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.
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.
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?’