Intelligent Manufacturing € August € 1996 € Vol. 2 € No. 8

North American Market Looks Strong for Manufacturing Sector

U.S. manufacturers expect moderate growth in their sector to continue at least through October, according to a survey conducted by Dun & Bradstreet Corp. (Wilton, Conn.). D&B's survey of 1,000 manufacturing executives also indicated that the steady expansion that characterized the manufacturing sector during much of the first half of the year continued through the past three months.

"Manufacturers are optimistic that sustained high productivity, full employment and low interest rates will enable the economy to support continued moderate expansion through the third quarter and beyond," said Joseph W. Duncan, D&B's vice president and chief economist. "The outlook for new orders has picked up. With few exceptions, manufacturers expect continued steady growth in demand from consumers and other businesses for most categories of durable and non-durable goods."

The Dun & Bradstreet Manufacturing Survey is summarized by three composite Industrial Sentiment Indexes (ISIs) covering three different time frames: the coming three months, the past three months, and the coming 12 months. Each ISI is made up of five component indexes: production, new orders, unfilled orders, exports and finished goods inventories.

"After being fairly conservative for much of the first six months of the year, manufacturers appear confident that demand will continue both from businesses and consumers," Duncan commented. "Many manufacturers are increasing production levels and appear willing to bear the costs of higher inventories in order to take advantage of sustained economic expansion for the foreseeable future." Manufacturers expect some increase in their production costs in the coming three months, and they hope to pass some of those costs along to their customers.

Meanwhile, north of the border, manufacturing is one of the fastest growing sectors of the Canadian economy. In fact, manufacturing is a key contributor to that country's competitiveness in the world market and critical to Canada's future success, according to research released by Deloitte Touche Tohmatsu International (DTTI) (Montreal, Quebec, Canada).

The research lays to rest the rumored demise of Canadian industry, and urges other countries to reassess the purported poor health of their own manufacturing sectors. The findings counter the widely-held belief that the Canadian service sector is dominating the economy.
The DTTI findings, identified by the firm's Institute for Manufacturing Research, place manufacturing among the leaders in both real annual revenue growth and investment. In 1995, the manufacturing sector comprised fully 20.0% of the Canadian economy, up from 18.6% in 1992. More strikingly, manufacturing investment has grown by 6.5% per year, nearly four times the overall economy average of 1.8%.

"Manufacturing has been falsely represented as a dying segment of the economy, depicted to trail both the burgeoning service sector and the public sector in its contributions to Canada," asserted Jean-Pierre Naud, national director of manufacturing for Deloitte & Touche Consulting Group/Canada. "While there are many factors contributing to the success of the manufacturing sector, it is clearly outperforming other segments of the economy," he noted. "The challenge for Canadian companies is to increase their productivity and investments while diversifying their export base to capitalize on the lucrative growth potential of emerging markets."

Many Canadian manufacturers have begun focusing on market niches, and have made investment in R&D a high priority, Naud added. "Biotechnology, telecommunications and transportation equipment are key areas showcasing Canadian success, and other industries are poised to follow suit."

"The Canadian example demonstrates that the global marketplace clearly has not destroyed manufacturing," added Michael J. Fradette, chairman of the DTTI Manufacturing Sub-Committee. "In fact, we have found that those countries with strong manufacturing sectors, like Canada, are far better suited to the rigors of international competition. Canada has been very successful in penetrating the U.S. market; however, it cannot maintain this relationship at the expense of developing a diversified roster of trade partners."

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