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June Manufacturing ISM Report flat; May GDP drops 2.9%June Manufacturing ISM Report flat; May GDP drops 2.9%

Manufacturing appears to be flat month-over-month after the Institute for Supply Management's June Manufacturing Report On Business shows PMI (Purchasing Management Index) decreased to 55.3%, down 0.1% from May's reading of 55.4%. While the report shows that manufacturing remains on the "expansion" side of the equation (above 50 is an expansion while below 50 indicates a contraction), the industry isn't exactly booming.

Clare Goldsberry

July 1, 2014

2 Min Read
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The PMI shows that New Orders were up 2.0% to 58.9% in June, however, the Backlog of Orders is in a "contraction" mode, down 4.5% from 52.5% in May to 48.0% in June. The Production Index dropped 1.0% from 61% in May to 60% in June. Employment remained steady at 52.8% for June, the same as May. Customers' Inventories also remained flat at 46.5%, which is considered "too low" and might reflect the low retail sales figures as well as lagging manufacturing equipment sales.

We might be entering a period that some in manufacturing refer to as "summer slump" which could account for the flatness of manufacturing as depicted in this report.

Every commodity important to the plastics industry is up in price said the ISM's report, including aluminum, natural gas, plastic components, stainless steel, steel and hot-rolled steel. Not a good sign for processors and moldmakers or their customers.

Manufacturing technology (machine tools and equipment) didn't fare so well, with the latest report from The Association for Manufacturing Technology (AMT) for April issued June 9, showing that orders were down 20.4% to $391.53 million in April from March. That wasn't a good start for the second quarter. However, orders were up 9.8% when compared with the total of $356.52 million reported for April 2013. Year-to-date orders totaled $1,620.83 million, which says that 2014 is up 3% compared with the same period in 2013.

Douglas K. Woods, AMT president, said, "The manufacturing technology market is up 3% year-over-year thanks to March and April orders picking up the slack from the January and February weather-induced slowdown. Indicators such as the Purchasing Managers' Index which surged forward in May and the optimism expressed by Oxford Economics in their spring update on our market suggest we are on track for a strong 2014."

Despite Woods' optimism, many analysts would beg to differ. After last week's report on the Gross Domestic Product (GDP) from the Bureau of Economic Analysis (BEA) showing Q1 GDP down a dramatic 2.9%, many analysts are doubtful we can dig ourselves out of this deep hole any time soon without two really big quarters as we head into the last half of 2014. That may not be a reality.

"This downturn in the percent change in real [Q1] GDP primarily reflected a downturn in exports, a larger decrease in private inventory investment, a deceleration in personal consumption expenditures (PCE), and downturns in nonresidential fixed investment and in state and local government spending that were partly offset by an upturn in federal government spending," said the BEA information.

Analysts are saying that the Q2 GDP report will tell the tale because the BEA won't be able to blame bad weather if the downturn continues. While the stock market indexes continue to ride record highs, many analysts are at a loss to explain why that is.

Hang onto your hats - 2014 could be a bumpy ride.

About the Author

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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