Why I’m Bullish on US Manufacturing

July 12, 2019

And why you should be too!

I could give you a lot of stories about how fulfilling my career has been making things that matter.

I could give you a lot of stories of the wonderful people that I have met in manufacturing- at all levels of the industry.

But today, I’m just going to provide you with some facts.

In order to have avoid confusion, I am going to use the Gross Domestic Product contribution from Manufacturing as the indicator best describing Manufacturing’s importance to our economy. Some could look at employment or productivity or other indicators, but from my perspective, I believe that how much US Manufacturing contributes to our Country’s GDP is the valid indicator.

The contribution to US GDP from Manufacturing has been growing and on quite a tear since 2009. (The vertical axis is in $ billions, ie.: ”reaching an all time high of 2154.90 USD Billion in the fourth quarter of 2018 from a record low of 1798.60 USD Billion in the first quarter of 2009.”

10 year chart of US GDP growth from Trading Economics.

Growing contribution to US GDP.

Chart source: 10 year Chart from Trading Economics United States GDP From Manufacturing

Here is another Trading Economics Chart for United States GDP from Manufacturing since January 2016.

US MFG GDP Growth 2016 to present Trading Economics

Looks like we began to get our stuff together in January of 2017!

What is it like for Precision Machining shops like ours?

I personally track a Business Trends Sales Indicator for the Precision Machining Industry Segment.

PMPA business Trends index shows growth in our manufacturing segment

We expect to finish 2019 up almost 20% over calendar year 2016.

Our forecast for 2019 is based on a very strong correlation indicator (r^2 of .96). We believe that we will finish 2019 up 4% over 2018.

And the last two years-2017 and 2018- were both up 7% over prior years.

In addition, all five of our highest months reported-ever- have been in 2018 and 2019.

Why am I bullish on US Manufacturing? As long as people around the world aspire to a USA Middle Class lifestyle, they will need manufactured goods to attain it. And US manufacturing is the third largest segment of contribution to US GDP.

Trading Economics: United States GDP From Manufacturing

PMPA Business Trends Report

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ISM PMI – The Beat Goes On!

July 1, 2019

 

nostalgic reminder that some things remain the same...

Sorry for the earworm, fellow Baby-Boomers…

Despite the sense of inevitable doom from all of the pundits, the June ISM PMI data came in at 51.7 (A reading above 50 indicates that the manufacturing economy is generally expanding.) The June report shows the New Orders unchanged, with Production and Employment growing.

Timothy R. Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee reported that “Comments from the panel reflect continued expanding business strength, but at soft levels; June was the third straight month with slowing PMI® expansion. ” (Link below)

After evaluating all factors, the June ISM PMI report concludes that the Overall Economy is growing, albeit slower, for the 122nd consecutive month.

The Manufacturing Sector was also shown to be growing, also slower, for the 34th consecutive month.

We agree that the pace of growth of manufacturing is slowing.

We also believe that there are other reasons to explain this slowing growth besides an imminent recession:

  1. Trade uncertainty– Nothing makes trade more volatile than Tariffs Policy being executed via Twitter.
  2. Trade tensions– Trade with China is a problem much greater than the tariffs issues which we see on the surface. A reset in Global trading order is playing out here, we think.
  3. Geopolitics– Iran, Russia, Brexit- nervous money remains on the sidelines keeping money tight.
  4. Speaking of money– The Fed and its future policy regarding accommodation is also on people’s minds.
  5. Employment– Full employment is typically seen as a positive, but if employers cannot get employees to replace those that they will promote to operate the new equipment, well, it becomes a vicious cycle of a don’t buy the new equipment; b) don’t promote the existing worker; c) don’t hire replacements because we can’t find them. So Full employment actually caps potential for growth.
  6. Finally, Weather.  Can’t have a complete list with out mentioning the weather! Much of manufacturing- especially fabricated metal manufacturing- goes into agricultural equipment. The unseasonable rains this year have certainly had an affect on purchase of Farm equipment. We saw headlines late last month indicating half of Ohio Farmland had yet to be planted.

Weather!

So “The Beat Goes On.” 34 months of consecutive growth in manufacturing have been logged, 122 months for the overall economy.

We see no imminent triggers for an immediate recession. and as we reported in our latest PMPA Business Trends Report, May 2019 was our fifth highest Monthly Sales Index ever.

We can agree we are at or near a top, but we do not agree that “gloom and doom” are imminent.

 

June ISM PMI

Farm and Dairy

May PMPA Business Trends 

Calculated Risk Blog 

The Beat Goes on...

The beat goes on…

 

 

Sonny and Cher


Optimism for 2019- Our Business Trends Sets Another Sales Record!

April 23, 2019

Following the pattern of last year, in which we finished up X%  year over year, our March 2019 Business trends reports logs a new record  of 147, up 14 points or 10.5% over February 2019’s 133. it is up 8.8% over the five year sales index average for March.

This is a new high for our index.

In March of 2018, we posted “…the PMPA Business Trends Index for March 2018 increased 14 points or 10.8% over February to 143, the highest value for the Business Trends Index EVER!” At 143, the index is up 11.2 points or 8 percent above that for the five year average for March Sales index.”

Deja vu Sales performance for the precision Machining Industry!

 

Why this matters:

Our performance and sentiment indicators this month justify our continued optimism about the markets and employment prospects for our precision machining industry in 2019. This auspicious start to 2019 builds a foundation for continued growth and prosperity for our shops in the year ahead.

Oh almost forgot: “Prospects for employment are positive with ninety-four percent (94%) expecting level or
increased opportunities for employment.”


Why are CNC Machinists so Difficult to Find?

March 14, 2019

I was asked this question on Quora. Thought that you might like my answer.

Spoiler alert- I blamed Moms…

There’s the culprit!

 

 

 

 

 

 

 

 

 

 

 

Enjoy!

https://www.linkedin.com/feed/update/urn:li:activity:6512027465236516864

Photo credit: http://forums.canadiancontent.net/showthread.php?t=117816

How can we help change their image of our High Tech Career opportunities?


February ISM PMI- Stronger Than The Pundits Let On

March 1, 2019

The February PMI® registered 54.2 percent, an decrease of 2.4 percentage points from the January reading of 56.6 percent…Economic activity in the manufacturing sector expanded in February, and the overall economy grew for the 118th consecutive month.“- Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee

Solidly positive unless you are microfocused on the trend.

 

While the expectation was for 55 or more, and so many folks were disappointed at this slower rate of growwth in manufacturing, this point of view actually misses where exactly we are in the Manufacturing cycle.

What the disappointed people see: Eeyores view:

ISM PMI Feb 2019 Down down down…

 

Here is a less myopic view:

Same data different scale.

 

Source: https://tradingeconomics.com/united-states/business-confidence

Yes the trend is declining.

Look at where we have been!

Now back to the ISM report:

““Comments from the panel reflect continued expanding business strength, supported by notable demand and output, although both were softer than the prior month. Demand expansion continued, with the New Orders Index reaching the mid-50s, the Customers’ Inventories Index scoring lower and remaining too low, and the Backlog of Orders returning to a low-50s expansion level. ” – No bad news to be found here!

We continue to see the positives in the ISM PMI indicator. Our shops are running full and sentiment on our internal reports remains strongly positive.

We’re definitely not having an Eeyore moment in Precision Machining!

We’re not having an Eeyore moment despite the graphs.

 

Disney photocredit: https://winniethepooh.disney.com/eeyore

 


Change for the Better, Better Together

February 18, 2019

“Progress lies not in enhancing what is, but in advancing toward what will be.”-Khalil Gibran

The PMPA Executive board (with the full support of your PMPA staff) has been working on a new approach to ensure that we continue to provide our members with the technical support, information and networking deliverables that our team has consistently delivered.

Your PMPA executive team has a vision that advances the interests and deliverables available for our members, through collaboration and progress with our long time partners, Gardner Business Media.”

The changes of the past year were unexpected, but despite them, our staff has continued to perform and provide deliverables that make us more competitive in our businesses and operations. Our executive team has come together, evaluated many options, and through a vigorous process of strategic planning, we have identified a way forward-not to merely stabilize PMPA, but actually enhance it and make it even more sustainable.

“Better Together” is the approach that we have identified to combine the strengths of PMPA and those of our long-term partner, Gardner Business Media. Together PMPA and Gardner have served the precision machining industry – each by its own strengths. Considering our history of successful and profitable collaboration on the PMTS show, and Production Machining magazine, the surprise to our executive team was “why hadn’t this been considered before?”

“Better Together” describes our proposal to work with our long time partners at Gardner to develop a Management Services Agreement (MSA). This MSA starts with a six-month initial exploratory phase (Phase 1) that will lead us towards a long-term proposal to combine our strengths and staff to enhance the value we provide to our members. This was approved at our Board meeting in Phoenix last week. In this phase, Gardner will assess PMPA organization and processes to identify opportunities to enhance performance- and create new and improved deliverables though our collaboration. “Better Together” is how we will collaborate- with both Gardner and PMPA staff bringing their unique strengths- to continue to deliver “Concierge Quality” services to our membership.

The synergies of collaborating, and sharing talent are exciting. We envision a future where our staff has more opportunity to work on advanced deliverables for our members- enhancing and extending the resources when combined with the Gardner/ Production Machining team. Gardner brings opportunities to expand our reach and better market PMPA in our industry, and beyond. PMPA can provide Gardner with a better understanding of our manufacturing niche, helping them advance the quality of their Top Shops Benchmarking- that in turn can help our members improve their own performance.

All parties will benefit as we advance the benefits of PMPA and Gardner continuing our work together. Deliberately building on our historic collaboration we believe, will allow us to enhance our performance and service to members.

We have a long history of success together. Our organizations have collaborated for many years to make Production Machining and PMTS successful, jointly produced brands. We think that now is the perfect time to re-focus our collaboration so that together we can deliver even greater value to PMPA members.

I can tell you that I am excited at the possibilities. Our PMPA staff- led by Miles and Renee- are equally excited at the continuous improvements that they think this can have for their work on behalf of you, our members. In addition, the Gardner team continues to advance the conversation- to assure that the PMPA continues to be a vital resource for our members and the industry.

We will have more details as this develops. However, I wanted you to know that your PMPA executive team has a vision that advances the interests and deliverables available for our members, through collaboration and progress with our long time partners, Gardner Business Media. I am excited to be able to announce this development. It will be under PMPA board oversight, and at the end of Phase 1, the PMPA board and Gardner will agree on a second phase to further execute our collaboration.

“Better Together” is our vision to build on our strengths with our trusted partners at Gardner. “Better Together”- to better serve us all. “Better Together” – that is our vision and means of “Effective Associating.”

Mike Reader, President, Precision Machined Products Association

For further information contact

 

 

 

 

 

Miles Free

Interim Director

Precision Machined Products Association

6880 West Snowville Rd. Suite 200

Brecksville, Ohio 44141

440 526 0300

 

 

 

 

Melissa Kline-Skavlem

Chief Marketing Officer

Gardner Business Media

6915 Valley Avenue

Cincinnati, Ohio 45244-3019

513 527 8800

PMPAGDNREXT


PMPA Business Trends Year-end Summary- Optimism for 1Q 2019!

January 28, 2019

2018 was a strong year for the precision machining industry. With sales up 7.2% our shops outperformed nearly every benchmark in terms of sales and performance including prior year and 5-year averages. Sentiment indicators bode well for the first three months of 2019.” PMPA Business Trends Report Year-end Summar

PMPA 2018 Yearend summary sentiment graph

Outlook for first three months of 2019: Lead Time remains level, prospects for Net Sales, Profitability and Employment strongly positive.

We remain optimistic regarding manufacturing outlook at our shops’ “component level.” However we acknowledge that the Manufacturing industry’s rate of growth is decelerating.

This difference between decelerating growth (which we believe we are seeing) and declining manufacturing (not what we are seeing) is important to keep in mind.

The level outlook for Lead Time tells me that we our shops are at their “practical” capacity. When they get busier in January , we expect to see this lead time indicator go up.

How to deal with this? Please see our article: Time to Change Your Thinking