The January 2013 PMI composite shows a modest expansion, with all of its component indices showing positive gains for January.

ISM PMI JAN2013 fredgraph

The PMI™ registered 53.1 percent, an increase of 2.9 percentage points from December’s seasonally adjusted reading of 50.2 percent, indicating expansion in manufacturing for the second consecutive month. The New Orders Index registered 53.3 percent, an increase of 3.6 percent over December’s seasonally adjusted reading of 49.7 percent, indicating growth in new orders. Manufacturing is starting out the year on a positive note, with all five of the PMI™’s component indexes — new orders, production, employment, supplier deliveries and inventories — registering above 50 percent in January.” January ISM Report

Precision machining is a subsector of Fabricated Metals, which was one of 13 sectors reporting growth in January in the following order: Plastics & Rubber Products; Textile Mills; Furniture & Related Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Transportation Equipment; Petroleum & Coal Products; Machinery; Primary Metals; and Food, Beverage & Tobacco Products.

What does ISM’s PMI have to do with you?

The ISM correlates generally with GDP and Industrial Production over time. for a great discussion of how the ISM fits into the big picture, you might like “Robert Oak’s” take over at “The Economic Populist” blog.

ISM to REal GDP fredgraph

ISM to IP fredgraph

“Robert Oak” is  the pen name of “a thinking person like yourself who became fed up with corporate written and special interest driven trade, labor and economic policy and analysis.  Many spin with numbers including the financial press.  Robert Oak analyzes by first principles and puts accuracy and objectivity first.  The numbers don’t lie but people lie with numbers all the time.”

Fred ISM Graph Series

Up five points over last July.

PMPA’s Business Trends Index for July 2012 is 111, down substantially from last month’s adjusted value of 119, but still well above last year’s July value of 106 and July 2010’s value of 99. While our index does reflect a drop in shipments that we expect seasonally in July, the 111 value is highest value for July in this decade. July 2012’s reading is up 4 % over last July, and year to date we are up 5% over same period last year. It is easy to see the absolute value of the month to month drop and be concerned, but our index shows that our industry continues to improve over past years’ performance when considering where we are seasonally.

Industrial Production (IP) increased 0.6 percent in July after having risen 0.1 percent in both May and June. In July, the U.S. summary “Purchasing Managers’ Index” (PMI) from the Institute for Supply Management (ISM) inched up 0.1 points for July, to a level of 49.8.

In plain English, “Industrial activity at the nation’s factories remained stalled in July” according to Dr. Ken Mayland, PMPA’s retained economist.

Our index indicates that our shops continue to adjust to the broader economy as we sustain higher performance than prior years.

Over half  of shops responding were scheduling overtime in July.

Full report here.

There is a lot of uncertainty in the press about the economy and a lot of fear among businessmen regarding the near term for their business. Here are 5 reasons why I am bullish on  the Precision Machining Industry’s prospects for the balance of 2012.

5 Reasons!
  1. Institute for Supply Management (ISM) Purchasing Manager Index (PMI) for April rose to 54.8 an increase of 1.4 points. If sustained this would indicate an approximate 4.1% real growth in GDP. Precision machined components are vital components in all facets of industry and so would reflect that GDP growth.
  2. The World Steel Association (Worldsteel) just released its April 2012 Short Range Outlook (SRO) for 2012 and 2013. Worldsteel forecasts that global apparent steel use will increase by 3.6% to 1,422 Mt in 2012, following growth of 5.6% in 2011. In 2013, it is forecast that world steel demand will grow further by 4.5% to around 1,486 Mt.
  3. “According to USMTO, February machine tool sales were 2,063 units. This was 23.5% more than February 2011, which was the highest one-month rate of change since September 2011. On an annual basis, unit sales continued to see slower growth, but that rate of growth (33.5%) is still historically high… While the rate of growth in machine tool sales is bound to slow, the leading indicators are strong enough that it looks like machine tool sales should be good throughout 2012.”- Steve Kline Jr, Latest email
  4. “Future business expectations remain strong. The index showed metalworking facilities are slightly more optimistic about their business than they were last month. This continues the trend of improving business expectations that began in October 2011. Finally, since September 2011, the average spending on metalworking equipment for the next 12 months has improved. This indicates that machine tool sales should remain strong for at least the next quarter or two.” Modern Machine Shop MBI
  5.  Real personal consumption expenditures increased 2.9 percent in the first quarter, compared with an increase of 2.1 percent in the fourth.  Durable goods increased 15.3 percent, slowing from the fourth quarter’s 16.1% increase. – BEA

Anecdotally PMPA’s Business Trends Reporting sentiment indicators are strongly positive. We’ll have the index, and our prediction for the end of year average in about two weeks.

Leadership is about action, not potential. Global Purchasing Managers Index (PMI) data shows that it is the USA, not China, that is leading the world out of the slowdown.

Maybe the term SHOULD be U-BRIC

Here are 5 reasons that PMI data is relevant evidence for your analysis

  • PMI is a reliable fact-based indicator as opposed to opinion or confidence-based indicators.
  • PMI is produced monthly, faster than comparable official data series.
  • PMI covers almost all private sector economic activity in many countries (including the all-important service sectors).
  • PMI are not revised after publication.
  • PMI are produced using the same methodology in all countries where they are produced- assuring comparability.

While we associate the PMI data with the Institute for Supply Management, the fact is that Markit Economics is the firm doing the actual surveys and reporting.

How do you read the above PMI Data?



The Institute of Supply Management said its index of the manufacturing sector, also known as the Purchasing Managers Index, rose to 48.9 percent from 44.8 percent in June.
That figure was better than Wall Street’s expected  level of 46.5 percent and closer to the 50 percent level that separates expansion and contraction. 48.9% is knocking on 50%’s door…
The ISM said that although the factory sector contracted for an 18th consecutive month, the decline was modest and suggested the slump is ending.
“It would be difficult to convince many manufacturers that we are on the brink of recovery, but the data suggests that we will see growth in the third quarter if the trends continue,” according to ISM survey chief Norbert Ore.
Additionally, the survey showed  growth in both the new orders and production sub-indexes. The survey also indicates that  the headline index was pulled down by weakness in inventories and lingering declines in employment.
We don’t think that it would be difficult to convince our members that “Now is the time,” for the orders to appear. We just hope that we can all have access to credit to cover our payrolls while we wait for payment on the new business that is imminent.
According to the NSBA’s July  Report , access to capital continues to be a major issue, with 80 percent of small-business owners negatively impacted by the credit crunch—up from 67 percent one year ago. Sixty-eight percent reported worsening terms on their credit cards and 38 percent were subject to a decrease on their lines of credit or credit cards.
It takes energy, machinists, materials and supplies to keep our machines running. And all of those require working capital.
Recovery may be imminent, but its duration will be measured by our ability to fund our work.
What has your shop done that is out of the box to stay ‘in the game?’