Orders, Employment, and Prices All Up in March 2019 Manufacturing ISM® Report On Business®

The March 2019 Manufacturing ISM® Report On Business® is here, and it’s a bit of a mixed bag. The consensus among industry professionals is cautious optimism — and it’s easy to see why from the numbers. Several key metrics are trending positive, while a number of headwinds seem to be stabilizing. The future appears less rocky than recent months, but only if the good keeps getting better and the not-so-good continues to taper down.

The good gets better

The positive points of the March 2019 report are plain to see at a glance. Employment jumps off the page with an astounding 5.2% increase over February’s report, reaching the previous high point set in November 2018 (57.7%). Demand for skilled workers has been strained for some time now; this increase shows much-needed growth.

Another major positive is the 3.7%
uptick in customers’ inventories. This generally means customers’ inventories
are too low, setting the stage for industry growth in the future due to demand.
This is similarly supported by the continuation of backlogged orders reported
for the month, although this figure was actually down from February (1.9%
decrease).

Alongside big gainers, new orders and
production were also up in March, by 1.9% and 1% respectively. These positives
pushed the general PMI® up 1.1% over February’s report.

New trends develop

Despite the positives of this report, one negative also stands out. Prices shot up in March, rising 4.9% and restoring them to December levels. While this isn’t inherently bad — higher prices generally point to stability and predictability within the market — material costs are still contending with global trade tensions. If the trend continues, we could face higher downstream costs similar to the ones that prompted economic uncertainty this time last year.

Imports were also down substantially in March, shedding 4.2%. With trade talks reportedly reaching a conclusion that may result in a rollback of tariffs, the reasons for this drop in imports could be numerous. Many manufacturers are likely biding their time to see the results of this deal.

Industry
sentiment

The March 2019 report has plenty to get
excited about — namely the rise in employment — but some new trends are worth
paying attention to, in case they develop into new headwinds for the industry.
The sentiment among industry professionals is generally one of cautious
optimism.

“Strong business momentum coming into January and early February has slowed to typical seasonal business conditions for our industry.” (Miscellaneous Manufacturing)

“Awaiting with anticipation the outcome of the U.S.-China trade deal.” (Plastics and Rubber Products)

It’s worth noting that the optimisms and fears currently present are on par with 2018 end-of-year predictions about the stability of the industry as a whole. In its 2019 Industrial Manufacturing Industry Outlook, Deloitte characterizes the manufacturing industry as being in a unique position:

“On one hand, manufacturing is firing on all cylinders: output is humming, capacity utilization is up, and many manufacturers are delivering solid performance results and shareholder returns. On the other hand, trade tensions lurk in the background and supply chains are straining to keep up with demand, while skilled talent is in short supply and threatening to derail the current industry momentum.”

It goes to show that the manufacturing
economy isn’t in uncharted territory. In fact, it appears to be exactly where
it needs to be this early in 2019. All signs point to major innovation and an
upcoming make-or-break timeframe, where the industry as a whole will either
surge ahead or succumb to stagnation based on several key external drivers. For
now, all we can do is observe the trends.


For the very best in machine repair and maintenance, you can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!

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