Manufacturing Recovery 7 Months and Counting!

March 10, 2010

11 industries reported expansion in February. The Precision Machined Products Industry, a sub industry of Fabricated Metals, serves 7 of these  industries showing the greatest recovery.

Here are the sectors that reported expansion that precision machining serves:

  1. Machinery; 
  2. Computer & Electronic Products;
  3. Miscellaneous Manufacturing;
  4. Transportation Equipment;
  5. Electrical Equipment;
  6. Appliances & Components;
  7. Fabricated Metal Products;

Economic activity in the manufacturing sector expanded in February for the seventh consecutive month, and the overall economy grew for the 10th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.

The PMI index for February was 56.5 down 1.9 percentage points from January. Because the PMI is above 50, the manufacturing economy is expanding.

How can they run out of vanilla?

According to ISM  steel, stainless steel, and aluminum are increasing in price.

Anecdotal data from our conversations with members confirms the ISM numbers, and points out that the metals named above are both more expensive and in short supply.

You know business is improving when they are out of plain vanilla.



Manufacturing Growth Confirmed by December Data

January 6, 2010

The December ISM Purchasing Managers Report confirms that manufacturing continues its recovery and growth – the PMI was up 2.3 points to 55.9%.

 “The manufacturing sector grew for the fifth consecutive month in December as the PMI rose to 55.9 percent, its highest reading since April 2006 when it registered 56 percent. This month’s report is quite strong as both the New Orders and Production Indexes are above 60 percent. The sector may be benefiting from an excessive destocking cycle as indicated by the recent performance of the Customers’ Inventories Index. Customers’ inventories have been ‘too low’ for nine consecutive months, and this month’s index is the lowest reading since the inception of the index in January 1997. Overall, the recovery in manufacturing is continuing, but there are still some industries mired in the downturn as evidenced by the seven industries still in decline.”

Fabricated Metal Products (NAICS 332)*  is one of those  seven industries “still mired in the downturn.” In December  the fabricated metals respondents reported decreases in  backlog,  employment,  customer inventories, and lower prices for materials. On the bright side, both production and  export orders grew for this sector in December 2009.

Fabricated metals may not be out of the woods yet, but...

We may not be out of the woods yet as an industry,   but the sustained low employment and low customer inventories for our industry tell me that the overtime production machine will be gearing up and starting to hum for many of our shops this month.

Bottom Line: Dr. Ken Mayland of Clearview Economics had this to say about the ISM Composite Report for December:

“…if the current reading were to be sustained, that would be consistent with 4.6% real GDP growth.  Folks: that’s “good” growth!”

* Precision Machining  Industry is NAICS 332721, and thus a segment of Fabricated Metal Products Sector.


Manufacturing Growth Not Just A Wish

December 8, 2009

ISM’s report of manufacturing’s expansion for the fourth , and economic expansion for seventh month in a row,  combined with PMPA’s  Business Trends Index improvement for 5 consecutive months,  confirm that we are in a recovery phase, rather than the free fall we just survived.

What should we be doing differently in the recovery phase, compared to what we  needed to do while we were free falling?

ISM values over 50 indicate expansion of manufacturing.

The latest Institute for Supply Management Manufacturing Report for November showed that Manufacturing expanded for the fourth month in a row. While the Purchasing Manager’s Index decreased from 55.7 in October to 53.6 in November, the fact that the November value is above 50 indicates that mnufacturing activity continues to expand.

The Precision Machined Products Association’s Business Trends Index of Sales  for October was up for the fifth month in a row, to 85, its highest value for the year.  Almost three quarters of PMPA Business Trends respondents expect industry sales to remain at current levels or increase.

This reinforces the signal from ISM’s New Orders measure, which climbed to 60.3 in November from October ‘s 58.5. (The tie-in for precision machined components and manufactured goods  should need little explanation- our products are the enablers of multiple technologies in automotive, appliances, aerospace, electrical/electronic, heavy truck, off road, and medical  products to name a few.

These are not the halcyon days of  “ship it, ship it, ship it.,” that seem like distant, almost forgotten memories. But ISM’s report of manufacturing’s expansion for the fourth , and economic expansion for seventh month in a row,  combined with PMPA’s  Business Trends Index improvement for 5 consecutive months,  confirm that we are in a recovery phase, rather than the free fall we just survived.

What are your doing differently now? What lessons have you learned? What is your new top priority every day?

Canadians See U.S. Manufacturing Recovery

November 11, 2009

Perhaps distance and perspective give them clarity.


It's the value of the dollar...

We follow the ISM Manufacturing Index as an input for our sensemaking as to what is going on in Precision Machining. PMPA’s own Business Trends Report has shown sales in our industry to be recovering.  So as we were considering the latest ISM Manufacturing Report, we came across this story from the Financial Post.

6 Reasons To Make A New List

October 22, 2009

Now that manufacturing is two months into expansion, September 2009 ISM Report , our short list of long delayed purchases will once again be under serious consideration. Here are 6 reasons to throw out your old list and start a new one.

  1. It’s not the old economy. It’s no longer business as Mayberry RFD anymore. 
    This is your grandfather's economy.

    This is your grandfather's economy.

    What you were looking at before the recession was what you needed for a prerecession economy. That’s not today.

  2. Your suppliers have been busy. Making improvements, reducing costs, increasing capabilities of their products. Machines, tools,  and software especially. What may have been a “lock” 6 months ago may in fact be a dog compared to currently available offerings.
  3. Your customers have changed. Some have gone away, and some have lost your trust. Do you really want to buy something that is single purpose for an account that you can’t trust?
  4. Your market focus has changed. The lessons your team learned in this downturn are what your customers will continue to buy from you and what they didn’t (won’t). Maybe what you were planning on buying was to produce something for the stuff that hasn’t been selling these days…
  5. Your needs are really, really different today. When you first made that shopping list, your planning assumptions included readily available bank credit, solvent customers, 16 million plus auto sales in US and full employment in your shops. Today availability of credit is iffy, customers that remain are slow to pay, and auto sales are not likely to top 12 million. The headcount in your enterprise has been drastically reduced. What you wanted then is NOT necessarily what you need today.
  6. It won’t be appropriate in your new structure. How will what you wanted back in the good ol’ days be appropriate in your shop today with half your staff on layoff and  the remaining staff working OT?

Is now the time to be faithful to a dusty old procurement plan based on a vanished Mayberry RFD economy? 

This is your current economy.

This is your current economy.

We have just survived the Terminator economy. Tell me again why  you want to buy Andy of Mayberry’s fishing pole?

Which items on your list remain viable, and what new ones will you be adding?


Just Posted- PMPA’s October 2009 Material Impacts Report

October 15, 2009

Of course prices have risen.

Information tool you can use.

Information tool you can use.

We finally are back to manufacturing expansion following 18 months of  contraction in the manufacturing sector.  Supply chain pretty much destocked. Low inventories. Domestic mills operating at 47% of capacity. Global influences on scrap and raw materials. You need a program to follow this game. We’re providing you one with this edition of PMPA’s Material Impacts Report.

The prices of the raw materials that we track have continued to rise with double digit percentage gains over January with one exception: China Coke. Year over year, all prices are still down significantly. 

  • Aluminum: Up 18.65% from January
  • Copper: Up 86.67% from January.
  • Nickel: Up 27% from May, up 4.44 % since January.
  • Steel Busheling: Up 26.67% from January.
  • China Coke: Down 2.73% from January. 

We have seen price increase announcements in addition to surcharge increases since our last report. 

Details in PMPA’s Material Impacts Report.