Manufacturing index contracts to close out 2019

Economic activity in the manufacturing sector contracted in December as the purchasing managers index (PMI) dropped to 47.2, which is a drop of almost 10 points compared to January 2019. While the overall economy grew for the 128th consecutive month, the decline remains a major concern.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, said in a press release: “December was the fifth consecutive month of PMI contraction, at a faster rate compared to the prior month. Demand contracted, with the new orders index contracting faster, the customers’ inventories index remaining at `too low’ status and the backlog of orders index contracting for the eighth straight month.”

Of the 18 manufacturing industries, three reported growth in December: food, beverage & tobacco products; miscellaneous manufacturing; and computer & electronic products.

“Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China. Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Transportation Equipment is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth,” Fiore said.

What respondents are saying

• “Backlog of orders is shrinking due to new order pace continuing to fall.” (Computer & electronic products)
• “Due to sluggish sales, we have introduced promotions to generate increased sales.” (Chemical products)
• “Cautiously optimistic is the rule these days. Sales are decent, but we’re wondering what 2020 will bring. Still hedging that it will be successful — but maybe not as much as this year.” (Transportation equipment)
• “Starting to see suppliers try to pass on costs associated with tariffs. Uncertainty on the trade front continues to keep agricultural markets on the defensive.” (Food, beverage & tobacco Products)
• “Down month-to-month, but up over last year.” (Miscellaneous manufacturing)
• “Anticipated large export orders did not materialize. As a result, expected U.S. production has decreased.” (Fabricated metal products)
• “Dealer inventories have rebounded, and overall customer market has softened, resulting in corrections to near-term production schedules and a tentative forecast outlook.” (Machinery)
• “Export markets continue to weaken for plastic resins — Mexican producers are actually trying to sell product back into the U.S. due to weak in-country demand.” (Plastics & rubber products)
• “Our outlook for the first quarter of 2020 is positive. We have secured contracts from a number of former customers and expect sales growth of about 5 percent over Q4 of 2019.” (Textile mills)
• “The construction market seems to have slowed for end of year. Overall, it’s marginally up.” (Nonmetallic mineral products)

Original content can be found at Plant Engineering.

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