Is it possible that everyone else is wrong? Respondents to FORGING's annual Business Outlook Survey are takinga decidedly positive approach to the arrival of a new year, or at least a calm assurance. A majority of respondents expect their total forging shipments to rise in 2013, or to remain mostly even, year-on-year; less than 20% expect their deliveries to decrease over the current year's results.
It's an outlook that is confirmed by an IMS Research report published this month forecasting industrial capital spending will continue to increase, and when the results are in for 2012 it will have risen 6.8% over the 2011 level. That study also predicts that total industrial capital spending in the Americas will pass $1 trillion by 2015: oil-and-gas is the sector drawing the most investment, more then one-third of all spending, IMS reported.
But that is an analysis that seems to filter out some external factors: the same source offers a more sober reading of recent manufacturing activity, as documented in the widely referenced Institute for Supply Management's purchasing managers' index (PMI) for manufacturing. There, IMS is concluding that although manufacturing volumes are rising slightly as 2012 closes, new orders have been "roughly flat, and unfilled orders continued to fall very rapidly.
"Continued production growth needs better orders," the IMS analysis stated, "The drag from weak export orders is being compounded by the uncertainty over the ‘fiscal cliff,' which is paralyzing domestic decision-making."
Of course, … the fiscal cliff. It's phenomena of policy that has infested productivity, as investors prepare themselves to take a recessionary jolt they expect once income tax rates spike and automatic federal spending cuts take effect, all in the absence of an agreement on a new federal budget as 2013 draws near. IMS calls it "an eminently fixable problem," but one with no resolution in sight.
Is this plausible? Would a drop off the cliff be enough snuff industrial demand that otherwise is apparently quite healthy? And what of the global economy? While there have been doubts brewing all year long over the sustainability of China's economic growth, IMS has found improvement in that nation's PMI, indicating stability in the near-term forecast. But, Europe remains strapped by the insolvency crises in several EU member states, which has been inhibiting regional investment and expansion through most of 2012 — and reminding the rest of us of the contagious damage that can be done even to normally steady economic systems once public debt becomes unsustainable.
It is in this atmosphere that forgers' view of economic conditions stands out. Forgings are among the handful of essential products for an industrial economy — as critical protein or vitamins are for healthy nutrition. Without forgings, an economy cannot grow.