Barr Group Aero Indicator
The trend for the industry was heading down, due primarily from the large proposed defense cuts that make up some 50% of all U.S. aerospace product spending. The good news is the commercial sector has filled the gap, and for the first time in many months, the Aero Indicator is up! The impact on our industry will affect our readings.
Since hitting a high of more than 105 last year, the index has continued to fall. In both January and February 2012, it was below 100, but in March 2012, it rose to 100.41. For the next six months the aerospace and defense manufacturing sector should grow at 0.41% annual rate. The defense side is contracting while the commercial side is expanding.
1. Aerospace Industrial Production
From a low of 94.51 a year ago, it hit 107.37 in February 2012, up 13.60% at an annual rate. This is way above the reading of only 95.18 for all U.S. manufacturing. Aerospace products and parts continue to be one of the healthiest manufacturing sectors in the U.S.
2. Aerospace Capacity Utilization
Capacity utilization for U.S. aerospace plants rose to 80.82% from 71.49% a year ago, a 13.5% annual rate. This is slightly above the 77.90% rate for all U.S. manufacturing. The percentage of factory floor space used will continue to rise.
3. U.S. Aircraft Production Workers
While the country still suffers from high unemployment, aerospace manufacturing continues to add jobs. In January, there were about 8,000 net new jobs, most of which were in production.
4. U.S. Aircraft Passenger Market
U.S. passengers totaled more than 63.4 million during November, 2011, up about one million for the same month a year earlier. The trend line is steadily up, with a 26% growth during the last 10 years!
5. U.S. Air Cargo and Air Mail
There is little change during the last 18 months with approximately 2 million tons of freight reported in November 2011.
6. U.S. Aerospace Net Profits
Fuel costs are responsible for about 30% of operating costs for the airlines, nearly as much of the DoD budget. Prices continue to rise by more than 20%. Aerospace profits, however, continue to be strong. In Q3 2011, aerospace profits were more than $5.7 billion, with the first quarter of 2012 is shaping up for another record.
7. DoD Spending and Aerospace
The forecast for FY2012 change to FY2013 is to fall by nearly 5%; O and M down about 4%; procurement down about 10%; RDT and E down 3.13%; MILPERS down 2.57%; and MILCON down a whopping 15.79%. Now is the time to plan.
8. Aerospace Trade
The latest figures continue to report exports are at two and half times imports. As the industry continues to grow, both imports and exports will see little change.
9. Sales of Civil Aircraft and Engines
Although Boeing and Airbus both report increased orders, general aviation, continues to struggle. The industry high in 2007 with 3,279 planes delivered, while 2011 saw deliveries down with the delivery of only 1,215, down 62.9%.
The aerospace manufacturing sector, unless otherwise noted, is NAICS3364 numbers.
Barr Group Aerospace recommends those companies who want to learn more about improving their own manufacturing competitiveness visit: bga-aeroweb.com/LEAP/LEAP-V2.pdf