September ISM PMI Declines- GDP Growth Likely 1.7%

October 1, 2019

“The past relationship between the PMI® and the overall economy indicates that the PMI® for September (47.8 percent) corresponds to a 1.5-percent increase in real gross domestic product (GDP) on an annualized basis,”– Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee

We know that all of the other media will be pointing out the fact that the “ISM PMI for September 2019 did decrease 1.3 percentage points from the August reading of 49.1 percent,” making two consecutive months below 50 and thus contraction in manufacturing. As Abraham Maslow’s often mis- attributed quote states “when all you have is a hammer, everything looks like a nail.” The negative bias in the media these days gives cause for alarm.

The negative bias in the press is extensive these days…

While we acknowledge that the actual ISM PMI for September is 47.8 percent- we remind everyone that this level corresponds to continued GDP growth in the broad economy, not a recession. With the UAW strike and softening Automotive sales, we believe that we have an “assignable cause” and thus lower the weight that this decrease actually has on our thinking.

PMI is down, real US GDP continues to grow

PMPA’s own Business Trends Report shows that shipments of our shops grew 1.5% over July, up 3.8% over this year’s lowest month (June) and are in fact up 4% over the five year average for the month of August. Our August value of 134, would have been the fourth highest month ever for our index, had it occurred prior to 2018.

Softening is not exactly unexpected.

The final quarter of the year is traditionally low for sales and deliveries for precision machining, so we do not anticipate a reversal of the sales trends in the remainder of the year.

Over all, we believe that the bitter taste of the bad news of the 47.8 percent PMI is far worse than the actual reality which is that the economy (real GDP) is continuing to grow.

September 2019 ISM PMI

Calculated Risk Blog- Thanks for the Graph. 

Hammer Lightning

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Dealing with Broken Links- A Process

September 24, 2019

Actually I am amazed at how few broken links I encounter in all of my online research.

But occasionally, we do encounter  the challenge of broken links.

A broken link- but what can we do to get the material that was supposed to be there?

I use the following process to meet the challenge of a broken link:

Deconstruct the broken link into a “likely domain” and the “deliverable Sought.” (In this case a .pdf file.)

So in this case the likely domain was “Nuclear Regulatory Commission,” and the deliverable sought was “BR0470 .pdf”

I searched for “Nuclear Regulatory Commission BR0470.pdf “

      1. And Google gave me this :

That top link looks like it!

So I followed the top result that Google provided.

    1. Which took me to the page that has a link to the file that I wanted:

This is the page that the google search found. the link we want is the third bullet (look for the pdf icon)

I then selected the pdf link  on that page which was in fact the deliverable that I was seeking.

    1. Which then delivered this:

NRC Primer on Lean Six Sigma .pdf

 

Which is the deliverable that I was seeking, and a very good reference on Lean Six Sigma!

That’s my process for dealing with the challenge of broken links keeping me from the information that I want.

What’s yours?

 


August ISM PMI -After 35 Months, a No-Grow Month for Manufacturing

September 3, 2019

 

After 35 consecutive months of growth, the Institute for Supply Management’s Purchasing Manager’s Index (PMI) contracted in August 2019, coming in at 49.1% (Readings above 50% indicate growth or expansion in the sector.) Last month, it was at 51.2

 

After 35 consecutive months of expansion, manufacturing has a no- growth month.

According to the ISM report: 

Comments from the panel reflect a notable decrease in business confidence. August saw the end of the PMI® expansion that spanned 35 months, with steady expansion softening over the last four months. Demand contracted, with the New Orders Index contracting, the Customers’ Inventories Index recovering slightly from prior months and the Backlog of Orders Index contracting for the fourth straight month. The New Export Orders Index contracted strongly and experienced the biggest loss among the subindexes.”

“Respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders. Respondents continued to note supply chain adjustments as a result of moving manufacturing from China. Overall, sentiment this month declined and reached its lowest level in 2019,” says The Institute’s Timothy R. Fiore.

 

PMPA analysis

This was below expectations which still had the index above 51%. While proclamations of “recession” are unavoidable in the media these days, we would urge caution about this single data point being a trend. IT HAS BEEN 35 MONTHS SINCE WE HAVE HAD A POINT BELOW 50!

Our latest PMPA Business Trends Report for July  showed a slowing of growth in shipments by our shops (3MMA fell below the 12MMA) but the index itself recovered higher and all forward looking three month sentiment indicators turned strongly positive.

Mixed Signals

Industries reporting contraction to ISM  include several of our markets most heavily served : Fabricated Metal Products; Transportation Equipment; Primary Metals;  and Electrical Equipment, Appliances & Components.

Here you go.

Our bottom line: The shock should be that we have enjoyed 35 consecutive months of growth, not that we finally had one month of no-growth out of 36!

What do you think?

Chart courtesy of Calculated Risk blog


Mixed Signals- Sales & Sentiment Recover, but Moving Averages Show Growth Slowing

August 30, 2019

“If slowing growth today means Sales 12% above the prior five years’ average sales for July, we’ll take it.”

With 80 companies reporting, the PMPA Business Trends Index for July 2019 recovered up 3 points or 2.3 percent to 132. While this 132 value is the second lowest value for the year, some context is in order. There were only 4 times where the index was higher than 132 prior to 2018. 132 is a 12.4 percent increase above the Average of July for the past five years, and 104 percent of July 2018 sales.

 

There are only 4 occurrences of the BT Index exceeding 132 prior to 2018. The July value of 132 is up 12.4% above the average for the past five Years of July. And 4X the Increase of Industrial Production reported by the FED.

We acknowledge that – the 3-month moving average of this sales index has dipped below the 12-month moving average- indicating that the pace of growth in our industry has slowed. At the same time all our forward looking sentiment indicators are Up. UP.  UP!

Opinions for the next three months compared to today:

  • Net Sales: Our companies’ outlook for the next three months is strongly positive for the next three months.
  • Lead Times: The outlook for Lead Times shows that respondents expect to be busy in the coming three months. Ninety percent of respondents expect lead times to remain the same or increase in the next three months. Positive for Sales.
  • Employment: Sixty percent (60%) of shops reported scheduling overtime in July. Prospects for employment are strongly positive with ninety-seven and a half percent (97.5%) expecting level or increased opportunities for employment.
  • Profitability: Overall sentiment for profitability shows respondents to be optimistic for the next three months, in line with all other sentiment indicator

2019 has been a very strong year for Sales. July’s recovery to 132, while not sufficient to keep the 3-month moving average above the 12-month moving average, is still a remarkable 12.4 percent increase for sales compared to the five year average of monthly sales for July.

Is sales growth slowing? That is what the 3- and 12- month moving averages are telling us. Are we at an enviable level of sales for such a slowdown? I would argue “Yes!” that the current July Sales index of 132 was only exceeded 4 times prior to 2018. Mixed signals appear quite positive to me for the next three months for our precision machining shops.


Most Valuable College Majors- Bankrate

August 29, 2019

Here in one tidy place you can find a current list of the most Valuable College Majors.

Many of them will lead to a valuable career in our precision machining shops.

The most valuable college majors include naval architecture marine and nuclear engineering and pharmaceutical sciences. We were pleased to see Mechanical Engineering, Transportation Sciences, and miscellaneous Engineering technologies all included in the top spots.

STEM careers add value!

STEM Careers add Value!

The top 10 most valued college majors are:

  1. Naval Architecture And Marine Engineering (Median income: $90,000; Unemployment rate: 1.6 percent, Percent with an advanced degree: 29 percent)
  2. Nuclear Engineering (Median income: $98,100; Unemployment rate: 1.8 percent, Percent with an advanced degree: 56 percent)
  3. Pharmacy Pharmaceutical Sciences And Administration (Median income: $100,000; Unemployment rate: 2.2 percent, Percent with an advanced degree: 58 percent)
  4. Genetics (Median income: $85,000; Unemployment rate: 1.2 percent, Percent with an advanced degree: 76 percent)
  5. Electrical Engineering (Median income: $99,000; Unemployment rate: 2.7 percent, Percent with an advanced degree: 46 percent)
  6. Architectural Engineering (Median income: $74,000; Unemployment rate: 1.5 percent, Percent with an advanced degree: 29 percent)
  7. Aerospace Engineering (Median income: $90,000; Unemployment rate: 2.3 percent, Percent with an advanced degree: 49 percent)
  8. Computer Engineering (Median income: $92,000; Unemployment rate: 2.8 percent, Percent with an advanced degree: 40 percent)
  9. Electrical Engineering Technology (Median income: $76,000; Unemployment rate: 1.8 percent, Percent with an advanced degree: 30 percent)
  10. Materials Science (Median income: $90,000; Unemployment rate: 2 percent, Percent with an advanced degree: 66 percent)
  11. Engineering and Industrial Management (Median Income $72,600; Unemployment rate 1.3%; Percent with an advanced degree: 34%)
  12. General Engineering (Median Income $80,000; Unemployment rate 2.4%; Percent with an advanced degree: 37%)
  13. Applied Mathematics (Median Income $78,200; Unemployment rate 1.8%; Percent with an advanced degree: 49%)
  14. Construction Services  (Median Income $70,000; Unemployment rate 1.9%; Percent with an advanced degree: 11%)
  15. Transportation Sciences and Technologies (Median Income $72,000; Unemployment rate 2.2%; Percent with an advanced degree: 20%)
  16. Mechanical Engineering (Median Income $88,000; Unemployment rate 3.0%; Percent with an advanced degree: 39%)

Cut to #22:

22. Miscellaneous Engineering Technologies (Median Income $70,000; Unemployment rate 2.1%; Percent with an advanced degree: 21%))

Our precision machining shops have career opportunities for those who are STEM minded. 

As the Bankrate study reports:

STEM majors are the most valuable.

 

Bankrate Study: Most Valuable College Majors

 


What About the Chips?

July 30, 2019

Our customers are interested in what is left after we remove the chips. But it is up to us  as operators and engineers to understand that there are differences in our chips based on process, material and tooling factors- and what those differences mean.

The infamous “Bird’s Nest Chip”

Process Differences

Turning can result in a long continuous chip, while sawing or milling processes result in shorter chips because of the interrupted nature of the cut. Drilling can result in the chips being recut depending on how the tool is fed and the nature of it’s spiral and means of chip evacuation.

Different materials can drive differences in the chips as well. I’m a steel guy, so my comments are based on that experience, but similar differences will be found in other materials, just based on different factors than Carbon.

Material Differences

Plain Carbon, Low Carbon Steels (C1008, C1010) tend to generate a more Continuous, Soft Chip. Plain Carbon, Medium Carbon Steels (C1030, C1045) can give a Continuous, Semi-Soft Chip. Plain Carbon, High Carbon Steels yield a Continuous, Hard Chip. Adding alloys can result in a Continuous, Semi-Hard Chip at lower carbon contents (4120) while higher carbon alloy steels can result in a Continuous, Tough Chip (4150) Very High Carbon Alloy steels (52100) give a chip that is both Continuous and Springy.

Having said that, I do not mean to say that all of these steels will result in long stringy chips- it is just that compared to Resulfurized Steels, such as 1117, 1144, 1215, or 12L14, the chips are far less likely to fracture into nice short pieces- often called “6’s or 9’s” or “C’s.” These chips can be described as Broken Semi-Soft (1117) or Broken Semi-Hard (1144) or Well-Broken Semi Hard (12L14, 1215)

Process Parameters

Finally, having the speed, feed, depth of cut, and angles on the tools is critical if we are to optimize material removal, minimize chip volume, and keep our process stable and maximize our uptime. Chip control features can also play an important role. ISO 3685 characterizes chips into 8 types- Ribbon, Tubular, Spiral, Washer-type Helical, Conical Helical, Arc, Elemental , and Needle chips. These can then be further described by length (short, long, or snarled).

Source ISO 3685

The ISO 3685 standard is a bit pricey, but it will help you to better understand what is going on in your turning process.

Of course you can look at the part, but to learn about your processes may I suggest that you take a really good look at the chips?


Reversion to the Mean in June- PMPA Business Trends.

July 24, 2019

2019 has been a very strong year for Sales.  PMPA’s June Business Trends Sales index  11 point “reversion to the mean” could be considered a substantial drop, but we believe the data suggests otherwise- the Sales Sentiment indicator recovery in June suggests that this is just a ‘moment’ and not a trend.

Yes it is an 11 point or 7.8% drop. That arrives at exactly the 5 year average for June 2014-2018. 129

Get more details on why we are unconvinced that this is bad news for our shops at June 2019 PMPA Business Trends