According to a report from international consulting firm PWC, the industrials sector is expected to continue to prosper for the remainder of 2015 as larger corporate buyers seek to acquire improved technology, facilities and people. The US Federal Reserve’s decision to keep interest rates low has substantially lowered the cost of M&A funded by debt. For companies with limited growth opportunities, acquisitions are a natural path to bolstering market share.
Manufacturers may be more cautious with inventory, production, staffing and capital expenditure strategies if US industrial production growth remains flat in the coming months.US industrial production of manufactured goods unexpectedly fell 0.2% in May 2015 compared to the month before. The recent stagnating US industrial output has sparked concern among some economists that US manufacturing may be in a technical recession. Economists polled by MarketWatch had expected to see May industrial production growth of 0.2%. Manufacturing activity has slowed as the strong dollar has made US exports less competitive in overseas markets. In addition, the decline in oil prices since mid-2014 has reduced investment in new equipment by energy producers. Overall global economic weakness also has contributed to reduced demand for US manufactured goods.
According to data from the Institute for Supply Management (ISM) industries in the industrials sector reporting growth in manufacturing include paper products; printing and related support activities; furniture; primary metals; nonmetallic mineral products; and food, beverage, and tobacco products. Three industries reporting a decline include textile mills; apparel, leather, and allied products; and computer and electronic products.
Posted by John Hammett.