February ISM PMI- Manufacturing Growing Despite Challenges

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“Manufacturing expanded in February, as the PMI^® registered 50.1 percent, a 0.8-percentage point decrease from the January reading of 50.9 percent. “The PMI^® expanded in February, but at a slower rate. Four of the big six industries expanded, at similar rates compared to January. Four of the PMI^®’s 10 subindexes recorded expansion, down from six the previous month,” says Fiore.
A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI^® above 42.8 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the February PMI^® indicates growth for the 130th consecutive month in the overall economy, and the second month of growth following five months of contraction in the manufacturing sector. “The past relationship between the PMI^® and the overall economy indicates that the PMI^® for February (50.1 percent) corresponds to a 2.1-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

Manufacturing grew in February, though rate down from January,

The industry is currently facing challenges from supply change disruption due to coronavirus outbreak and continued Boeing 737 Max delays.
The low but still positive PMI in February corresponds to a 2.1-percent increase in GDP according to ISM.
This February PMI^® indicates growth for the 130th consecutive month in the overall economy, and the second month of growth following five months of contraction in the manufacturing sector.
Could certainly be worse!
Graph: Calculated Risk Blog

Precision Machining Sales January 2020- Success-ion, not Recession!

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NO RECESSION IN PRECISION MACHINING! (only two consecutive months of declines.)

Success-ion not Recession — No recession here! Only two consecutive months of (expected) seasonal declines!

With 81 companies responding, the PMPA Business Trends Index for January 2020 rebounded to 139, up 26% over December 2019.
Down just 2% from January 2019’s record of 142, up 3% over January 2018, and up 7.8% over the five-year average for the January index.
This is a repeat of last January’s strong performance, and should help you understand that the sluggish performance in the last quarter of 2019 was due to seasonal factors, as well as to assignable causes in our largest markets served- the UAW strike at GM and the ongoing issues at Boeing.
(The Boeing story remains on the front page of the Wall Street Journal- Boeing Plans More Relief for Suppliers– February 24, 2020).
NO RECESSION IN PRECISION MACHINING! (only two consecutive months of declines.)
And by the way, we outperformed the Fed’s Industrial Production Manufacturing Index by a huge margin!
The Fed reported that Industrial Production (IP) “declined 0.3 percent in January, as unseasonably warm weather held down the output of utilities and as a major manufacturer significantly slowed production of civilian aircraft. The index for manufacturing edged down 0.1 percent in January; excluding the production of aircraft and parts, factory output advanced 0.3 percent.”
Recession? Not even.
Success-ion? Well, it depends on how you manage. The numbers show a very positive outlook. Be positive. The facts support you.

PMPA Business Trends December 2019 Review and Summary

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“2019 was a better year than you think, finishing essentially even with 2018. Responding shops have balanced expectations going into 1Q 2020.” -PMPA Business Trends Review and Summary December 2019

Despite the drop in shipments in the last two months of the year, calendar year 2019 finished at 133, one point off last
year’s calendar year final of 134, and up nearly 10 points or 7.8 percent over the average of the last five years 2014-2018.
December came in at 110, up 3.4 points and 3.2 percent over the five- year average for the month of December.
Despite the softening of shipments in November and December, 2019 has been a very strong year
for Sales, and finished virtually even with 2018. Even with the lowest level of sales for the year this month, we are just one
point (less than ¾ of a percent!) off last year’s Sales for the year.
Forty-two percent of our shops were scheduling overtime in December! The almost even balance between sentiments to increase or decrease for all of our sentiment indicators likely
bode well for a level and stable start in 2020. We have no reason to complain about sales softness with both the December and year-end sales numbers coming in above 5-year averages.
The Fed INDPRO release for December reported “increases of 0.2 percent for manufacturing.”
After two years of strong sales growth (2017 was up 6.8% over 2016; 2018 was up 7.2% over 2017), 2019 finished
essentially even with 2018.
December 2019 Business Trends Report
Accredited media please contact gro.apmp@noskcaJJ for your copy.

OSHA Enforcement Priority Weighting System Revised

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How does OSHA decide to inspect shops?
Prior to this latest change, OSHA followed its Enforcement Weighting System (EWS).
Late in 2019 OSHA revised its inspection priority weighting system.

OSHA has identified two objectives for this revision to the Enforcement Weighting System
(EWS), now known as the OSHA Weighting System (OWS)
• To continue to develop and support a management system to focus enforcement activities
on critical and strategic areas where the Agency’s efforts can have the most impact and
• To further promote the appropriate allocation of resources to support OSHA’s balanced
approach to promoting safe and healthy workplaces.
Here is the new Enforcement Priority Weighting Scheme
Enforcement Units
Enforcement cases will be assigned the following weight:

Group A: Includes the most time intensive, complex, and high-priority inspections. 7 EUs
a. Criminal cases
b. Significant cases
Group B: Includes inspections for high-priority hazards and those that are more complex
than average and/or are of high lasting value. 5 EUs
a. Inspections following fatalities and catastrophes
b. Chemical plant NEP and Process Safety Management (PSM) Inspections
Group C: Includes programmed inspections following an established emphasis program
(EP) for hazards that are among the leading causes of death in the workplace.3 EUs
a. Caught-in hazards—e.g., trenching, equipment operations, oil & gas
b. Electrical hazards—e.g., overhead power lines, electrical wiring methods
c. Fall Hazards—e.g. scaffolds, elevated walking working surfaces
d. Struck-by hazards—e.g., highway work zones, landscaping, material handling
Group D: Includes programmed inspections following an established EP for priority
hazards that are somewhat time intensive and are a high priority. This category also
includes inspections for novel hazards and programmed inspections undertaken in
conjunction with an established enforcement policy addressing associated serious safety
and health hazards. 2 EUs
a. Amputation hazards
b. Combustible dust
c. Ergonomics
d. Federal agency inspections
e. Heat hazards
f. Non-PEL overexposures
g. Workplace violence hazards
h. Permit required confined space hazards—e.g., grain storage or maritime or
construction
i. Personal sampling—e.g., air contaminants or noise
j. Site specific targeting
Group E: Includes all other inspections not otherwise listed. 1 EU
Regions may submit other regional or local emphasis programs for approval and
weighting if they are not already covered under items 1-4 and assign them two to three
EUs.
Link to OSHA White Paper on OWS

We urge all shops to look at this for guidance in prioritizing their risk evaluation and remediation and training programs to minimize the chances of these OSHA Priority Hazards occurring in their shops.

OSHA Amputation National Emphasis Program-Renewed

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On December 10, 2019, the U.S. Department of Labor’s Occupational Safety and Health Administration issued an instruction (Directive) CPL 03-00-022 cancelling the prior NEP CPL 03-00-019 National Emphasis Program on Amputations, August 13, 2015, and describes the policies and procedures for the continued implementation of the National Emphasis Program to identify and reduce Amputation hazards in Manufacturing Industries.
We covered the prior NEP notice in our post HERE

OSHA’s enforcement history shows that employees are often injured when machinery or equipment is not properly guarded or maintained. This NEP targets industrial and manufacturing workplaces having machinery and equipment that can potentially cause amputations. Our 332- manufacturing NAICS codes are identified in this updated instruction.

See the source image

OSHA Instruction: CPL 03-00-022, National Emphasis Program on Amputations in Manufacturing Industries, is now available:

Directive Type: OSHA Instruction

Directive number: CPL 03-00-022

Directive subject: National Emphasis Program on Amputations in Manufacturing Industries

Effective Date: 12/10/2019

Cancellation/Archive including PDF: CPL 03-00-019, National Emphasis Program on Amputations, August 13, 2015

https://www.osha.gov/enforcement/directives/cpl-03-00-022

To support the purpose of this NEP, OSHA is beginning a three-month period of education and prevention outreach to encourage employers to bring their facilities into compliance with OSHA standards. Additional outreach and compliance assistance material will be forthcoming in the near future.

We will be providing reminders to our shops to retrain shop personnel in 1910.147 Control of Hazardous Energy and 1910.212 Machine Guarding – General Requirements. These are relevant to preventing amputations as well as being two of the 5 most prevalent general industry related violations in 2019.
We are hopeful that this time around, the Agency will give equal attention to enforcing part (b) of Section 5 of the OSH Act: “Each employee shall comply with occupational safety and health standards and all rules, regulations, and orders issued pursuant to this Act which are applicable to his own actions and conduct.”
OSH Act Sect 5 part (b)

USMCA- Updated NAFTA Finally Signed!

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“While we expect some changes in the automotive supply chain, some to the benefit of the U.S. and some to the benefit of Mexico, overall this is a positive outcome for manufacturers.”

On December 10, 2019, the U.S., Mexico, and Canada formally signed an updated NAFTA following months of negotiations between the White House and Democrats in the U.S. House of Representatives led by Speaker Nancy Pelosi. This marks a major victory for President Trump, Congressional Democrats, and most importantly, manufacturers who have sought some stability after several years of uncertainty over trade with Canada and Mexico. PMPA is part of several coalitions who have pushed for an update to the 25 year old NAFTA and believes the new agreement will expedite commerce across all borders. While we expect some changes in the automotive supply chain, some to the benefit of the U.S. and some to the benefit of Mexico, overall this is a positive outcome for manufacturers.
The changes agreed to by Speaker Pelosi, labor leaders, the White House, and Mexico do not significantly alter provisions impacting autos on Regional or Labor Value content levels except one last minute provision requested by the White House that all steel for autos be “melted and poured” in North America (delayed for seven years, Mexico refused the same terms for aluminum).
Sources in Washington indicate the U.S. House of Representatives could vote to approve the new NAFTA on December 19, one day prior to departing for the Christmas break, and one day after voting to impeach President Trump. Senate Majority Leader McConnell indicated he will not schedule a vote until after the Senate concludes the impeachment trial, which many believe could begin around January 7, 2020 and last at least two weeks (President Bill Clinton’s Senate impeachment trial began on January 7, 1999…). This puts Entry Into Force (when the new agreement officially takes effect) still a few months away.
Major changes in the White House-U.S. House Democrats-Labor-Mexico update include:

Creating rules of evidence for labor and environmental enforcement;
New labor enforcement applies to all goods and services in Mexico and can apply penalties on goods with labor violations;
A party cannot block dispute settlement panel from being formed;
Creates an interagency committee to monitory Mexico’s labor practices;
Unions may have attaches on the ground in Mexico but unclear if U.S. official or American labor representative may inspect Mexican facilities;
Adds Multilateral Environmental Agreement language for all parties;
New Customs verification system for fauna, flora coming from
Mexico to ensure properly harvested;
Removes requirement to provide at least 10 years of patent exclusivity for biologics;
Content liability protections for internet companies maintained;
Requires steel to be “melted and poured” in North America to meet standards for use in auto production (delayed seven years).

Photo credit

C-1200 Series Steels- Not Recommended for Applications Requiring Mechanical Properties

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Question: Why don’t the Certs for C12L14 and C1215 cold drawn steel bars have mechanical properties routinely reported?
Answer: Because these steels ARE NOT recommended for applications requiring mechanical properties, alternating stress applications, cold metal movement and can also be notch sensitive.

Don't do it! — Don’t use these steels for critical applications!

Here are some details from the application notes provided to me when I started as Plant Metallurgist at Bliss & Laughlin Steel in 1985:

The 1200 series steels (1215 and 12L14) are not generally sold for applications requiring high standards of strength, hardness, or other related properties
These steels are particularly adapted to automatic screw machine production of small repetitive parts. The ideal application is one where bulk and shape, as dictated by the design, are the chief requirements.
They may be used for parts which require only nominal strength values providing the factor of safety as in accordance with established practice. This is especially true where the stresses involved are static tension, compression, or shear. Vibratory, torsional, or alternating stress applications approaching the static limits are not recommended; thus these steels should not be used for line shafting.
When cold drawn, the C-1200 steels are notch sensitive and while polished fatigue specimens will show expected endurance limit values, poor finish and processing of parts, or faulty design may cause low or erratic results for finished parts under dynamic or alternating stresses of relatively small intensity.
These steels are not recommended for applications involving cold metal movement, such as crimping, forming or bending. Operations such as knurling and character rolling can be done satisfactorily.
Because of the smaller amount of hot work in rolling, the large size cold drawn C-1200 bars increase in relative brittleness. The large sizes may also be expected to reveal stringer sulfide inclusions on polished surfaces. Further removal will likely reveal more inclusions as they are distributed throughout the bar cross-section.
A cold drawn surface will not plate to the highest quality finish; a turned or ground surface may prove necessary for critical applications

Your customer wants inexpensive parts, and machining them from 12L14 and 1215 minimizes the cost of machining to the desired geometry. But if the parts are not likely to fulfill the properties expected, that is false economy at best.
Don’t do it Image
Little Charlie and the Night Cats If you Dig It, Don’t Do it.

November ISM PMI, Consistent with Seasonal Expectations

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“Economic activity in the manufacturing sector contracted in November, and the overall economy grew for the 127th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM^® Report On Business^®.”
The decrease in the ISM PMI index of 0.2 percentage point from the October reading of 48.3 percent is modest and not unexpected for this time of year- it dropped 0.5 point in 2017, and three of the last five November ISM PMI’s were negative (2017, 2015, 2014.)
Considering ongoing issues with production at Boeing (737 MAX) and residual slack as a result of the just settled UAW strike against GM, and this 0.2 percent decline is modest.

Is manufacturing in a recession? If we use the definition of “a period of temporary economic decline during which industrial activity is reduced, for two successive quarters,” the answer is not yet. four consecutive months of contraction have been logged, but following 35 straight months of growth in the manufacturing sector, we are not yet ready to throw in the towel.
What are we watching?
We are beginning to pay attention to automobile loan delinquencies which have climbed to 4.7% of the total automotive loans and leases. This is just 0.56% off from the peak of auto loan delinquencies back in 2010 (5.27%). Automotive is our industry’s single largest market served, and if automotive loans continue to go south, our shops may be in for diminished production for a longer period than anyone is expecting.
Link to November 2019 ISM PMI Report.
Link to Calculated Risk November 2019 ISM PMI Chart

Standing on the Shoulders of Giants- Veterans Day 2019

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My family has a story. I’ll bet yours does too.

My grandfather and namesake, Miles Sr., joined the army cavalry back in WWI. Sounds dashing, but the assignment to cavalry in those days, for farm boys from Ohio, was all about the barn, not about the riding.My father, Miles Jr., was first in his graduating class of 1942 to enlist in the Army. He got some great training at the New England Aircraft School and as ground crew chief was responsible for the maintenance of a number of B-17’s over Europe.

I am humbled by what he and his generation did in their late ‘teens and early twenties. Not so impressed with how I muddled through those same years in my life.

Thanks Dad.

My daughter, Emma, and her husband, have been deployed in Europe, Asia, and the Middle East with the U.S. Army. Today they call West Point home.
I’ll bet your family has some stories like this too. I hope you share them this weekend. They are important ways to share your family’s values.
I got a pass. I got a university deferment. then I got a high draft number. No crazy Asian war for me.
So, when they bring up the flag at the parade today, I’ll be the first to jump up (or try to be) to salute, not the flag that goes by, but the sacrifices and love gifts of all who have worn the uniform of a U.S. Armed Service, who stepped forward and chose “Duty, Honor, Country” instead of “What’s in it for me?”
Isaac Newton is famously credited with saying “If I have seen further than most, it is because I have stood on the shoulders of Giants.”
Today, I echo his sentiment with gratitude for the service and sacrifice of the veterans. Thank you for your service. Thank you for your sacrifice.
You are all giants in my book.

September ISM PMI Declines- GDP Growth Likely 1.7%

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“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.
Hammer Lightning