November 2, 2018
Our Take– Job gains beat consensus expectations, Unemployment is at its lowest level since I was a junior in High school, Participation rate matches its best level this year, and private non-farm wages have risen 3.1% this year according to this BLS jobs report.
Bottom line–the US economy is based on consumer spending. This report shows that consumers are growing their purchasing power a positive indicator for the economy going forward.
Facts keep us bullish on manufacturing.
- “Total non-farm payroll employment rose by 250,000 in October, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in manufacturing, in construction, and in transportation and warehousing.”
- “In October, employment in manufacturing increased by 32,000. Most of the increase occurred in durable goods manufacturing, with a gain in transportation equipment (+10,000). Manufacturing has added 296,000 jobs over the year, largely in durable goods industries…On average, 213,000 jobs have been added each month in 2018 YTD.”
- “The labor force participation rate increased by 0.2 percentage point to 62.9 percent in October but has shown little change over the year.
- “In manufacturing, the workweek edged down by 0.1 hour to 40.8 hours, and overtime was unchanged at 3.5 hours.“
- “In October, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $27.30. Over the year, average hourly earnings have increased by 83 cents, or 3.1 percent.“
- “The unemployment rate remains at it’s 48 year low, 3.7%- lowest rate since 1969. Interestingly, not a single industry was reported to have lost any jobs.”
November 1, 2018
PMPA’s Business Trends Index for September 2018 came in at 106% of its value a year ago, despite its 7.7% decline from August’s record tying performance. September 2018’s value of 132 is a record for the month of September, a frequent occurrence this year. The September 2018 value of 132 is also 10.4% above the five year average for the index in the month of September. year to date our index indicates that sales up 10 points or 8% over the 2017 year-end average.
Unseasonably strong sales in September for Precision Machining Industry.
Opinions for the next three months compared to today:
- Net Sales: The sales outlook confirms Pareto’s law with 80% of reporting shops expecting sales to improve or remain level over the next three months.
- Lead Times: Ninety- one percent of respondents expect lead times to remain the same or increase in the next three months.
- Employment: Prospects for employment are positive with ninety-eight percent (98%) expecting level or increased opportunities for employment.
- Profitability: Eighty-four percent of our respondents expect business and margins to remain strong for the next three months.
Current Environment: 2018 continues on pace to a much stronger than average sales year as we determined in our April report. The sentiment indicators that we track recognize a seasonal decline ahead, but remain in positive territory for the precision machining industry. Our industry continues to outperform 5-year averages by a wide margin!
PMPA members can download a full copy of the September 2018 Business Trends Report here
Key takeaway: Our business has changed- have we adjusted our management thinking to match?
October 10, 2018
No spec, no quality. Know Spec, know quality.
Quality means compliance with all terms of the specification.
Know the specification!
September 26, 2018
PMPA Business Trends Report reclaims all-time record high of 143 in August. March 2018 was the first time that our sales index recorded such strong sales.
Precision machining Industry Sales and shipments back up to March 2018’s record levels!
Eighty percent (80%) of our respondents reported sales increases, 51 percent of shops reporting reported sales increases in the double digits.
Sentiment indicators remain strong.
Very positive look forward next three months.
Our markets and businesses have changed- have we as managers kept up?
If this was a control chart, you would say the process has shifted upwards…
How are you managing differently for success rather than survival?
September 5, 2018
The ISM PMI was reported at 61.3, the highest reading since January 2004, when it was 60.8.
Prior to that the ISM PMI has not been at this level since 1984, when it was 61.3 in February, in 1987 it made it to 61.0 in December.
It has been a long time since the ISM PMI was at today’s levels!
Here is the ISM’s Announcement:
“The August PMI® registered 61.3 percent, an increase of 3.2 percentage points from the July reading of 58.1 percent. The New Orders Index registered 65.1 percent, an increase of 4.9 percentage points from the July reading of 60.2 percent. The Production Index registered 63.3 percent, a 4.8-percentage point increase compared to the July reading of 58.5 percent. The Employment Index registered 58.5 percent, an increase of 2 percentage points from the July reading of 56.5 percent. The Supplier Deliveries Index registered 64.5 percent, a 2.4-percentage point increase from the July reading of 62.1 percent. The Inventories Index registered 55.4 percent, an increase of 2.1 percentage points from the July reading of 53.3 percent. The Prices Index registered 72.1 percent in August, a 1.1-percentage point decrease from the July reading of 73.2 percent, indicating higher raw materials prices for the 30th consecutive month.” ISM Timothy R. Fiore Press Release
- Manufacturing continues to expand. the 3.2 point jump from July to August was a substantial increase.
- The overall economy continues to expand- 112 consecutive months of economic expansion.
- The increases from July to August were especially robust for New Orders (up 4.9%); and Production (up 4.8%).
- Other indicators for employment, inventories, supplier deliveries increased on the order of 2% or more.
- The Prices Index fell 1.1 percent in August from July, but still showed increasing costs for raw materials, for the 30th consecutive month.
Thoughts to consider: while past performance is no assurance of future performance, we note that the current level of the PMI has been of prior high water marks, rather than sustainable levels. While “this time it’s different,” is a possible comment, our look at the graph above suggests that we may be nearing the top. Although the values for the 1964-1966 do provide another possible interpretation.
Bottom line: Manufacturing and the broad economy showed remarkable strength in August 2018. Prospects remain positive for sales and employment in manufacturing. The current strong level of performance convinces me that we must be thoughtfully reconsidering all aspects of our business at this time. This trend might have legs- it might also be nearing a top. PMPA’s Latest Business Trend Report was optimistic on Outlook for the next three months.
ISM August 2018
Graph courtesy Calculated Risk
August 29, 2018
On June 21, 2018, the ECHA added Lead to the Candidate List for Substances of Very High Concern under REACH.
Not banned in every application…
While this regulation arguably covers only manufacturers and importers in the EU, the fact of the matter is that our shops here in North America are producing components (articles) which are incorporated into products in the EU.
Our customers, who specify the use of leaded materials because of the economics of product provision (Leaded materials machine at much higher efficiency rates, lower costs , and seldom need post fabrication operations) are now asking their suppliers for a statement of compliance for the materials that THEY specify us to make THEIR components from. Leaded Steels, Brasses and Aluminums.
Our shops find themselves placed right in the center of a paradox- how can they certify that the material that their customer told them to use is compliant with this new REACH development?
PMPA has analyzed this and provided our members with a guidance document that
- Recites the applicable facts and regulatory obligations
- Describes where and where not the REACH and other EU regulations apply / might not aply;
- Analyzes the duties to our customers
- Describes ways to meet our obligations
- Provides references for understanding this new development
The world of Precision Machining is characterized by Volatility (this regulation just Arrived), Uncertainty (does this apply to me, I’m an North American, not European manufacturer?) Complexity ( So I need to read the ECHA announcement, The ECHA Substance Support Document, the Annex that covers Lead, and then two more annexes that tell me what I need to do) before I can figure out what I need to do, and Ambiguity (Actually the annexes do not expressly state what the exact deliverable required is).
This VUCA world is made manageable by PMPA regulatory sensemaking to help our shops first recognize, then intelligently understand and manage their risk.
- Who is helping you and your team recognize new regulatory risks?
- Who is helping you to understand those risks?
- Who is providing answers so that you can concentrate on making those critical parts that the world needs, instead of spending three or four man-Days trying to figure it out? (Presuming that you know the issue even exists!)
PMPA members know who.
PMPA Members Only Guidance Document
July 25, 2018
“With 84 companies responding, the PMPA Business Trends Index for June 2018 held steady at 138, highest June on
record and tied with May 2018. The calendar year average remains 136. The 2018 June index of 138 is 2.2% higher
than June 2017’s 135 value. This is our Index’s highest value recorded for June, and is our second highest value ever
recorded (March 2018’s 143 was the highest ever).”- PMPA Business Trends Report- June 2018
2018 continues to set a blistering pace for the performance and sentiment indicators that we
track. June 2018 is now our second highest sales Index ever- tied with May 2018- while March 2018 was our all-time
high. Our forward- looking indicators remain strongly positive even as they reflect some softening from our current record
levels of performance. Our industry continues to outperform 5-year averages by a wide margin- ~10.4% for June!
See the full report here: https://www.pmpa.org/news/latest-news/2018/07/24/pmpa-business-trends-june-2018
Employment prospects are 98% positive In precision machining shops!
P.S- Employment Sentiment: Prospects for employment are positive and strengthening with ninety-eight percent (98%)
expecting level or increased opportunities for employment!
photo credit: Life of Dad blog