2020 Predictions: What Manufacturers Need to Know
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The recent shutdown by the U.S. government did not appear to have an effect on domestic manufacturing activity, according to the nation’s supply executives. A leading indicator of economic growth, the Institute for Supply Management’s Purchasing Manager's Index (PMI), increased for the fifth straight month to reach 56.4 percent. A PMI reading above 50 percent indicates that the manufacturing economy is expanding; below 50 percent indicates that it is contracting.
The ISM tracks 18 manufacturing industries including electronics. Although some respondents to the ISM’s monthly business survey reported uncertainty in their market, the data showed no effect from the shutdown, said Bradley Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. Holcomb added he doesn’t expect to see an impact: manufacturers are responding to market demand, not to politics in Washington, D.C., he said.
Nearly all other ISM indices were up and to the right. The New Orders Index increased slightly in October by 0.1 percentage point to 60.6 percent, while the Production Index decreased by 1.8 percentage points to 60.8 percent. Both the New Orders and Production Indexes have registered above 60 percent for three consecutive months. The Employment Index registered 53.2 percent, a decrease of 2.2 percentage points compared to September’s reading of 55.4 percent. The panel’s comments are generally positive about the current business climate.
Other highlights from the report include:
Inventories*
The Inventories Index registered 52.5 percent in October, which is 2.5 percentage points higher than the 50 percent reported in September. This month’s reading indicates that respondents are reporting inventories are growing relative to September’s unchanged reading. An Inventories Index greater than 42.7 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis’ (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).
The six industries reporting higher inventories in October — listed in order — are: Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; Petroleum & Coal Products; and Miscellaneous Manufacturing. The six industries reporting decreases in inventories in October — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Machinery; Fabricated Metal Products; Transportation Equipment; and Chemical Products. Six industries reported no change in raw materials inventories in October compared to September.
Prices*
The ISM Prices Index registered 55.5 percent in October, which is a decrease of 1 percentage point compared to the September reading of 56.5 percent. This month’s reading indicates an increase in raw materials prices for the third consecutive month. In October, 22 percent of respondents reported paying higher prices, 11 percent reported paying lower prices, and 67 percent of supply executives reported paying the same prices as in September. A Prices Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.
Of the 18 manufacturing industries, eight reported paying increased prices during the month of October in the following order: Plastics & Rubber Products; Miscellaneous Manufacturing; Fabricated Metal Products; Machinery; Chemical Products; Paper Products; Food, Beverage & Tobacco Products; and Transportation Equipment. The only industry reporting paying lower prices during October is Petroleum & Coal Products. Nine industries reported no change in the price of raw materials in October compared to September.
New Export Orders*
ISM’s New Export Orders Index registered 57 percent in October, which is 5 percentage points higher than the 52 percent reported in September. October’s reading reflects growth in the level of exports relative to September, and is the highest reading since April 2012 when the index registered 59 percent. This month’s reading also represents the 11th consecutive month of growth in new export orders.
The 10 industries reporting growth in new export orders in October — listed in order — are: Wood Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; Furniture & Related Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Transportation Equipment; and Chemical Products. The two industries reporting a decrease in new export orders during October are: Primary Metals; and Paper Products. Six industries reported no change in new export orders in October compared to September.
The full report can be found at http://epsnews.com/2013/11/04/ism-manufacturing-growth-continues/ or http://www.ism.ws/.
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