Leading indicators this week point to a heating economy, and it’s affecting manufacturers both on the upside and downside.
Manufacturing is a key indicator because it tends to predict conditions nationwide, according to experts who read the economic tea leaves.
Says Diane Swonk, chief deputy economist for First Chicago NBD Corp.: “The manufacturing sector continues to outperform the overall economy, and there’s no reason to think it won’t continue that way.”
Leading the charge, she says, is the auto sector and farm-equipment manufacturers, including Peoria-based Caterpillar Inc.
Because of work stoppages last year, she says, auto inventory dropped by about 350,000 units while export demand strengthened, especially in Latin America and Canada: “Consumers abroad are buying while consumers at home close their pocketbooks.”
But keep an eye on farm equipment.
Swonk sees rising prices and profits in agriculture worldwide, plus an interest in agriculture by emerging markets.
“China has been focusing on the industrial side,” she said. “They found it was rewarding to think about the agricultural side again, and they are buying agriculture equipment worldwide.”
“Agricultural profits and farm income have been very good, nationally and internationally. China is getting back into the game again,” Swonk said.
Bantam-weight competitors: Even as demand in giant-size markets like the auto industry heats up, small suppliers like strobe light producer Mellish & Murray Inc., at 1715 W. Carroll Ave., are being squeezed to reduce prices.
“It’s extremely competitive out there,” says Cari Murray, vice president and general manager. She is the fourth generation in the 102-year-old family enterprise.
“We’re finding we have to re-evaluate everything we are doing, from the manufacturing process, the technology we are using and the computers. We’re changing everything.”
That’s a challenge for a firm with 45 employees. But Murray has an ace in the hole.
She turns to the Chicago Manufacturing Center, 3333 W. Arthington Ave., for help in finding services common for big companies.
“Small companies have trouble accessing the kind of resources the large companies can buy, like top-flight consulting services,” said Helen Squires, spokeswoman for the center, which is funded by government agencies and client fees.
The center says helping small businesses stay afloat created 125 jobs in Chicago in the last 10 months, saved 150 jobs and caused targeted companies to increase sales by $7 million.
A new push is on to help small companies become exporters.
Tellabs expands: Meeting the rush for demand head-on, Lisle-based Tellabs Inc. is nearing completion of its $33 million telecommunications manufacturing plant in Bolingbrook.
By midsummer, it will begin to produce its Titan family of digital cross-connect systems for telephone and wireless service providers.
“Tellabs is growing 30 percent-plus a year,” says John Kohler, vice president of manufacturing. New manufacturing facilities help control costs and improve profitability, he said.
The company, which received the Illinois Chamber of Commerce “Invest in Illinois” award last month, is adding about 500 jobs in Lisle and Bolingbrook in the next few years.
Luxury trucks: Manufacturers of those big 18-wheelers are testing the concept of luxury trucks that could cost up to $200,000 apiece.
Freightliner Corp., the Portland, Ore., subsidiary of Germany’s Daimler Benz, displayed a full-scale prototype of its proposed “Penthouse” sleeper cab at the Midwest Truck Show in Louisville. Two beds fold into the roof and rear of the cab to create a mobile home for long-haul truckers.
Truck cabs now cost anywhere from $45,000 to $120,000.
