New report on additive manufacturing shows wide spread but limited use

PWC and the Manufacturing Institute has put out a new report on additive manufacturing (or 3D Printing – 3DP as they call it): 3D printing and the new shape of industrial manufacturing. (Click here for the full report in PDF format.)
Their bottom line:

• Manufacturers–from small job shops to multinational industrial products firms–are crossing the threshold from tinkering with prototypes to the production of final products.
• 3DP has the potential to shrink supply chains, save product development times and increase customization offerings to changing customers with expectations that products be tailored to their preferences and needs. Indeed, 3DP has arrived on the factory floor and into R&D.
• According to a PwC survey of US manufacturers, two of three companies are already adopting 3DP in some way — from experimenting with the technology to making final products.

One of the points I find so interesting is that last bullet about the widespread use of some form of 3D printing. Note that I carefully use the term “3D printing” rather than “additive manufacturing.” That is because few of the uses are for actually manufacturing. Most companies use it only for prototyping (24.6%) or are just “experimenting to determine how we might apply” (28.9%). Only 13.1% are actually manufacturing using additive techniques (9.6% prototyping and limited production; 2.6% production for products that cannot be made from traditional methods; 0.9% for final products/components).
According to the report, one of the most likely uses for actually additive manufacturing in the near term is in after-market and obsolete parts production. Such a widespread use could dramatically change the inventory and delivery components of the manufacturing cycle by creating a one-off “Just in Time” system for end use consumers.
The report also sees increased use in the near term of additive manufacturing for low-volume, highly specialized products. Like many analysts, they see additive manufacturing complimenting/supplementing rather than replacing traditional manufacturing.
Also like many other analysts, they see additive manufacturing as a “double-edge sword” for workers: displacing low skilled factory floor workers while creating highly skilled jobs for technically trained workers. Interestingly, they find that almost half of the companies interviewed felt that there is a “lack of current expertise in our company to fully exploit the technology.” This points to a large opportunity for our educational and training systems.
The challenge will be especially great for the worker training system to make sure that workers are trained in these new skills. That includes not just technical skills in operating the machinery (aka printers) but also design skills to take advantage of the technology and business skills to develop new products and markets.
I’ve noted before that additive manufacturing is a disruptive technology. This report gives us a better understanding of the current view from the manufacturing world. As the report states, “there are signs that the technology is on the cusp of being mainstreamed …” Companies and individuals need to get ready for the disruption.

June trade in intangibles

Some good news on trade. Today’s data from BEA shows the trade deficit shrinking by $3.2 billion in June, down to $41.5 billion. Exports were up by $0.3 billion over May while imports dropped by $2.9 billion. This was much better than economists’ forecast of a $44.8 billion deficit. In contrast to last month, our deficit in both petroleum and non-petroleum goods improved (see last chart below).
However, our surplus in pure intangibles dipped slightly to $13.3 billion as imports grew while exports remained steady. Most categories of pure intangibles were generally unchanged. Charges for the use of intellectual property paid out to foreign sources (imports) grew slightly, resulting in the small decline in the surplus.
The same story of little change also applied to our Advanced Technology deficit, which declined somewhat in June to $7.5 billion from $7.6 billion in May. An increase in aerospace technology exports was offset by increases in imports in other areas, mainly information and communications technology.
Advanced Technology goods also represent trade in intangibles. These goods are competitive because their value is based on knowledge and other intangibles. While not a perfect measure, Advanced Technology goods serve as an approximation of our trade in embedded intangibles. Adding the pure and embedded intangibles shows an overall surplus of approximately $5.9 billion in June, basically unchanged from May.
Intangibles trade-June14.png
Intangibles trade parts-June14.png
Intangibles and goods-June14.png
Oil goods intangibles-June14.png

Note: I am now reporting the trade data using the new BEA classifications for services trade, which breaks services into more categories. In the past, the intangible trade data was the sum of Royalties and License Fees and Other Private Services. Under the new classification system, intangibles trade data is the sum of the following items: maintenance and repair services n.i.e. (not included elsewhere); insurance services; financial services; charges for the use of intellectual property n.i.e.; telecommunications, computer, and information services; other business services.

Charges for the use of intellectual property n.i.e. is simply a renaming of Royalties and License Fees. This includes transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights.

Maintenance and repair services n.i.e., financial services, and insurance services, were previously included in Other Private Services. Telecommunications, computer, and information services is a combination of those two items (telecommunications and computer & information services) that were also previously included in Other Private Services. Three categories previously in Other Private Services — education-related and health-related travel and the expenditures on goods and services by border, seasonal, and other short-term workers — were removed and reclassified to travel. The new category of other business services is a continuation of the older category Other Private Services with those components removed.

Thus, other business services includes categories such as advertising services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; and industrial engineering services. It also includes personal, cultural, and recreational services which includes fees related to the production of motion pictures, radio and television programs, and musical recordings; payments or receipts for renting audiovisual and related products, downloaded recordings and manuscripts; telemedicine; online education; and receipts or payments for cultural, sporting, and performing arts activities.

For more information on the changes, see the March 2014 Survey of Current Business article, “The Comprehensive Restructuring of the International Economic Accounts: Changes in Definitions, Classifications, and Presentations.”

July employment

And in other economic news last week, the BLS announced that the U.S. economy added 209,000 jobs while the unemployment rate ticked up 0.1% to 6.2% in July. This was somewhat below what economists had expected (the Bloomberg forecast was for 230,000 additional jobs) but still considered relatively good (but not great) news.
The number of involuntary underemployed (part time for economic reasons) remained basically steady in July. The number of those who could only find part time work actually declined while the number of workers part time because of slack work rose. The total involuntary underemployment remains well above pre-Great Recession levels. As many analysts are beginning to understand, this constitutes a continued waste of human capital (see early posting).
Involuntary underemployed July 2014.png

Intangibles investments in 2Q 2014 GDP

Catching up on economic news from last week, by now everyone probably knows that BEA’s advanced estimate for 2nd quarter GDP showed a healthy 4.0% growth rate. One of the positive contributions to the economy was a 3.5% growth in business investments in intellectual property products (IPP). That was down from 1st quarter’s rate of 4.6% (which itself is a downward revision from the 6.3% growth rate for IPP reported last month). Two of the big turnarounds in 2Q were equipment investment (which grew by 7.0% compared with a -1.0% in 1Q) and residential construction (which grew by 7.5% compared with a dismal -5.3% in 1Q).
The new BEA data also contains revisions for the last 3 years. While the numbers change somewhat, the basic economic story of the past few years remains the same. For IPP, there were some months that showed much slower growth (as much as a 2.3% change) and some months where the revised data showed faster growth than previously reported (as much as a 3.3% change). But again, the basic story remains the same (as the second chart below shows).
IPP percent 2Q14 -1st.png
IPP percent pre-post 2014 revisions.png