December ISM Manufacturing Report- Mixed Message

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The December ISM Manufacturing Report is out, and the headline story is good news.

But the full report is a bit of a mixed bag for our industry.

Manufacturing is back in expansion mode as the Purchasing Manager’s Index, “‘The PMI™,’ registered 50.7 percent, an increase of 1.2 percentage points from November’s reading of 49.5 percent, indicating expansion in manufacturing for only the third time in the last seven months. This month’s PMI™ reading moved manufacturing off its low point for 2012 in November.” – ISM Report Dec 2012

ISMDec2012

A closer reading however notes that “The nine industries reporting contraction in December — listed in order — are: Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; and Apparel, Leather & Allied Products.” – ISM Report Dec 2012

Precision machining is an industry of Fabricated Metal Products. Four of our most important market segments were also in decline in December: Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components. The market we see is not as rosy as the headline.

In addition, the New Orders component of the survey, at 50.3, went unchanged. This suggests that new orders, the source of our business’s future production, was virtually unchanged in December. The backlog of orders component, at 48.5,indicates a small contraction of the orders book.

Graph courtesy of Calculated Risk Blog

Manufacturing Picked Up Steam In October

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And Precision Machining is likely to show a similar pickup when we compile our numbers later this month.

Precision machined components are critical to many manufactured goods in many markets including automotive, off road, aerospace, medical, appliance and many, many, more.
The Institute of Supply Management (ISM) said its survey of purchasing managers nationwide revealed strong gains in new orders and production; its index rose to to 56.9%, from 54.5% in September. you can read their survey here.
Of the 18 manufacturing industries, 14 are reporting growth in October, in the following order: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; Printing & Related Support Activities; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Chemical Products.
The two industries reporting contraction in October are: Nonmetallic Mineral Products; and Furniture & Related Products.
Manufacturing activity has expanded for 15 consecutive months but the rate of growth has been slowing since April. This latest strong showing provides hope for continued growth for the balance through the end of the year.
“This month’s report signals a continuation of the recovery that began 15 months ago, and its strength raises expectations for growth in the balance of the quarter,” said Norbert Ore, head of the ISM’s manufacturing business survey committee.
Photocredit.

Manufacturing Growth Not Just A Wish

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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?

ismgraphnovcrop — 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?

Just Posted- PMPA's October 2009 Material Impacts Report

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Of course prices have risen.

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.