Industry By the Numbers

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Industry by the Numbers

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Industry By the Numbers

It’s surprising that analysts and economists aren’t flocking in drones to the firearms and ammunitions industry, with pencils and calculators in hand.  Has there ever been as significant and as concentrated a shift in demand, supply, and production in a 1+ year period in a single industry in the history of capitalism?  A lofty claim – yes, so let’s break it down.

We’ve chosen four indicators from the 2011 to 2013 period to comprise our own forecast that demand for firearms and ammunition will continue to increase in 2014.

Indicator 1:  NICS Background Checks

Since November 1998, the ATF background check system has provided a monthly indicator of firearms purchase background checks.  There are limits to the data, particularly in that it doesn’t have a direct correlation (1:1) to firearms sales.  But, it is a large data set that is at least reflective of interest in and activity around firearms purchases.

Every year since 2002, the annual totals have risen for NICS background checks from 
•    8,454,322 (2002) to
•    21,093,273 (2013)
The biggest annual increases were
•    2008-2009
•    2011-2012, and 
•    2012-2013

Monthly figures continue to rise each October, November and December.

And, the ATF monthly reports of the top 10 weeks and days continue to reflect dates in late 2012 and early 2013.

It is in the fact that the number of background checks has risen for a sustained period of 12 years, coupled with all time highs in the past 16-months that makes the NICS background check volume a leading indicator of consistently increasing sales with no end in sight.

Indicator 2:  Company Production Figures

The firearms industry is not one with much public reporting, but what has been released, via SEC or otherwise, mirrors the ATF NICS figures – demand continues to rise.

The big names in the industry with publicly traded stock continue to put out quarterly earnings and production reports that show not only an increase in demand but an ability to expand production to meet demand.  If early 2013 headlines included product shortages, manufacturers just as rapidly reported new hires and additional shifts to meet demand.

We’re going to have to wait until April 2015 to get the ATF annual production statistics for 2013, but that’s where we’re really going to see the set of numbers that will enable the 2011, 2012 and 2013 production increase analysis.  (Remember that AFMER statistics are released with a one-year lag due to a provision of the Trade Secrets Act.)

Indicator 3:  Interstate Relocations and Expansion

It’s not just manufacturers, which believe firearms and ammunition are a growth industry; it’s state and local governments, as well.

Last year (2013) was a banner year for relocations and expansions on an interstate basis.  No fewer than 10 name-brand manufacturers accepted proposals from state and municipal governments to build new facilities or take over former (vacant) manufacturing space.  In several companies, management made decisions to expand R&D and production, creating hundreds of new skilled jobs in the process, paying well above minimum wage.

Adding up the headlines, 10 companies moved or expanded into TX, SC, NC, PA, TN and WY with company investments exceeding $100 million.  Each manufacturer created new or relocated labor at the facility and also impacted supply chain jobs.  One company notably stated it was their first major expansion in 25 years.

For these manufacturers, as well as smaller ones, incentives included not only a less regulated general business environment, but also multi-year tax relief packages.  With several other mid- to large-size manufacturers on radar as considering similar big maneuvers, this trend is far from over.

Indicator 4:  Women as a Market Segment

It wasn’t just men doing the buying in 2013.  Manufacturers responded to the blossoming market segment of women as consumers of firearms and ammunition.  Reports abounded on women attending gun shows, taking self-defense and training courses and buying a wide range of gender-differentiated products.

With such a relatively recent entrance into the demand portion of the equation, the demand created by female consumers can only be expected to grow.

Orchid Advisors provides electronic newsletter (“Advisory and Alert”) and blogs for general informational purposes only. It should not be considered a formal or informal interpretation of law. It is not intended as professional counsel, should not be considered legal advice and should not be used as such.