Longbow Survey Shows Flat Demand

Feb. 6, 2009
Last Three Months of 2008 Show a Flat or Negative Demand in Manufacturing

Invenstment analyst firm, Longbow Research, Independence, Ohio, released a survey last month indicating that demand in manufacturing was predominantly flat or negative for the last three months of 2008. According to analysts Mark Douglass and Eli Lustgarten, reports of decreasing demand were more prevalent in December, accounting for 35% (versus 24% in October) while flat demand was basically unchanged at 44% (versus. 43%). The automotive, machine tools, pulp and paper, steel, ethanol, semiconductors and general industrial sectors were cited as particularly weak, with packaging, solar, oil and gas, beverage, wastewater, biodiesel and pharmaceuticals still showing life. MRO work is supporting many right now, but this pipeline is expected to last only about another three to five months.

Pricing remains strong year over year, but flat sequentially. Pricing remains up, with respondents reporting a year-over-year increase ranging from 3% to 12%. Forty-two percent now categorize prices as up less than 5% (versus 47% in October) and 54% observed increases of 5% to 10% (versus 50% in October). Pricing has remained stable sequentially, and there were no reported announcements of pending price increases.

One Ohio-based respondent said, “[Pricing for] products that came out more recently are pretty flat, because the raw material increases were already priced in. Anything that’s been out for a while is up 10-12%.”

Inventories remain in-line. The majority of survey respondents (59%) still have flat inventories (versus 76% in October) with upticks in increasing and decreasing inventories: 16% reported decreases (versus 5% in October), reflecting fourth quarter economic weakness, and 25% reported increases (versus 18%). Many of the contacts who stated that inventories were increasing cited strong local economies or efforts to win market share as the cause.

DCS Markets

Douglass and Lustgartin also discussed the market for what used to be called DCS systems...things like FactoryTalk and PlantWeb/DeltaV/AMS.

Their report says, “We also have indications that plant-wide software (e.g., Rockwell’s  Factory Talk and Emerson’s PlantWeb/AMS Suite) demand is waning due to the economic downturn. Even in good times, small- to medium-sized manufacturers have had difficulty justifying the investment costs and are especially leery now, while large multinationals have already transitioned. One integrator commented that many companies continue to look, but do not upgrade until the pain of not installing plant-wide software ‘hurts.’”

A Missouri-based distributor surveyed said,  “Allen Bradley (ROK) stuff is weak, but so is everything else. The only new business we’re generating is from people overhauling their production facilities. There are still some of those projects ramping up, and we have at least four months in our pipeline.”