Slow forward momentum in U.S. manufacturing strategy is better than none

September 28, 2012

With a potential fiscal cliff looming in the not-so-distant future, U.S. manufacturers could be forgiven for feeling slightly downbeat.

Recent figures released by the U.S Commerce Department show that new orders for manufactured goods fell by 13.2 percent in August and the second-quarter growth rate has been adjusted from 1.7 percent down to 1.3 percent. Cuts in defense spending, the continued economic problems in Europe and an apparent reduction in long-lasting durable goods has led some manufacturing strategy analysts to claim that the industry is "struggling."

However there is a light at the end of the tunnel, because despite all the doom and gloom, manufacturing is still considered to be moving slowly forward, at a seemingly glacial pace but showing signs of movement nonetheless. Despite high-profile order cancellations at companies such as Boeing, other manufacturing firms are taking overseas orders and producing goods for U.S. companies.

According to the Financial Times, General Electric has just received a $1.2 billion order from Japan and Saudi Arabia to build gas turbines, while the boom in natural shale gas and increased implementation of renewables has also seen an increase in demand for the company's energy manufacturing technology. Cheaper power can help manufacturers, another small indication that forward momentum is better than none.

"There is always going to be a diverse range of investment in coal, gas, nuclear and renewables," said Steve Bolze, CEO of Water and Power at GE. "But we are seeing a little more of a shift towards gas and renewables."

The housing market is continuing to rise, with the Standard & Poor home price index increasing by 1.6 percent in August, the third consecutive month that it has shown a rise. There is even some good news on the employment front with figures showing, according to CNN, that despite 4.3 million jobs being lost in the first year of the Obama administration, 4.4 million jobs have been added since 2009 with the majority of them being in professional services, healthcare and manufacturing.

"The jobs recovery over the last 2.5 years has been a bit stronger than initially reported, although much work remains to be done to return to full employment," said Alan Krueger, the president's top economic advisor.

Overseas orders, slow job growth, the availability of cheap power and a rise in the number of people buying property. The country is moving forward at a slow pace, but any momentum should be warmly welcomed by U.S. manufacturers.