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.
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
July 1, 2019
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:
- Trade uncertainty– Nothing makes trade more volatile than Tariffs Policy being executed via Twitter.
- 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.
- Geopolitics– Iran, Russia, Brexit- nervous money remains on the sidelines keeping money tight.
- Speaking of money– The Fed and its future policy regarding accommodation is also on people’s minds.
- 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.
- 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.
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…
Sonny and Cher
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.”
April 18, 2017
The BLS’s Employment Population Ratio was 60.1 in March 2017, its first time back over 60% since February 2009.
This indicator actually shows what it purports to, unlike the U-3 (headline) Unemployment rate.
Not since February 2009…
The U-3 Unemployment rate may actually fall if workers give up looking for work, as the labor market falters. As the labor market is recovering, the U-3 unemployment rate can rise because more people are re- entering the labor force as they start to look for work again.
The Employment-Population ratio, because it is unaffected by voluntary changes in labor force participation, is a useful indicator of current labor market conditions. Lows in the employment-to- population ratio correspond with economic downturns. The employment-to-population ratio holds clear and discernible implications for the labor market, both among and between segments of the population.
The Employment-Population ratio is a useful indicator. And currently, a positive one.
BLS Employment Population Ratio
March 3, 2014
Manufacturing Sector continues to grow and strengthen in February according to ISM PMI index, confirming PMPA’s own January Business Trends Outlook.
“Optimism in terms of demand and growth in the near term” – Bradley Holcomb, Institute for Supply Management
“The February PMI® registered 53.2 percent, an increase of 1.9 percentage points from January’s reading of 51.3 percent indicating expansion in manufacturing for the ninth consecutive month. The New Orders Index registered 54.5 percent, an increase of 3.3 percentage points from January’s reading of 51.2 percent. The Production Index registered 48.2 percent, a decrease of 6.6 percentage points compared to January’s reading of 54.8 percent. Inventories of raw materials increased by 8.5 percentage points to 52.5 percent. As in January, several comments from the panel mention adverse weather conditions as a factor impacting their businesses in February. Other comments reflect optimism in terms of demand and growth in the near term.”
Markets the precision machining industry serves did well in February: Machinery; Plastics & Rubber Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Furniture & Related Products; Primary Metals according to the ISM release.
The PMPA’s January Business Trends Report was similarly upbeat with strongly positive indicators for Sales, Lead Times, Profitability and Employment.
Over 59% of our reporting precision machining shops were scheduling overtime in January.
The ISM PMI Report for February 2013 shows continued growth and strength in the manufacturing sector.
The ISM report confirms this statement with its report on commodity prices
“No commodities are reported down in price.”
That pretty much validates the index…
February 26, 2014
The precision machining industry is generating strong sales and positive prospects going into calendar year 2014.
Very strong sales and busy shops characterize the precision machining industry in January 2014
PMPA’s January Business Trends Report’s Index of Sales bounced back up to 126 from December 2013’s high for any December of 100.
January 2014 ‘s 126 was just 2 points shy of January 2013’s 128.
Precision Machining Businesses had a great month in January.
Outlook for sales remains positive with 87% of respondents expecting the level of sales to remain the same or increase over the next three months.
Profitability is expected to remain the same or improve by 93% of respondents.
Fifty-eight percent (58%) of shops scheduled overtime- 36% scheduled 45 hours or more.
Get the full report here.
Note: This report was our inaugural issue of the Business Trends Reporting using our newly updated secure, online reporting system. Effective with this move to the new system, we have established the year 2010 as our index base.
October 17, 2013
The PMPA Business Trends Report for September 2013 shows our sales /shipments index to be down to 115 for September, up 12 points over September 2012, but down 9 points from last month,
Outlook for sales and employment remain high, and sentiments for profitability remain positive.
81 % of respondents felt sales would remain the same or increase over the next three months.
This positivity in the face of an actual decline in shipments for most respondents is a sign that the variability seen is expected, rather than a harbinger of a more drastic slowdown industry wide.
You can download a copy of the Sept. Business Trends Report Here
By the way, over one third of respondents were scheduling 45 hours or more of overtime…
August 23, 2012
Up five points over last July.
PMPA’s Business Trends Index for July 2012 is 111, down substantially from last month’s adjusted value of 119, but still well above last year’s July value of 106 and July 2010’s value of 99. While our index does reflect a drop in shipments that we expect seasonally in July, the 111 value is highest value for July in this decade. July 2012’s reading is up 4 % over last July, and year to date we are up 5% over same period last year. It is easy to see the absolute value of the month to month drop and be concerned, but our index shows that our industry continues to improve over past years’ performance when considering where we are seasonally.
Industrial Production (IP) increased 0.6 percent in July after having risen 0.1 percent in both May and June. In July, the U.S. summary “Purchasing Managers’ Index” (PMI) from the Institute for Supply Management (ISM) inched up 0.1 points for July, to a level of 49.8.
In plain English, “Industrial activity at the nation’s factories remained stalled in July” according to Dr. Ken Mayland, PMPA’s retained economist.
Our index indicates that our shops continue to adjust to the broader economy as we sustain higher performance than prior years.
Over half of shops responding were scheduling overtime in July.
Full report here.