Sponsored By

You might say the manufacturing economy is slip slidin' away. With the completion of the third quarter, things aren't looking good. The September 2015 Manufacturing ISM Report on Business from the Institute of Supply Management (ISM) shows yet another slippage, to 50.2% from August's 51.1%. While that's only a drop of 0.9%, it's enough to support the trend that we've been seeing for several months. For example, the August Purchasing Managers Index (PMI) was down 1.6% from July's 52.7%; and July dropped from a June PMI of 53.5%.

Clare Goldsberry

October 2, 2015

4 Min Read
September ISM manufacturing report proof that economy is still sliding

You might say the manufacturing economy is slip slidin' away. With the completion of the third quarter, things aren't looking good. The September 2015 Manufacturing ISM Report on Business from the Institute of Supply Management (ISM) shows yet another slippage, to 50.2% from August's 51.1%. While that's only a drop of 0.9%, it's enough to support the trend that we've been seeing for several months. For example, the August Purchasing Managers Index (PMI) was down 1.6% from July's 52.7%; and July dropped from a June PMI of 53.5%.

curvyroadsign250nuttakit.jpg

Image courtesy nuttakit/freedigitalphotos.net.

The benchmark for the PMI is 50, with a reading above 50 showing an expansion and below 50 indicating a contraction. We're getting awfully close to that "contraction" marker, in spite of the commentary from the ISM noting that "the manufacturing sector expanded in September for the 33rd month, and the overall economy grew for the 76th consecutive month."

That language is a bit more optimistic than many indicators would support. A report in the August 20 edition of the Washington Post by Jim Tankersley, noted that while "it took less than a year for America's factory output to rebound from the 1991 recession," and "3 and a half years to bounce back from the 2001 recession," here we are "six years clear of the Great Recession" (or we are supposed to be clear of it) and "manufacturing output still hasn't returned to the pre-crisis levels it reached in 2007, according to revised economic data from the Federal Reserve."

Tankersley noted the "persistent weakness" in the manufacturing sector, which hasn't lived up to expectations. Employment in manufacturing has been tepid at best, adding "fewer than half of the 1 million jobs that Obama promised the sector would create in his second term."

The Alliance for American Manufacturing keeps score of manufacturing jobs added in a chart on its home page. Currently, the number stands at 382,000 out of a promised 1 million by January 2017. The prognosis is not looking good at this point.

The ISM's September PMI shows that new orders dropped to 50.1% from 51.7% in August; the Production PMI took a hit as well, falling to 51.8 from August's 53.6, down 1.6%.

ISM's employment index also shows a drop from 51.2% in August to 50.5% in September. Supplier deliveries are stagnant at 50.2 in September from 50.7 in August. Inventories are also stalled at 48.5% in September, the same as August, meaning that the lack of new orders is having an impact on manufacturers. Customer inventories are "too high," moving from 53.0% in August to 54.5% in September, meaning that sales are sluggish.

To promote sales, prices have once again declined, with that PMI at 38.0%, a 1% drop from an August prices PMI of 39.0%. What all of this means is just what the backlog PMI shows—a definite slowing trend in manufacturing, down 5.0% from 46.5% in August to 41.5% in September. Out of the 18 manufacturing industry sectors ISM tracks, only seven evidenced growth in September: The plastics and rubber and fabricated metal products sectors were not among that group.

A response from the transportation equipment sector revealed a lack of confidence: "Overall business is slowing. Consumers are nervous. Not sure what is coming next."

Tankersley noted in his Washington Post editorial that "revised data show manufacturing output grew by nearly 2 percentage points less than previously estimated in both 2012 and 2013, and nearly 1 point less in 2014. Output in defense and aerospace equipment was revised even more dramatically downward by 4 points in 2012, 7 points in 2013 and 2.5 points in 2014. That coincides with the implementation of a series of curbs to the federal defense budget, including ones agreed to by Obama and congressional Republicans in a 2011 budget deal."

All in all, we're entering the fourth quarter on a downer. The political situation over the next year won't be helping things. Continuing trade deficits, failure to press China with regard to its currency manipulation, reluctance to do any type of corporate tax reform and various regulatory issues that are adding more costs in the face of a continued slow-down certainly do nothing to help us clear this recessionary hurdle we're still facing.

Revlon just doesn't make enough lipstick to pretty up the face of this pig!

About the Author(s)

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."

Sign up for the PlasticsToday NewsFeed newsletter.

You May Also Like