In order to know where the industry is heading, it’s important to understand where it has been. Here’s a look at two monthly reports — one that tracks manufacturing technology orders and another that looks at economic activity in the manufacturing sector.
According to the latest U.S. Manufacturing Technology Orders (USMTO) report from The Association For Manufacturing Technology (AMT), manufacturing technology orders declined slightly in November 2016, dropping 2.4 percent compared to October 2016. Overall, orders were down 5.1 percent for the year compared to the same point in 2015.
Manufacturing technology analysts forecast that orders may begin to rebound as early as April. The November 2016 total order value was $329.61 million. Year-to-date orders were valued at nearly $3.6 billion. Orders for the same point in 2015 were valued at nearly $3.8 billion.
“While our industry endured some challenges in 2016, bookings for the last few months of the year were better than expected and early input on January is very promising, particularly in the aerospace and job shop sectors,” said AMT President Douglas K. Woods in a statement. “We are seeing improvements in the overall economy, with post-election business confidence on the rise as demonstrated by strong performance in the financial and equity markets. We hope the new presidential administration and Congress keep that momentum going by focusing on comprehensive tax reform, global competitiveness and building a skilled workforce to ensure a strong future for U.S. manufacturing.”
USMTO is a leading economic indicator as manufacturing companies invest in capital metalworking equipment to increase capacity and improve productivity.
Purchasing Managers Index
Sectors showing increased manufacturing orders in the last few months of the year included the automotive, aerospace and job shop sectors — indicating capital investments in anticipation of needed additional manufacturing capacity. Additionally, the recent Purchasing Managers Index from ISM grew for the fifth consecutive month from 54.5 in December 2016 to 56 percent in January 2017. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
“The PMI set a new record and it's the highest number since December 2014,” says Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “That is also true of New Orders and Production with new highs since November 2014. Twelve industries are reporting growth in New Orders and 10 industries report growth in Production. So manufacturing is certainly growing on the momentum of the last four months of 2016.”
A PMI above 43.3 percent, over a period of time also generally indicates an expansion of the overall economy. The January PMI indicates growth for the 92nd consecutive month in the overall economy.
ISM’s New Orders Index registered 60.4 percent in January, which is an increase of 0.1 percentage point compared to the seasonally adjusted 60.3 percent reported for December — indicating growth in new orders for the fifth consecutive month. A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).
ISM’s Production Index registered 61.4 percent in January, which is an increase of 2 percentage points when compared to the seasonally adjusted 59.4 percent reported for December, indicating growth in production for the fifth consecutive month. An index above 51.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
One area to note is ISM’s New Export Orders Index which registered 54.5 percent in January, a decrease of 1.5 percentage points when compared to the 56 percent reported for December, indicating growth in new export orders for the 11th consecutive month.
“The Exports Index is particularly interesting as we hear about the high price of the dollar — which would mean that our exports are more expensive to our overseas customers,” explains Holcomb. “Nevertheless, they continued to buy, meaning they like our products in terms of quality, selection, availability and innovation. I expect that to continue and be in good shape, despite the price of the dollar.”