Despite the uncertainty of the US Section 232 Tariffs on Steel and Aluminum, demonstrably higher steel prices, full employment, and trucking difficulties, US manufacturing is having a strong year, as evidenced by the June ISM PMI.
““The June PMI® registered 60.2 percent, an increase of 1.5 percentage points from the May reading of 58.7 percent… The Supplier Deliveries Index registered 68.2 percent, a 6.2 percentage point increase from the May reading of 62 percent…
“Demand remains strong, with the New Orders Index at 60 percent or above for the 14th straight month, and the Customers’ Inventories Index remaining low. The Backlog of Orders Index continued to expand, reading at 60 percent of higher for the third consecutive month. Consumption, described as production and employment, continues to expand in spite of labor, skill and material shortages.””- Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee
PMPA members have reported price increases for Steel and Aluminum as a result of the imposition of the Section 232 steel tariffs, with lead times for raw materials lengthening and growing more uncertain and base steel prices up by 20 percent since March.
Steel prices are at their highest level since the 2009 recession, and the difference between US prices and foreign steel prices are at a record differential according to Steel Benchmarker.
Precision Machining Industry Sales in May second highest level on record. Our latest Business Trends Report for May 2018 showed our industry’s sales at their second highest level ever. We remain strongly positive on outlook for our manufacturing industry, confirming the ISM PMI Report.
We continue to hear reports of issues in trucking industry, including loss of routine deliveries caused by the strict adoption of electronic logs and enforcement of driver time shortening the reach of mills for deliveries out of state.
There are more job openings than people to fill them according to the JOLTS report of the Bureau of Labor Statistics.
Manufacturing in Europe and China cooling. According to Reuters “Euro zone factory growth slowed to an 18-month low in June, slipping for the sixth month in a row amid widespread concerns about trade barriers and their impact on overall economic activity, a survey showed on Monday.”Euro zone factory growth slowed to an 18-month low in June.
“Growth in China’s manufacturing sector cooled slightly in June as firms faced rising input costs and a decline in export orders amid an escalating trade dispute with the United States, a private survey showed on Monday.” Growth in China manufacturing sector ebbs in June.
Bottom line:Despite the uncertainty, US manufacturing is having a strong year, as evidenced by the June ISM PMI. This is in strong contrast to pessimistic manufacturing activity readings from Europe and China which are not at all positive. And in spite of uncertainty and challenges we face from tariffs, trucking, employment, pricing and other issues.
ISM PMI June 2018 Announcement
Steel Benchmarker Steel Price History
Graph Courtesy Calculated Risk Blog