By Andrew Tangel and Josh Zumbrun
American manufacturing has improved during the year since Donald
Trump's election, despite a lack of promised policy changes aimed
at lifting the sector's fortunes.
Instead, say executives and observers, business for makers of
items from bulldozers to semiconductors to food products is on an
upswing thanks to steady global economic growth, a rise in energy
and other commodity prices, and increased confidence. Overall in
the U.S., the sector is adding jobs.
Manufacturing "absolutely has improved relative to where we were
a year ago," said William Strauss, a manufacturing economist at the
Federal Reserve Bank of Chicago, who described the sector's growth
as modest.
Various measures of industrial production, spending, sentiment,
and employment have climbed, while stock markets have risen to
record highs partly in anticipation that the
businessman-turned-president would usher in reduced taxes and fewer
regulations.
"Global macroeconomic conditions are solid," Rockwell Automation
Inc. Chief Executive Blake Moret told analysts, citing "strong
orders" and optimistic forecasts for global gross domestic growth
and industrial production.
Rockwell -- the Milwaukee-based maker of factory hardware and
software to myriad manufacturers around the world -- said last week
it expected organic sales growth as high as 6.5% in its fiscal
2018, with an additional 2.5% boost from a weaker dollar.
Global energy and commodity prices have rebounded amid growth in
many economies around the world. That has led to more sales for
Illinois-based manufacturing giant Caterpillar Inc. and other
makers of heavy machinery used to extract natural resources.
In the process, Caterpillar has increased its domestic workforce
by 3,200 from the end of March to 49,700 at the end of
September.
"The overall environment is more business-friendly and we think
that has created some business confidence," Caterpillar Chief
Financial Officer Brad Halverson said in an interview.
Much of the progress in the past year has come even though
important parts of Mr. Trump's manufacturing agenda haven't come to
fruition, observers and business leaders say.
Earlier in his term, Mr. Trump promised to punish American
companies that shift production abroad, but such penalties haven't
materialized. Advisory panels that included top manufacturing and
other executives disbanded after Mr. Trump made controversial
comments about racial tensions in Charlottesville, Va.
A big item, the overhaul of U.S. taxes, is being debated in
Congress. But a $1 trillion infrastructure plan hasn't panned out.
Nor has repeal of the Obama-era health-care law.
Some business leaders have mentioned the slow pace of policy
change in Washington.
"We believe the lack of progress over key elements of federal
policies -- specifically health care, tax reform, and
infrastructure funding -- continues to exert downward pressure on
both public and private construction activity," C. Howard Nye,
chief executive of North Carolina-based Martin Marietta Materials
Inc. said in an analyst call on Nov. 2.
The White House didn't respond to a request for comment.
While the sector overall has improved, some industries and
companies have posted significant gains while others have continued
to struggle. Among 70 manufacturing sub-industries tracked by the
Labor Department, 19 have seen robust employment increases of 2.5%
or more since October, the month before the election. But over that
same period, 22 industries have seen employment decline, including
motor vehicles and parts manufacturing and aerospace.
The performance of America's largest manufacturing companies
also has been mixed. Of the 10 largest industrial companies in the
S&P 500, only Caterpillar, Honeywell Inc. and 3M Co. saw their
net income and earnings per share in the third quarter increase
from a year ago, according to data from Thomson Reuters I/B/E/S.
Net earnings and earnings per share have declined at General
Electric Co., Boeing Co., United Technologies Corp., Lockheed
Martin Corp. and General Dynamics Corp. Two companies -- United
Parcel Service Inc. and Union Pacific Corp. -- managed to increase
their earnings per share, while their overall net income
slipped.
Data points to a healthier sector this year, but it has
generated some mixed readings recently. An Institute for Supply
Management manufacturing gauge hit its highest level in 13 years in
September before dialing back in October.
The Federal Reserve's industrial production index hit a 9-year
high in April, though it has gradually declined in recent
months.
Employment numbers underscore the overall improvement. The
government has said U.S. manufacturers have added 156,000 workers
since Mr. Trump was elected in November 2016. That is a clear
turnaround from the loss of 16,000 such jobs during the final year
of Barack Obama's administration, although the recent growth hasn't
surpassed manufacturing payroll increases in 2011 and 2014, when
the sector gained more than 200,000 jobs.
Also, business investment has risen, a sign companies are
spending to increase productivity. In the first quarter, investment
in plants climbed 14.8% at a seasonally adjusted annual rate, the
highest since early 2014. Investment in equipment climbed 8.8% in
the second quarter, the highest in almost two years.
Spending on infrastructure has increased in countries like
China, buoying makers of construction equipment that sell to
builders there. And a weakened U.S. dollar is boosting exports by
making American goods cheaper abroad.
To be sure, manufacturing job growth could again slow if the
economy tips into recession or if there are disruptions in trade or
other geopolitical problems. Those factors could fuel a long-term
decline in the sector fueled by advances in automation and shifting
of production abroad.
Still, many business leaders remain hopeful Mr. Trump can still
deliver an infrastructure-spending plan and new trade barriers that
benefit domestic manufacturers.
American corporate chiefs and other observers added the
administration's actions to roll back federal regulations -- an
agenda that has moved ahead with less public fanfare -- is likely
to help in the long term. They also detect a boost in business
confidence that has led manufacturers to spend on capital projects
and hire more workers.
Harley-Davidson Inc. Chief Executive Matt Levatich added Mr.
Trump's administration has brought a welcome spotlight to
manufacturing and skilled trades.
"It hasn't yet really accrued into any specific policies, but
we're optimistic that just the attention and the awareness will
help shift people's mind-set about the role of manufacturing," Mr.
Levatich said in an interview.
Write to Andrew Tangel at Andrew.Tangel@wsj.com and Josh Zumbrun
at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
November 14, 2017 05:44 ET (10:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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