JUNE 2018 ISM PMI- Manufacturing Thrives Despite Tariffs and Trucking Challenges

July 2, 2018

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

Manufacturing continues to thrive despite tariffs and trucking Issues according to ISM PMI for June 2018.

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.

Demonstrably higher steel prices…

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.

Second highest value ever- second only to the value for March 2018!

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

PMPA Business Trends Report May 2018

Job Openings

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Material Impacts Report Posted

February 2, 2010

The prices of raw materials that we track rose substantially this year!

  • Aluminum  up 44% from Dec 2008.
  • Copper up 112% from Dec 2008
  • Nickel up 27% from Dec 2008
  • Steel busheling up 35% from Dec 2008
  • China coke up 60% from Dec 2008

We expect to see continued incidents of shortages, material unavailability, and skyrocketing surcharges and price increases until the supply lines are filled.

Here is link to PMPA’s Material Impacts Report for year end 2009.

Last year taught us 2 economics lessons:

  1. It doesn’t matter how many parts your machines can supply. Orders are based on DEMAND.
  2. Prices for raw materials inevitably go up when there is no SUPPLY available.

Remember those the next time your customer tells you they want a fixed price or a mandatory discount.

For more on Supply and Demand:

Well, maybe the demand we’re talking about is a wee bit different…

Cartoon Credit.

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