March ISM Report, Manufacturing Expands But Rate Of Growth Slows

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PMI shows manufacturing continues to expand, but rate of growth is slowing.

“The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The PMI™ registered 51.3 percent, a decrease of 2.9 percentage points from February’s reading of 54.2 percent, indicating expansion in manufacturing for the fourth consecutive month, but at a slower rate. Both the New Orders and Production Indexes reflected growth in March compared to February, albeit at slower rates, registering 51.4 and 52.2 percent, respectively. The Employment Index registered 54.2, an increase of 1.6 percentage points compared to February’s reading of 52.6 percent.” ISM

According to the report, Fabricated Metals, the industry classification which includes precision machining, was one of the top 4 market sectors reporting growth in March.

Comments from respondents highlighted in the ISM release indicated that reduced government spending and uncertainty about federal regulations were among the reasons for the March slowdown.

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Precision Machining Indications from September ISM Report

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“Manufacturing continued its growth in September as the PMI registered 51.6 percent, an increase of 1 percentage point when compared to August’s reading of 50.6 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.”- September 2011 ISM Report.

The view in the marketplace for precision machined products is somewhat less clear.

LED Mtg feb09 109 — Precision Machining is an important sector of Fabricated Metals Industry.

Here is a look at the ISM indicators for Fabricated Metals Manufacturing in September.

(Precision machining is a component of Fabricated Metals Manufacturing- the Fab Metal data reflects our machining industries.)

The ISM September 2011 data for Fabricated Metal Manufacturing shows:

New Orders- Growth
Production- Increase
Employment- Decrease
Deliveries- Faster
Inventories- Decrease
Customer’s Inventories- Too High
Prices- Fab Metals is only industry reporting lower prices (as well as higher prices)
Order Backlog- Increase
New Exports- Increase
Imports of Materials- Increase

It may not feel like Christmas, but only two of the above ten indicators (Customer’s Inventories and Employment) were negative for Fab Metals and Precision Machining.

You can access the full ISM Report for September here.

Manufacturing Growth Confirmed by December Data

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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.

winter woods adj — 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.