EoW November 2013

Transatlantic cable

† As to Microsoft’s acquisition of Nokia’s handset business, it e ectively turns the Finnish mobile phone pioneer into the engine for the American rm’s ambitions. But Carolina Milanesi, an analyst at Gartner, told the New York Times that she believed the deal could help both companies. How? By prompting them to respond more quickly to the dynamism of the mobile market: “They need to move faster,” she said. (3 rd September) The advice should be useful to any phone maker seeking to gain ground on Apple and Samsung.

The economy

Manufacturing is on the rise in the US and set to make a bigger contribution to the expansion at home and abroad

A closely watched barometer of American factory activity – the index of the Institute for Supply Management (ISM) – climbed in August to the highest level in more than two years. Another report showed a rise in construction spending in July to the highest level in four years. Those outlays climbed 0.6 per cent to a $900.8 billion annual rate, the strongest since June 2009, the Commerce Department said. Readings above 50 in the ISM index indicate growth. The August reading posted by the Tempe, Arizona-based industry group was the strongest since June 2011. Up from 55.4 a month earlier, it took analysts by surprise. The median forecast in a Bloomberg News survey of 85 economists was 54. “American producers are leading a global manufacturing recovery that stretches from China to Europe as their economies improve,” wrote Bloomberg ’s Shobhana Chandra (3 rd September). “Resilient US demand for motor vehicles is prompting companies such as Ford Motor Co to expand, while further strides in construction are bolstering orders for building materials.” Brian Jones, a senior economist in New York at Société Générale, the French multinational bank, also saw both “a solid quarter for US manufacturing” and a wider trend. “Businesses are expanding production not only to meet demand but to also to build inventories,” he told Ms Chandra. “Manufacturing worldwide is impressing to the high side.” The pickup in other parts of the world is substantiated by gures cited by Bloomberg . In China, manufacturing strengthened in August, with one gauge showing the biggest jump in three years. Euro-area factory output also expanded at a faster pace than initially estimated, driven by a resurgence in Italy and Spain as the recovery in the 17-nation currency bloc started to build momentum. Good news could be found throughout the ISM report. The group’s US new orders measure advanced to the highest level since April 2011, while its gauge of export demand rose to a ve-month high. The index of orders waiting to be lled also climbed. At the same time, the report showed factory inventories contracting for a second month in August, while customer stockpiles shrank at the fastest pace since November. To Michael Feroli, chief US economist at JPMorgan Chase & Co in New York, the input from the supply managers was predictive of smoother sailing ahead. In an email to clients he wrote, “The combination of strong orders growth with weak inventory-building augurs well for future increases in industrial production.” † Automobile purchases – on track for the best year since 2007 – are also helping to power gains in manufacturing, which accounts for about 12 per cent of the US economy. Dorothy Fabian – USA Editor

Ohio redux

Led by aerospace and automotive, the state’s exports are on pace to set a record this year

The US International Trade Administration (ITA) on 8 th August announced that Ohio companies exported $25.3 billion worth of goods and services in the rst half of 2013. The total is three per cent higher than in rst-half 2012, and in fact exceeds that of any other six-month period in state history. At this pace, Ohio exports will reach $50 billion this year, the highest value ever. According to the ITA, an agency of the US Commerce Dept, transportation-related products led the way, with aircraft parts ($2.6 billion worth, or about 10 per cent of state exports) in rst place. Cars and car parts were close behind. Ohio is also seeing increased exports of machinery and metal fabricated goods. Susan Whitney, director of the US Export Assistance Center of Northern Ohio, said exports have risen steadily since 2010 to reach a record $48 billion last year. She credits the “National Export Initiative” launched by President Barack Obama in his 2010 State of the Union address. Ms Whitney told Robert L Smith, the economic development reporter for the Plain Dealer (Cleveland), “Because of the recession, many companies told me they would have had to lay people o , but for their exports.” One of over 100 domestic o ces of the US Commercial Service, another branch of the Commerce Dept, the centre serves the needs of Northern Ohio companies seeking to succeed in overseas markets. Exporters consult international trade specialists at either the Cleveland headquarters or a satellite o ce in Akron. The broader network includes o ces at more than 80 US embassies and consulates worldwide. † In an overseas initiative of another kind, Lubrizol Corp (Wickli e, Ohio) is opening a new plant in Guangdong Province, China, to make chemical additives for lubricants. Primarily intended for automotive applications, the products also will go into industrial uids, such as those used in metalworking. Peter Krouse, who covers industry in Northeast Ohio for the Plain Dealer , reported on 20 th August that the plant, under construction in the city of Zhuhai since October 2010, will include a research and testing facility. It will primarily serve the Asian market. The Zhuhai plant is the latest investment in China for Lubrizol, which has operations in 17 countries, 7,000 employees worldwide, and revenues exceeding $6 billion. The company is owned by Berkshire Hathaway (Omaha, Nebraska), the multinational holding company whose chairman, Warren Bu ett, is renowned for his investing acumen.

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November 2013