Monday, September 29, 2014

US Manufacturing Renaissance Starting to Happen (excerpt)

Over the past few years, there has been lots of buzz about the coming manufacturing renaissance in the US. The central concept is that plentiful and cheap natural gas will convince manufacturers to expand or to move production to the US to cut their energy costs. Labor is still cheaper overseas, but it isn’t as expensive as it once was in the US. Besides, the IT revolution has increased factory productivity with more automation, including robots and the “Internet of Things.” The recent strength in the dollar could be a spoiler if it continues since it reduces the global competitiveness of US exporters and provides a competitive edge for importers.

For now, the evidence is finally mounting that the highly anticipated new age in US manufacturing may be happening, though the jury is out on how long it will last. Let’s review the relevant data:

(1) Capital spending. One of the strongest components of real GDP in recent quarters has been real capital spending on industrial equipment. It is up 14.7% y/y through Q2, the fastest such pace since Q4-2011.

(2) Factory orders. Industrial machinery orders soared to a record high during July. They are up 37.3% y/y. Nondefense capital goods orders excluding aircraft rose to a record high during August.

Today's Morning Briefing: The Top? (1) Did BABA make the top? (2) The bears have been seeing tops since the start of the bull market. (3) The lamest argument. (4) Bears now focus more on technicals than fundamentals. (5) Another test for buy on dips. (6) “Death Cross” in the Russell 2000. (7) The “internal correction” continues from high to low P/Es as earnings outlook for SmallCaps cools relative to LargeCaps. (8) Manufacturing renaissance finally showing up in the data. (9) No renaissance in the Eurozone and Japan. (10) Updating our “Stay Home” investment strategy. (11) Have EMs become “story” stocks? (More for subscribers.)

No comments: