit on their wallets?
As Milacron's Tom Goeke said: Stay tuned.
Changes at the top
Two major plastics machinery executives are pulling back from their active roles— and the industry, and plastics journalists — will be poorer for it.
Peter Neumann, Engel Holding GmbH's CEO and long-time chairman, will withdraw from day-do-day management by the end of the year. And Helmar Franz, a longtime executive at Chinese injection press maker Haitian International Holdings Ltd., retired from his operational role at Haitian on Oct. 2 last year.
These are two men that Plastics News reporters sought out for comments about machinery — and even about current events like the VW emissions scandal, global economic issues and politics. Always insightful and well-spoken, Neumann and Franz certainly are leading figures in the plastics industry.
Bregar is a Plastics News senior reporter. Follow him on Twitter @machinerybeat25.
