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Manufacturing Slowdown Leading to UK Economic Contraction

By APICS Staff | 13 | 2 | January 15, 2013
Manufacturing Slowdown Leading to UK Economic Contraction

The United Kingdom’s economy shrank in the fourth quarter of 2012, according to the National Institute of Economic and Social Research. Part of the reason is slower-than-expected growth in industrial production, including manufacturing, mining and quarrying, and energy supply.

Additionally, the UK Office for National Statistics released data indicating manufacturing output dropped 0.3 percent month-to-month in November and 2.1 percent for the year, the Wall Street Journal [subscription publication] reports. Export demand is slowing, due to factors such as the euro zone crisis, weak business investments in manufacturing, and sluggish consumer and government spending. Low demand for midrange also has led Honda to cut 800 jobs at its main European facility in Swindon, England.  

The nation has experienced two recessions since 2008, and the possibility of a third exists, says Vicky Redwood, chief UK economist at Capital Economics. “A triple dip still seems to be looming,” she says.

Small-Business Optimism Rising Despite Economic Fears 

Even as the United States faced the prospect of the fiscal cliff, optimism among small-business owners rose at the end of 2012, according to a survey conducted by the National Federation of Independent Business (NFIB), the Associated Press reports.

Despite the increase, the NFIB’s small-business-optimism index remains near its all-time lowest level. Other survey results indicate small-business owners have better expectations of higher sales in 2013. However, employment in the small-business sector remains flat, and 52 percent of those surveyed say they are reluctant to take loans for their businesses. 

Survey: Auto Executives Prefer Gas Vehicles

What does the future look like for electric vehicles? Grim, according to a survey of auto executives by tax advisory firm KPMG, the Detroit News reports. While sales tripled in the United States in 2012, the survey found that electric vehicles are expected to only comprise a maximum 15 percent of global new-vehicle sales for the next 12 years. Additionally, many automakers plan to invest in better internal-combustion engines rather than electric technology.

Nearly three-quarters of the 200 global automotive executives say internal combustion has the capability to offer more efficiency and produce less carbon dioxide than electric in the next decade. Ford’s recent EcoBoost engines are an example of this idea in action.

“When you look at current [miles-per-gallon] estimates for new cars, it’s very evident that automakers are continuing to significantly improve engine efficiency,” says Gary Silberg, national automotive leader for KPMG. “What’s clear is that the internal combustion engine is not going anywhere soon.” 

Weak Fourth Quarter for PC Sales

Once again, the PC business seems to be in trouble. According to data by research groups IDC and Gartner, PC sales dropped 6 percent in the fourth quarter of 2012 compared to 2011, the Guardian reports. Gartner also indicates the release of Windows 8, Microsoft’s latest operating system, failed to revitalize the market.

This represents a “structural shift” for the industry, says Mikako Kitagawa, principal analyst at Gartner. “Tablets have dramatically changed the device landscape for PCs, not so much by cannibalizing PC sales, but by causing PC users to shift consumption to tablets rather than replacing older PCs,” she says.

Meanwhile, Microsoft Windows head Steve Sinofsky blames a supply shortage of touchscreens and touchscreen devices for his product’s sluggish sales. There also “was some misalignment between where products were distributed and where there was demand,” he says.

Target Combats Showrooming with Price Matching

Retail giant Target recently announced it would match online prices in its stores year-round, including from online sellers such as Amazon, Walmart, and Best Buy, in order to decrease the effect of “showrooming.” However, as CNET reports, this is unlikely to make much of an actual difference to the showrooming effect, where customers browse products in person but spend their money online.

The reason? Online price-matching plans, including recent holiday experiments by companies including Best Buy, require buyers to work for savings and potentially visit multiple stores to get a good deal. Additionally, the fine print on Target’s policy restricts price matching to identical products, including brand name, size, weight, color, quantity, and model number, as well as other restrictions.

Finally, there are logistics concerns before price matching can truly work, Larry Dignan writes. Ideally, information systems would be aligned across multiple sales channels and pricing adjusted on the fly. He argues that showrooming will continue until consumers can trust retailers to match prices without having to work for it. 

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