U.S. Manufacturing Sees Slight Improvements in May

June 4, 2020


Recent U.S. Manufacturing Figures

The latest U.S. manufacturing figures from the Institute of Supply Manufacturing (ISM) continue to show a market in contraction. For May, the purchasing managers index (PMI) was 43.1%, up slightly from April’s 41.5%.  According to ISM, a PMI above 42.8%, over a period of time, generally indicates an expansion of the overall economy.

In mid to late March, manufacturing facilities across all industries shut operations in response to COVID-19. Prior to the COVID-19 impact, manufacturing was already in a slowdown as demand softened. In addition, the impact from U.S. tariffs on Chinese and other countries’ exports to the U.S. was felt. However, April recorded significant declines in manufacturing activity followed with slight improvements in May.

Among the bright spots to report new orders in May were:

  • Textile Mills
  • Nonmetallic Mineral Products
  • Food, Beverage & Tobacco Products
  • Paper Products

Nonetheless, it was not enough for the overall new orders index to climb out of contraction territory. Reporting in at 31.8% in May, up 4.7% from April, it was the second-lowest reading since December 2008.

New export orders improved slightly, 39.5% up 4.2% compared from April. However, it was the second-lowest reading since March 2009. The two industries reporting growth in new export orders in May were Paper Products & Food, Beverage & Tobacco Products.

Inventory levels increased as well in May. According to ISM’s Chairperson, “Given suppliers’ difficulty in delivering during May and the weakness in new orders and production, inventories growth is likely attributed to the companies’ desire to have inventory on hand to respond to shorter lead time customer demand.”

May Commentary

The monthly ISM report is based on surveys and commentary. The commentary can be quite telling regarding the state of the market. A few from May are:

  • “Despite the COVID-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” (Computer & Electronic Products)
  • “We see an issue with suppliers that are affecting production. At the same time, social distancing measures in [the] manufacturing plant and customer demand are impacting the rate of production.” (Transportation Equipment)
  • “Getting out from under several suppliers being closed worldwide. Also, looking at what really needs to be in China.” (Machinery)

There are a number of uncertainties as manufacturing facilities reopen. For example, what demand will look like and a possible rethink of supply chain operations. As many manufacturers depend on ‘just in time’ inventory, will they instead shift to ‘just in case’ inventory?

 


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. We use cost modeling technology and market intelligence to help companies with transportation, distribution and fulfillment spend. As a result, large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases.

As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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U.S. Manufacturing Sees Slight Improvements in May

June 4, 2020


Recent U.S. Manufacturing Figures

The latest U.S. manufacturing figures from the Institute of Supply Manufacturing (ISM) continue to show a market in contraction. For May, the purchasing managers index (PMI) was 43.1%, up slightly from April’s 41.5%.  According to ISM, a PMI above 42.8%, over a period of time, generally indicates an expansion of the overall economy. In mid to late March, manufacturing facilities across all industries shut operations in response to COVID-19. Prior to the COVID-19 impact, manufacturing was already in a slowdown as demand softened. In addition, the impact from U.S. tariffs on Chinese and other countries’ exports to the U.S. was felt. However, April recorded significant declines in manufacturing activity followed with slight improvements in May. Among the bright spots to report new orders in May were:
  • Textile Mills
  • Nonmetallic Mineral Products
  • Food, Beverage & Tobacco Products
  • Paper Products
Nonetheless, it was not enough for the overall new orders index to climb out of contraction territory. Reporting in at 31.8% in May, up 4.7% from April, it was the second-lowest reading since December 2008. New export orders improved slightly, 39.5% up 4.2% compared from April. However, it was the second-lowest reading since March 2009. The two industries reporting growth in new export orders in May were Paper Products & Food, Beverage & Tobacco Products. Inventory levels increased as well in May. According to ISM’s Chairperson, “Given suppliers’ difficulty in delivering during May and the weakness in new orders and production, inventories growth is likely attributed to the companies’ desire to have inventory on hand to respond to shorter lead time customer demand.”

May Commentary

The monthly ISM report is based on surveys and commentary. The commentary can be quite telling regarding the state of the market. A few from May are:
  • “Despite the COVID-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” (Computer & Electronic Products)
  • “We see an issue with suppliers that are affecting production. At the same time, social distancing measures in [the] manufacturing plant and customer demand are impacting the rate of production.” (Transportation Equipment)
  • “Getting out from under several suppliers being closed worldwide. Also, looking at what really needs to be in China.” (Machinery)
There are a number of uncertainties as manufacturing facilities reopen. For example, what demand will look like and a possible rethink of supply chain operations. As many manufacturers depend on ‘just in time’ inventory, will they instead shift to ‘just in case’ inventory?  
ABOUT SPEND MANAGEMENT EXPERTS Spend Management Experts provides strategic guidance to optimize your supply chain. We use cost modeling technology and market intelligence to help companies with transportation, distribution and fulfillment spend. As a result, large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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