Sunday, October 25, 2020

V-Shaped Recovery in U.S. Manufacturing

This is interesting. Frankly, you have to read WSJ just to get straight economic news. 

From makers of cars to appliances to paint cans, U.S. manufacturers are falling behind on demand for goods that Americans are buying up as the Covid-19 pandemic drags on.

Factory production of consumer products has largely recovered after shutdowns this spring related to the virus crippled manufacturing across the country.

But as companies rush to restock, buyers are snapping up items at an even faster pace, leading to inventory shortages on goods that have recently surged in popularity with people spending more time at home and nervous about travel, executives, retailers and analysts say.

Five months after vehicle production restarted, car dealers are still seeing their stockpiles dwindle as public transit-averse buyers flock to the new-car lot and more people relocate to the suburbs and countryside.

A surge in home-improvement projects has left paint producers with not enough cans and appliance makers short on parts to produce refrigerators, kitchen mixers and washing machines. 

Supply-chain disruptions, worker absences and other challenges related to virus-proofing the workplace are further complicating manufacturers’ efforts to catch up. Some executives say it won’t be until early next year before stock levels return to normal.

“We do not have the inventory on the new side or the preowned side to meet the demand that’s out there,” said Mike Jackson, chief executive for AutoNation Inc., the U.S.’s largest publicly traded dealership chain. He said he expects availability to improve next year.

Some manufacturers with big consumer businesses, including 3M Co. MMM -0.53% , Harley-Davidson Inc. HOG 1.93% and Ford Motor Co. F -0.61% , are expected to report earnings for their latest quarters this coming week, likely offering more insight into the state of U.S. supply chains.

Production of long-lasting consumer goods, like appliances, trucks and furniture, was down nearly 50% in April from January levels, according to data provided by the Federal Reserve. But over the summer it rebounded, and in September, production was up 1% from January, the data shows.

For buyers, shortages can be a letdown. But for businesses, there is also upside. With inventory tight, auto makers and dealers say they are able to charge more for vehicles, driving stronger profits. And the pent-up demand should help keep sales robust into next year, some executives say.

“It’s good that we have an exceptionally strong order book, but we are, of course, trying to minimize any customer frustration,” Marc Bitzer, chief executive of appliance maker Whirlpool Corp. , said on a call last week with analysts.

After widespread plant closures this spring, manufacturers began bringing workers back in late May under new safety protocols, many scheduling overtime to make up for lost production.

But the restart efforts were slow-going at first, with suppliers also struggling to reopen and factories confronting high rates of worker absences.

It wasn’t until August that many U.S. factories were back to a normal level of production, but by then, demand had also bounced back faster than many had expected, depleting inventories and creating a bigger supply gap, executives and retailers say.

Auto makers, in particular, have been straining to keep up with demand for new vehicles as low interest rates, extra cash from stimulus checks and growing interest in owning a car have stoked sales.

Part of the problem is that auto makers continue to grapple with supply-chain shortages, particularly on items from Mexico, and aren’t always able to get parts needed for the features and configurations buyers want, analysts and executives say.

Still more.