Business Trends Sales Index Remains Positive Year to Date
Upbeat! With 82 companies responding, the PMPA Business Trends Index for October came in at 135, up 3 points or 2.7 percent above September. The index is 100% of last year year-to-date. October’s index is up 6 points or 4.7 percent of this year’s low in June, and up 7.4 points or 5.8% over the five-year average for October. The 3-month moving average of this sales index at 133.7 is climbing towards the 12-month moving average- indicating a return to growth of Sales in our industry. Our year to date average remains at 136, up 2 points or 1.5 percent over 2018’s year-end average of 134.
The need frequently arises in our shops to estimate the weight of steel, whether as a part of quoting, to estimate how much steel may be needed given a certain length of part, or just to decide how heavy the bar is that we are loading into the machines for safety purposes. Counting bars in a bundle and multiplying by weight per bar allows a quick “reality check” on whether or not the tag weight is correct, or how much weight is left in the rack.
“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.
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.
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
Dan Ignasiak, owner of SEPCO-Erie in Erie Pennsylvania, wanted to improve the productivity and efficiency of his shop, so he started with the men’s room and implemented process and a new way of thinking.
The properties of the steel materials we machine in our shops are the result of a complex interplay between chemical composition, developed by hot and cold work, and further controlled by various thermal treatments to develop microstructures.