ISM PMI Declines in January, Still Bodes Well for Manufacturing

February 3, 2015

The Institute for Supply Management (ISM) reported to day that the PMI for January
PMI was at 53.5%a decrease of 1.6% points from 55.1% in December. The employment index was at 54.1%, down 1.9 percentage points  from 56.0% in December. The New Orders Index  came in at 52.9 percent, a decrease of 4.9 percentage points from the seasonally adjusted reading of 57.8 percent in December.

These numbers are softer than we expected for January, but are still indicative of positive news for manufacturing- “Economic activity in the manufacturing sector expanded in January for the 20th consecutive month, and the overall economy grew for the 68th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.”

Markets (industries) of interest to our shops  that reported growth in January 2015 included: Fabricated Metal Products; Electrical Equipment, Appliances & Components;  Transportation Equipment; Chemical Products; Machinery; Food,  Computer & Electronic Products.

For PMPA’s 2014 Year end summary of our Business Trends Index click here.

Calendar year 2014 was strong and steady until the final quarter with its seasonal and expected fall off.  Over 90% of respondents in December 2014 shared positive (same or improved) expectations for Net Sales, Lead Times, Employment, and Profitability for the first quarter of 2015.  With strong expectations in Automotive, Aerospace, Housing, and Medical Device Industry, we believe that the first quarter of 2014 will be a busy one for precision machining. – See more at: http://www.pmpa.org/news/latest-news/2015/01/22/business-trends-2014-review-and-summary#sthash.BXDQAFun.dpuf

We just came back from 5 days on the West Coast  visiting shops and sentiments were positive and optimistic except for the outlook for finding skilled workers.

Manufacturing continues to be a great place to be in the current economy.

ISMJan2015

Hat tip to Calculated Risk Blog for their Chart of ISM PMI

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November ISM Report-Manufacturing Sustains its Strength

December 1, 2014

 

” Economic activity in the manufacturing sector expanded in November for the 18th consecutive month, and the overall economy grew for the 66th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.”

Manufacturing sustains expansion in November 2014

Manufacturing sustains expansion in November 2014

” “The November PMI® registered 58.7 percent, a decrease of 0.3 percentage point from October’s reading of 59 percent, indicating continued expansion in manufacturing. This is consistent with a 5.1% annualized rate of change in inflation adjusted GDP.”

This was above expectations  and indicates a sustained expansion of manufacturing.

In other good news for our manufacturing shops – ISM’s Miscellaneous Manufacturing; Fabricated Metal Products;  Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Transportation Equipment; and Primary Metals  respondents reported growth in November.

“The New Orders Index registered 66 percent, an increase of 0.2 percentage point from the reading of 65.8 percent in October.  The Employment Index grew for the 17th consecutive month, registering 54.9 percent, a decrease of 0.6 percentage point below the October reading of 55.5 percent.”

These are all positive indicators for manufacturing.

Materials impact in November

Inventories of raw materials registered 51.5 percent, a decrease of 1 percentage point from the October reading of 52.5 percent. The Prices Index registered 44.5 percent, down 9 percentage points from the October reading of 53.5 percent, indicating lower raw materials prices in November relative to October. This is a major change from the strength of the prices index in the recent past.

How this relates to our precision machining shops:

The PMPA Business Trends Index for October increased a whopping 13 points (10.9%) from 119 to 132.  This is the highest value for our index, ever.   While this was an unexpected show of strength for our industry, we did confirm our data and noted that over 40% of respondents reported double digit sales increases for October.

The ISM PMI  indicator’s strength in November leads me to believe that our shops will also report stronger than expected results in our November Business Trends Report.

How is your shop dealing with the unexpected strength in demand for your products?

ISM November Release
Calculated Risk Blog PMI Graph

 


October 2014 ISM PMI-Manufacturing Remains Robust

November 3, 2014

“The October PMI® registered 59 percent, an increase of 2.4 percentage points from September’s reading of 56.6 percent, indicating continued expansion in manufacturing. The New Orders Index registered 65.8 percent, an increase of 5.8 percentage points from the 60 percent reading in September, indicating growth in new orders for the 17th consecutive month. The Production Index registered 64.8 percent, 0.2 percentage point above the September reading of 64.6 percent. The Employment Index grew for the 16th consecutive month, registering 55.5 percent, an increase of 0.9 percentage point above the September reading of 54.6 percent. Inventories of raw materials registered 52.5 percent, an increase of 1 percentage point from the September reading of 51.5 percent, indicating growth in inventories for the third consecutive month. Comments from the panel generally cite positive business conditions, with growth in demand and production volumes.”-  Bradley J. Holcomb, Institute for Supply Management® (ISM®

Highest level since  early 2011

Highest level since early 2011

Outstanding October
Sixteen of eighteen manufacturing industries reported growth in October.

We were especially pleased to see New Orders up 5.8 points to 65.8.

The October ISM PMI numbers reflected the  PMPA’s Business Trends results for September:

“The PMPA Business Trends Index for September increased 2 points (1.7%) from 117 to 119. This is the highest value for

September in the 5 years since the recession’s low of 83. September 2014’s 119 is 7 points, or 6.25% higher than the value for

September 2013. (On PMPA’s recently completed Shop Hourly Wage Survey, we determined that sales had increased 6% year over

year for those shops reporting in both 2013 and 2014.) The Sales Index average, year to date, is 121.9, up 4.9 points from the 2013

calendar year average. Six of the eight months this year have had an index value higher than that of the prior year. “

PMPA member companies continue to report strong sales and increasing lead times as the North American manufacturing economy continues to show its strength.

Now is a great time to be engaged in precision machining as advanced manufacturing continues to grow here in North America.

 

Graph courtesy Calculated Risk Blog


August ISM-PMI – Bullish on Manufacturing

September 2, 2014

“The August PMI® is led by the highest recorded New Orders Index since April 2004 when it registered 67.1 percent. At the same time, comments from the panel reflect a positive outlook mixed with caution over global geopolitical unrest.”

Manufacturing is looking good according to the writing on the wall- and August ISM PMI.

Manufacturing is looking good according to the writing on the wall- and August ISM PMI.

The ISM PMI index for  Manufacturing in the United States has been a good leading indicator for US GDP. We like to calibrate our Precision Machining Industry’s performance against it as well.

Our July PMPA Business Trends Report showed that our industry outperformed several FED manufacturing indicators. Our July Sales  usually low because of summer shutdowns, vacations and retooling in Customer plants, were at the average for the Calendar year. today, ISM PMI shows that that positivity extending to August.

Today’s report from Institute for Supply Management showed the indicator rose 1.9 percent to 59 in August from 57.1 in July. This is a very optimistic reading, showing that the manufacturing economy expanded for the 15th consecutive month.

ISMFedAug2014

What does a bull sound like for prospects in manufacturing?

“This month’s PMI® reflects the highest reading since March 2011 when the index registered 59.1 percent. The New Orders Index registered 66.7 percent, an increase of 3.3 percentage points from the 63.4 percent reading in July, indicating growth in new orders for the 15th consecutive month. The Production Index registered 64.5 percent, 3.3 percentage points above the July reading of 61.2 percent. The Employment Index grew for the 14th consecutive month, registering 58.1 percent, a slight decrease of 0.1 percentage point below the July reading of 58.2 percent. Inventories of raw materials registered 52 percent, an increase of 3.5 percentage points from the July reading of 48.5 percent, indicating growth in inventories following one month of contraction. The August PMI® is led by the highest recorded New Orders Index since April 2004 when it registered 67.1 percent. At the same time, comments from the panel reflect a positive outlook mixed with caution over global geopolitical unrest.” -Bradley J Holcomb, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee.

PMPA  Business Trends data for July has also painted a picture of stronger than seasonally expected performance. We can hardly wit to see how the PMI August Data compares to our industry performance.

Graph courtesy Calculated Risk Blog

Street art courtesy REDBOY at Street and Stage Blog


July ISM PMI Confirms Positive Outlook For Manufacturing

August 5, 2014

We remain optimistic for the outlook for manufacturing for the next three months based on the latest  ISM PMI and PMPA Business Trends Indicators.

The latest Institute for Supply Management PMI (Purchasing Managers Index) increased 1.8 points to 57.1 for July. The July value was the 14th consecutive month of manufacturing expansion; the 62nd consecutive month of expansion in the broad economy, and the highest value since April 2011.

Using the July reading, this value indicates an expansion in manufacturing, but if annualized, is also consistent with a 4.6% rate of increase of real GDP according to ISM.

July 14 ISM pmi

If the January through July data is annualized, the  corresponding GDP growth would be about 3.7%.

PMPA’s June 2014 Business Trends Report showed a seasonal decline  in shipments for the month of June, but the average for the year to date is 123, up 6 points (~5.1%)  from last year’s 117 year end average.

PMPA’s Business Trends Indicator for Sales/ Shipments sentiment was strongly positive in June, with ~88% of respondents expecting sales to remain the same or increase over the next three months. and 89% of respondents expecting lead times to increase or remain the same for the next three months.

July ISM PMI GRAPH  courtesy St Louis Fed

July 2014 ISM PMI Report for Manufacturing

 


September ISM Report Reaches Highest Level for the Year

October 1, 2013

The ISM PMI  report issued today  is the highest reading for the year to date. 

Highest value of the year.

Highest value of the year.

PMPA’s Business Trends Index for August was up substantially (6.7%),  and we believe that the PMPA index is a leading indicator for industrial activity. ( You can’t ship your manufactured goods if our precision machined components aren’t in them.)

Leading indicator?

Leading indicator?

The September ISM PMI reaching its high for the year validates our belief in the Business Trends as a leading indicator.

The PMI™ registered 56.2 percent, an increase of 0.5 percentage point from August’s reading of 55.7 percent. September’s PMI™ reading is the highest of the year, leading to an average PMI™ reading of 55.8 percent for the third quarter. The New Orders Index decreased in September by 2.7 percentage points to 60.5 percent, and the Production Index increased by 0.2 percentage point to 62.6 percent. The Employment Index registered 55.4 percent, an increase of 2.1 percentage points compared to August’s reading of 53.3 percent, which is the highest reading for the year.“- Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee.

As businessmen and women, we’re obviously pleased with the Increase in the PMI.
However, The employment index also reached its highest point for the year to 55.4, up 2.1 %.

We continue to be optimistic about employment opportunities in advanced manufacturing, and ISM report supports our claim for this too.

ISM PMI Sept 2013

Fred NAPM


February 2013 ISM PMI Increases to 54.2

March 1, 2013

In the words of PMPA’s economics advisor, Dr. Ken Mayland, “The factory sector wants to grow.  Orders were better (57.8, up 4.5 points), production was better (57.6, up 4.0 points), and the order backlog was better (55.5, up 7.5 points).  The U.S. economy may be the best performing of the major economies of the world.”

Graph via calculated risk blog

Graph via calculated risk blog

The Institute for Supply Management (ISM) reported that its summary Purchasing Managers’ Index (PMI) increased 1.1 points, for a February reading of 54.2.  According to the ISM, a reading above 50 would typically be associated with an expansion of the manufacturing sector. Furthermore, based on the ISM’s estimates, if the current reading of 54.2 were sustained, it would tend to be consistent with 3.7% real GDP growth (annualized).

Our inferences:

  • Manufacturing remains a growing sector of the U.S. and world economies
  • The ISM employment index was weakest of any of the ISM indicators tracked,  at 52.6%, down 1.4% from 54.0%.
  • With Affordable Health Care Act clearly on the minds of employers, adding employees has to be the least preferred outcome until we can see costs more clearly.
  • The Prices sub-index rose 5 points to 61.5. Can price increases and inflation be all that far away?

One respondent in the Miscellaneous Manufacturing sector is quoted by ISM, “Starting to pick up after a slower than normal year-end.”

That is certainly in agreement with PMPA’s Business Trends Report for January 2013 which showed a record rise of 41% over December 2012 sales levels, which were quite low.

ISM February 2013

Calculated Risk Blog