Ever have that dream where you're running down the road as fast as you can, and you don't dare look back because you don't want to see what's chasing you—and then suddenly you run out of road and just as you begin to fall, you wake up sweating and shaking?
It seems like the entire economy is having repeats of that dream, night after night. Publicly, the leaders of the major automation companies are trumpeting the significant advances they've made and the growth they've had since the dark days of 2009, and many of them have recovered as if they hadn't ever had that little drop-off in revenue.
In just the last three or four weeks, ABB, Rockwell Automation, Invensys Operations Management, Emerson Process Management, Siemens Industry and Schneider Electric have all announced significant increases in bookings and profits over the last time we surveyed the field in December 2010. We're sure you've noticed that those vendors are in the Global Top 50. Most of the Top 50 have revealed that their projected sales funnels are full, perhaps into 2014 and beyond. Backlogs are up, too.
Last year, we said we'd probably paint a rosier picture for you than we had before. Unfortunately that's not really going to happen. While some asset owners are spending on CAPEX (capital expenditure) for new automation systems and OPEX (operations expenditure) to optimize the systems they have, and the automation vendors are reporting fantastic results, there is that possibility that the highway is going to end suddenly in a broken overpass.
So What's Wrong?
What's wrong is that the entire economic world is scared to death. This is a consumer-driven economy, right? Well, consumers in North America and Western Europe, at least, have mostly stopped consuming in droves. Why? Well, for one thing, their retirement plans and other investments have taken 30% to 40% hits, about half of the consumers that own houses are underwater (at least in the United States), and unemployment in the largest segment of that economy (the United States) is somewhere between the officially reported 9% and the probably more realistic 15% number. On top of that, most consumers are worried about losing their own jobs.
But wait! There's more!
In the Eurozone, the emperor Euro appears to be underdressed, to say the least. First Ireland, now Greece and Italy, next Spain, Portugal, and perhaps then we'll go back around the loop again. All of a sudden, people are beginning to question the strength of even the French economy. So far, there have been no defaults, but just the fear of one has caused global stock markets to plunge.
Then too, there's the "Crazy Eddie" effect. From an award-winning science fiction novel by Dr. Jerry Pournelle and Larry Niven, The Mote in God's Eye, Crazy Eddie is the one who leads the garbage workers out on strike for higher wages the day after the city has declared bankruptcy. Does this sound a little like former Greek Prime Minister George Papandreou to you? He's certainly not the only Crazy Eddie either.
And then, there's China.
Bill Strauss, senior economist and economic advisor for the Federal Reserve Bank of Chicago noted in his presentation at Rockwell Automation's "Manufacturing Perspectives" during Automation Fair 2011 that it is very hard to get economic data out of China, and some data manipulation has to be done to make it make sense. What we know is that the Chinese economy, after a decade or more of double-digit growth is now running at a semi-official 9% growth rate, but it might be 6%, or it might even be slightly negative.
We better hope not. The Chinese government has made some significant promises to the rural poor—the people still living in huts with dirt floors, some of them within a half-days' walk of Shanghai or Beijing that they, too, would be able to live the good life of televisions, air conditioners, computers and a car—the whole consumer economy lifestyle. These people are expecting results, and as Chinese history has shown, when they don't get results, the government loses the "Mandate of Heaven," and civil unrest or worse ensues. The last time China dissolved into regional warlordism was in the 1920s after the death of revolutionary leader Dr. Sun Yat Sen. This time, the possibility exists that any such warlord would have nuclear missiles. At any rate, a destabilization of China would have, as the policy wonks say, significant adverse effects on the global economy.