August 2018 Metals & Manufacturing Outlook

In this issue:

PAGE 18

MANUFACTURING OUTLOOK PAGE 3

METALS OUTLOOK PAGE 9

ISSUES OUTLOOK PAGE 13

JULY

ISM PMI:

58.1%

Released on August 1st

Brought to you by

MANUFACTURING

MBC

BROADCASTING

CORPORATION

The Full Report Page 22

IN THIS ISSUE PUBLISHERS STATEMENT - p.2 MANUFACTURING OUTLOOK - p.3 Publisher – Lewis A. Weiss Editor-In-Chief – Tim Grady Design – Rovere Media

INTRODUCING WOMEN AND MANUFACTURING - p.6

Contributing Writers:

NORTH AMERICAN OUTLOOK - p. 7

Royce Lowe, UK and EU International Correspondent

METALS OUTLOOK - p.9

Tim Grady, Co-Host, Manufacturing Talk Radio

AUTOMOTIVE OUTLOOK - p.11

Chris Kuehl, PH.D - Chief Economist, FMA

AEROSPACE OUTLOOK - p.12

Norbert Ore, Senior Correspondent for Global PMI Survey Reports

ISSUES OUTLOOK - p.13

by ROYCE LOWE

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ENERGY OUTLOOK - p.14 EUROZONE OUTLOOK - p.15 ASIA OUTLOOK - 16 SOUTH AMERICA OUTLOOK - 17 THE STUPID TRUMP TARIFFS - p.18

by TIM GRADY GLOBAL PMI OUTLOOK - p.20

by NORBERT ORE TAKING IT TO THE NEXT LEVEL - p.21

by NORBERT ORE JULY ISM PMI REPORT - p.22

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Metals & Manufacturing Outlook

PUBLISHERS STATEMENT

BY LEWIS A. WEISS Okay – now I’m going to just say it: Tariffs are a terrible idea and they do not work to protect U.S. companies, markets, imports or exports. This is pure folly tried by several U.S. presidents that have back-fired in every case – every time.

Billions of dollars that should be feeding the U.S. economy are being sucked up into the U.S. Treasury as Customs collects tariffs and imports (manufacturers, retailers, chemicals, and any other industry buying raw materials from China, Russia, and other countries hit with tariffs) while countries hit with tariffs retaliate on our exports, including agricultural products. Farmers, who generally struggle to make ends meet, are really feeling the pain from dairy to pork to soybean exports being hit with tariffs on their exports.

The National Association of Manufacturers is pushing against further tariffs and existing ones.

Both sides of the aisle in the U.S. Senate passed a nonbinding resolution 88-11 calling on President Trump to get congressional approval before using national security as a reason for imposing tariffs on other nations, which is ridiculous on 3 counts: 1) It is non-binding, so it amounts to a slap on the hand that is mostly meaningless, a waste of the taxpayers time and the Senate’s time, 2) It continues to allow tariffs to exist when they | August 2018

have been consistently shown to be a failed economic tool that has never worked, and 3) It does nothing to reverse the existing tariffs that are clearly damaging to voters across the country who may vote differently in November of 2018 and November of 2020 (by which time this expansion may have tanked).

Political commentary aside, consumers will soon feel this as prices rise for goods they buy, and the tax reduction they saw vanishes in those price hikes. In fact, if this continues, consumers will be worse off than they were in 2017 and some 400,000 may even be unemployed as a direct result of the tariffs. Manufacturers are already anticipating layoffs, especially in the automotive industry as aluminum and sheet metal prices rise, and component parts made with steel and aluminum become more expensive.

Soybean prices, pork futures, and even cheese sales are taking a big hit along with hundreds of other exports to China and even Canada. No country is going to sit idle and simply take one hit after another from the U.S. – not even as a negotiating tactic; albeit, a bad one. And across the board, across the U.S., from America’s heartland to big city corner grocery stores, you – the reader, the consumer, are in for several months or longer of a lousy financial ride.

Oh, and then there is the minor issue of ending a trade war this administration started. Do we just wake up one morning and – poof – prices return to former low levels because the tariffs are gone?

That’s a fairytale ending that won’t end that way. Once a company is getting their higher price, they will be loathe to swiftly back down to lower prices and take a hit on profits. Why should they – if the buyer is already conditioned to the higher price, they will keep the price high until competition forces them to lower their price, unless that price battle has been negotiated away in the bilateral trade deals.

So, regardless of when this trade war ends, it will not end well for the American consumer who will continue to pay the price for years, if not decades, to come.

In many cases, all this will do is make things more expensive forever. When did car prices return to 1990 levels? When did food prices recede to what they were a decade or two ago? Are component parts, sheet metal and aluminum going to revert to pretariff prices? Those ships didn’t simply sail – they hit the reefs and sank.

“Those who do not learn history are doomed to repeat it” -George Santayana.

Well, now you know how we got here!

Enjoy this issue of Metals & Manufacturing Outlook Lewis A. Weiss Publisher

Metals & Manufacturing Outlook

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MANUFACTURING OUTLOOK

BY ROYCE LOWE

FROM THE MIDST OF CHAOS COMES A 4.1 PERCENT GDP GAIN. THE MANUFACTURING INDUSTRIES OF THE U.S., CANADA AND EUROPE CONTINUE TO PERFORM WELL ; ASIA TRAILING STILL. From toymakers to drink producers to auto companies, the effects of Trump’s tit-for-tat tariffs are being felt and railed against.

The IMF says an escalation of said tariffs could shave 0.5 percent off global growth by 2020. There’s lots of news and controversy regarding tariffs; see ISSUES OUTLOOK.

an IMF analysis: potential U.S. duties on foreign cars represent a greater risk to the global economy than do the tariffs the Trump administration is considering on Chinese imports.

The Global manufacturing PMI posts its lowest reading for a year.

U.S. - China trade talks were recently reported to be in limbo, stalled, victim of lots of name calling. The IMF says a global trade war may undermine the strongest economic upswing in years.

The BLS jobs report for July shows the addition of 157,000 non-farm payroll jobs, and a decrease in the unemployment rate from 4.0 percent in June to 3.9 percent. Some 37,000 new jobs were added in manufacturing in July, mostly in durable goods.

There were job gains in fabricated metal products (7,000); computer and electronic products (5,000) and primary metals (3,000). Motor vehicles and parts added 12,000 jobs. Over the past 12 months 327,000 jobs were added in manufacturing.

Tariffs on imported cars? No, says

U.S. light vehicle sales were off

over 3 percent y-o-y in July. But no panic yet.

The ISM PMI figure for U.S. manufacturing fell back to 58.1 percent in July from 60.2 percent in June, representing the 23rd consecutive month of growth in manufacturing. The overall economy grew for the 111th consecutive month. There are recurring strains on supply chains and on availability of qualified personnel. See NORTH AMERICAN OUTLOOK. IHS Markit’s remarks on the U.S. put the PMI at 55.3 percent in July, down very slightly from June’s 55.4, to a five-month low, all this in spite of a strong improvement in manufacturing operating conditions in July.

There were weaker rises in production and employment, while export sales fell for the second consecutive month. | August 2018

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Metals & Manufacturing Outlook

Companies referred to the greatest deterioration in supplier performance since the series began, and a faster rate of input cost inflation. But business confidence remained very positive, a feeling backed up by hopes of further increases in new orders.

Growth was largely driven by domestic demand.

Backlogs continued to rise in July and there were difficulties filling work vacancies. There was increased pressure on the supply chain, and there were difficulties sourcing raw material.

Expectations regarding the outlook for production over next year improved in July.

The five ISM components are equally weighted at 20 percent each. The IHS Markit components are weighted: 30 percent New Orders, 25 percent Production, 20 percent Employment, 15 percent Supplier Deliveries and 10 percent Raw Materials Inventories.

The Bureau of Economic Analysis recently released its ‘advance’ estimate for the annual rate of Real GDP growth in the second quarter of 2018, putting it at 4.1 percent. The (revised) figure for the first quarter of 2018 was 2.2 percent.

World crude steel production for the 64 reporting countries – which represent 99 percent of world crude steel production - for the month of June, continues to rise and was 151 379 Mt, up 5.8 percent y-o-y. Capacity utilization for the month was 78.5 percent, also on the increase, was up 3.8 percent on June 2017 and up 1.0 percent on May 2018.

Have U.S. steel prices peaked?

See METALS OUTLOOK. | August 2018

U.S. crude steel production for June 2018 was 6.847 Mt, up 0.8 percent y-o-y.

Primary Global Aluminum Production in June 2018 was reported at 5.321 million tons, with production in China, at 3.03 million tons representing 57 percent of world total. Production was 444,000 tons in GCC; 368,000 tons in rest of Asia; 309,000 tons in Western Europe; 303,000 tons in North America and 333,000 tons in Eastern and Central Europe.

America’s biggest aluminum company is a victim of Trump’s tariffs. See METALS OUTLOOK. Non-ferrous metal prices still on downward trend. See METALS OUTLOOK. It’s said the UK might come out of Brexit negotiations without ‘a deal,’ leading to reversion to WTO trading, utter chaos at

British and European ports and customs points between Northern Ireland and the Republic. The number of Google hits for the word ‘stockpile’ recently increased significantly. Imports and exports are worth over 60 percent of British GDP, twice America’s level. Half of Britain’s food is imported, most of it through EU ports. Britain imbibes 3 billion liters of imported booze (almost 800 million U.S. gallons) every year. A month’s supply would be enough to fill 100 Olympic-sized swimming pools.

There’s talk of a bilateral NAFTA deal between the U.S. and Mexico, with Canada needing to wait its turn for its own (bilateral) deal. Mexico’s president-elect, the Canadian government and many members of the U.S. Congress favor a trilateral deal. No word yet from Himself.

India and coal.....see ENERGY OUTLOOK

U.S. LIGHT VEHICLE SALES The SAAR (Seasonally Adjustes Annualized Rate) for U.S. light vehicle sales was at 16.8 million in July, down some 2.9 percent from last month’s figure.

General Motors will no longer publish its monthly sales figures, stating that they are not a true representation of its overall market. It will instead report quarterly figures.

Metals & Manufacturing Outlook

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THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Industrial Production, Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the % change on the previous quarter, annual rate. The industrial production figures represent year-on-year changes, as do the consumer prices increases. The unemployment figures, %, are for the month as noted.

ISO9100:2015 and AS9100D

| August 2018

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Metals & Manufacturing Outlook

Most people have heard that women are 51% of the U.S. population and only 27% of employees in manufacturing. But there is so much more to this story than a few statistics. To bring the story to life, the Manufacturing Broadcasting Corporation (MBC), broadcasters of Manufacturing Talk Radio has launched Women And Manufacturing, an exciting new show where accomplished women interview accomplished women who can share their experiences and encourage women to look across the broad landscape of manufacturing, from the loading dock doors to the C-Suite, and the expanse of jobs and careers in between, to learn more about this exciting sector of the U.S. economy and what it might hold for them.

Never before has the manufacturing industry been in such an accelerated state of change, from retirees leaving the workforce creating a serious skills gap and brain drain to the implementation of the technological innovations of modern manufacturing often referred to as Industry 4.0, or the 4th Industrial Revolution. The hosts of Women And Manufacturing, all successful women in their own right, will interview women who are in the midst of a successful career in the industry and their respective companies, providing the guests with an opportunity to give guidance, insight, and inspiration to women who may or may not have considered a career in the industry, from teenagers just beginning to think about their career path to women in the industry or in transition in their own professional lives.

The subject matter of the interviews will cover the spectrum of unique challenges any woman might face in the workplace or the industry from the success and accomplishments of women from the shop floor to the C-suite, from executive management to labor unions, and from educational to governmental institutions.

Each will share their thoughts in congenial, collegiate conversations with one of 6 hosts who will alternate each week. Hosts will also tease out insights through guest introspection, along with suggestions and recommendations from guests to listeners about navigating the manufacturing and corporate world.

Tune in to each episode to hear the accomplished women share their experiences with this generation and the next generation of women who will make and remake manufacturing for the generations who follow in this noble profession which contributes to the greater good of all, improving products, making things better and safer, and fulfilling lives – not just making a living.

All of us involved with Women And Manufacturing appreciate your listenership and look forward to your feedback as this incredibly exciting show develops.

Visit WOMENANDMFG.COM for more information. | August 2018

Metals & Manufacturing Outlook

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NORTH AMERICAN OUTLOOK

BY ROYCE LOWE

The Latest Manufacturing Reports from the United States, Canada and Mexico The Institute of Supply Management PMI figure fell back from 60.2 percent in June to 58.1 in July, representing the twenty-third consecutive month of growth in manufacturing. There was growth in the overall economy for the 111th consecutive month.

Of the 18 manufacturing industries, 17 reported growth in July, in the following order: Textile Mills; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Computer & Electronic Products; Petroleum & Coal Products; Paper Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Miscellaneous Manufacturing; Fabricated Metal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Chemical

Products; Wood Products; and Transportation Equipment. The only industry reporting a decrease in July is Primary Metals.

Industry comments point to a strong global demand that is to a fairly large extent being clouded by tariffs and their attendant costs and customs delays; concerns that customers may go directly to China or elsewhere to buy their finished products; a tight labor market and supply chain delays and the necessity to hold higher-than-normal inventories.

Following is a summary of the five major indexes, each weighted at 20 percent in calculation of the PMI number for July; June’s readings are in parentheses: New orders 60.2 (63.5) Production 58.5 (62.3) (56.0) Employment 56.5 Supplier Deliveries 62.1 (68.2) slowing, slower Inventories 53.3 (50.8) The following five components are not instrumental in the PMI calculation, but are an important part of the manufacturing industry: Customer Inventories 39.4 (39.7) too low 73.2 (76.8) Prices Backlog of orders 54.7 (60.1) New export orders 55.3 (56.3) 54.7 (59.0) Imports

| August 2018

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Metals & Manufacturing Outlook

Commodities Up in Price Aluminum (21); Aluminum Based Products (3); Capacitors (2); Caustic Soda (13); Chemicals; Copper* (9); Corrugate (22); Corrugated Boxes (2); Diesel (2); Fabricated Metal Products; Freight (6); Hydraulic Valves (2); Lumber; Machine Components; Natural Gas (2); Nylon (2); Paper (3); Resistors; Silicone Fluids; Solvents (2); Steel; Steel — Galvanized (2); Steel — Hot Rolled (20); Steel — Stainless (4); and Steel Based Products (3).

Commodities Down in Price Copper* Commodities in Short Supply Aluminum (3); Capacitors (13); Electrical Components (4); Electronic Components (3); Fabricated Metal Products; Freight (3); Integrated Circuits; Memory; Nylon; Resistors (9); and Steel Based Products (3). *Indicates both up and down in price. Note: The number of consecutive months the commodity is listed is indicated after each item.

| August 2018

The complete ISM Report on Business may be found at the end of this MMO report.

CANADA’s manufacturers reported a strong increase in production, new orders and employment in July, and a further improvement in overall business conditions in the manufacturing sector. The PMI was at 56.9 in July, very slightly down from June’s survey-record 57.1.

There have been concentrated efforts to increase operating capacity in the manufacturing sector, with higher production levels being recorded in each month since November 2016.

Input cost pressures eased only slightly from the seven-year peak seen in June, with metal prices and tariffs being significant in this regard.

There was a strong upturn in manufacturing conditions across all regions, led by Quebec, which experienced the greatest lengthening of suppliers’ delivery times in July. Manufacturers in Alberta and B.C. recorded the sharpest rise in average cost burdens, as well as the greatest

degree of inventory building.

Canada produced 0.985 Mt of crude steel in June, down 12.1 percent y-o-y.

Canadian light vehicle sales in July were off for the fifth straight month, down 3.6 percent y-o-y. Passenger car sales were down 9 percent to 53,018 units, and light truck sales were down 1.1 percent to 122,299 units, MEXICO saw continuing improvement in operating conditions in its manufacturing sector in July, with stronger increases in new orders and export sales.

Job creation was sustained and production increased further.

The PMI for July was unchanged from June’s 52.1 figure. Business sentiment strengthened, and there was a cooling in inflation rates for both input costs and output charges; there were reported higher prices for chemicals, metals, plastics and textiles.

Metals & Manufacturing Outlook

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METALS OUTLOOK

BY ROYCE LOWE

Hot-rolled and cold-rolled steel prices in the U.S. may have temporarily peaked, with recent pricing for H.R. Band at $904/ ton, C.R. Coil at $1012/ton and rebar at $700/ton. Prices for steel products from most sources are holding up well for the moment.

Arcelor Mittal, the world’s largest steel company, is not complaining about Trump’s 25 percent steel tariff, rather it’s profiting, thanks to high steel prices in the U.S., where it has a strong exposure.

The company reports increased shipments and earnings, and expects to close its $2.1 billion bid for Italy’s Ilva SpA in September. It is also looking to buy Essar Steel India Ltd. in India.

The SMS Group has contracted to install a new stainless-steel melt shop at Voestalpine Bohler Edelstahl’s plant in Kapfenberg,

Austria. The plant will include a 55-tonne electric arc furnace with an AOD converter, will produce 200,000 tonnes per year and is due to start up in mid 2021. Bohler Edelstahl is a longestablished producer of highspeed specialty and tool steels and open and closed die forgings for, particularly, aerospace customers, and for automotive and oil-and-gas markets.

Kobe Steel admitted last October that employees misrepresented the strength and durability of parts shipped to hundreds of customers, including Toyota and Boeing. Similar revelations came up from Mitsubishi Metals Corp. and Toray Industries Inc. that have tarnished Japan’s manufacturing reputation. Kobe, the nation’s third-biggest steelmaker, said in March that an external probe had found its misconduct around

quality issues dates back to the 1970s and that over 40 people in management had been aware of the faked data.

Alcoa Corp., America’s largest aluminum producer, is suffering through Trump’s 10 percent tariffs on imports of the metal, and has lowered its 2018 profit projections accordingly. Tariffs have so far cost the company $15 million on material it produced mostly in Canada and shipped to the U.S. Alcoa was expected to make 28 percent of its primary aluminum in Canada this year.

There is a strong demand for the metal, but there are concerns that industrial customers could eventually move operations outside the U.S. so they might buy metal not subject to duties.

Non-ferrous metal prices are on a continuing downtrend, with | August 2018

10

Metals & Manufacturing Outlook aluminum at around $0.96 per pound in early July, $0.91 in early August; copper at around $2.90 per pound in early July, $2.80 in early August; nickel at around $6.40 in early July, $6.04 in early August; zinc at around $1.26 per pound in early July, $1.22 in early August.

The U.S. Air Force granted a $476.9 million contract to Superior Forge and Steel Corp. of Lima, Ohio, and a $419.6 million contract to Finkl Steel of Chicago, Ill., to manufacture BLU137/B penetrator warheads. Both contracts are indefinite-delivery/ indefinite-quantity agreements for guaranteed production of 300 warhead casings during the first year and up to 3,500 additional units during the next four years. For Superior Forge and Steel, work will be performed in Lima and Cincinnati, Ohio; and Falconer, N.Y. For Finkl Steel, work will be performed in Chicago; Corry, Pa.; and Burr Ridge, Ill. The work for both companies is expected to be completed by May 3, 2020.

| August 2018

Carpenter Technology Corp. will build an Emerging Technology Center in Athens, AL, where it will develop additive manufacturing technologies, initially, and later soft magnetics and meltless titanium powder. The $52-millon project is part of a strategy to offer “end-to-end solutions” for additive manufacturing, Carpenter said. The site is the same one that Carpenter selected in 2013 for a superalloy powder manufacturing plant. It’s also the location of Carpenter’s radial forging operation for specialty alloy and stainless steel bar products.

Allegheny Technologies Inc. acquired Addaero Manufacturing, a New Britain, CT, producer of additive-manufactured metal parts for aerospace and defense industries. The cost of the purchase was not announced.

“This strategic acquisition brings together ATI’s deep knowledge and experience in commercial aerospace and our industry-leading, powder metal manufacturing capabilities, including our new aerospacequalified Bakers Powder Operations, and Addaero’s technical expertise to produce aerospace-quality parts using various additive manufacturing technologies,” stated ATI chairman Rich Harshman.

American Axle and Manufacturing Inc. plans a new plant near Barcelona to produce automotive powertrain components for European automakers, including Renault, BMW, Daimler, Porsche, Audi and Ford.

Metals & Manufacturing Outlook

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AUTOMOTIVE OUTLOOK

BY ROYCE LOWE

Sergio Marchionne recently passed away. He it was who as CEO of Fiat SpA in 2004 took that company from the brink of bankruptcy to the NYSE, where he rang the bell on October 13, 2014, to mark the début of Fiat Chrysler Automobiles NV, the London company created when Fiat bought Chrysler.

He smoked too much and drank too much coffee, wore jeans and a sweater, and is credited with turning around the U.S. auto industry back in those darker days. He wanted to merge with GM, but they, GM, would have none of that.

GM meanwhile is seeking tariff exemption for its China-made Buick Envision SUV, claiming tariffs would harm the company’s ability to compete in the luxury SUV market. In 2017, GM sold 210,000 Envisions in China

compared to 42,000 in the U.S. - not enough to justify a U.S. manufacturing plant - but the model is needed to complete its lineup against brands such as Audi, Lexus and Mercedes-Benz.

GM is further suffering from tariffs on steel and aluminum, and from increasing costs on oil-based commodities, copper, resins and diesel. In fact increased raw material costs will add $1 billion to GM’s input bill.

Ford is suffering likewise, and says it will take some time and some concerted effort to make the savings it has pledged to do over the next several years.

Tesla, it is alleged, according to one of those stories from ‘a person familiar with the matter’ is to build a plant near Shanghai and to start production of a new model 3 by 2020. An annual

vehicle capacity of 500,000 units has been mentioned China upped tariffs on U.S.-made cars by 25 percent as retaliation for Trump’s levies on $34 billion of Chinese goods.

China is the world’s largest EV market and will likely continue to be for quite some time. Tesla sold almost 15,000 vehicles to China in 2017, some 3 percent of China’s battery-powered electric vehicle market.

BMW will spend $1.17 billion on a plant in Hungary that will produce 150,000 units per year, in both electric and combustion engine formats. Construction will start in the second half of 2019.

And last, but certainly not least, Harley Davidson are to come out with an electric bike called Live Wire – what else would Harley call it – and five more models by 2022. | August 2018

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Metals & Manufacturing Outlook

AEROSPACE SONIC AND PROFIT BOOM

BY TIM GRADY

The XB-1 “Baby Boom” by Boom Technology

The aerospace and defense industry is hitting new demand heights. The Teal Group is expecting deliveries to rise by 9% in 2018 and revenues are forecasted to increase 4.1%, about double 2017’s 2.1% growth.

Stocks of aerospace companies are also on the rise along with long-term earnings growth projections. Low interest rates worldwide, low and stable fuel prices, and ongoing increases in passenger traffic especially in the emerging aerospace markets of Asia and the Middle East are expected to continue to drive the strength of the industry through the next 5 years.

One new entrant is Boom Technology, headquartered in Denver, Colorado, that was founded in 2014 to design and build a supersonic jetliner to address the 500 possible flight routes at speeds of Mach 2.2, making travel to business destinations faster and more affordable. Mach 2.2, or just over 1,450 miles per hour, is more than double the speed of sound and could cut current flight times by half. Boom Technology design also is expected to reduce sonic booms by 30%. | August 2018

The current 55-passenger design can reach London from New York in 3 hours and 15 minutes, Miami to Chile in 3 hours and 48 minutes and Los Angeles to Shanghai in about 5 hours. The company has raised funds from 76 sources as of December of 2017 for its delta wing design that is expected to be flight ready in 2025. The onethird scale model of the three turbofan engine design, the XB-1 Baby Boom, is anticipated to be flight tested in 2019.

The projected market for full-scale supersonic jetliners is forecast at 1,000 planes worldwide. The Boom plane is designed to be efficient enough that tickets from New York to London are estimated to be $5,000 in a 55-seat configuration compared to what the Concorde would have cost for a similar adjusted-forinflation ticket price of $15,000 if it were flying today. While the Concorde was a beautiful design, its fuel efficiency lagged in ongoing development and the plane became unprofitable to operate. Although it had a few crash incidents, it was not seen as a risky plane to fly.

The plane utilizes both conventional materials and carbon fiber composites to reduce weight for fuel costs and a low drag coefficient. However, a third engine was added into the design in 2017 for a 180minute diversion time and the proposed engines are turbofans without afterburners, similar to jet fighter engines that lack the fuel economy, reliability and noise reduction for commercial aviation.

It is not expected that the final design will actually incorporate the jet fighter engines if this company gets its planes off the ground.

In the rest of the commercial market, Boeing is completing planes at a record pace.

Bombardier in Canada is reporting big revenue gains in its business aircraft division, and its commercial aircraft including the Q400 and CRJ-series have an increasing backlog. However, both Airbus and Embraer saw revenues drop and profits descend. All planemakers are working to fix any supply chain problems and skilled worker shortages to cut into their backlogs for a record 2018 order and delivery year.

Metals & Manufacturing Outlook

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ISSUES OUTLOOK

BY ROYCE LOWE

The U.S. is looking at putting 10 percent tariffs on $200 billion worth of goods from China, from clothing to TV parts to refrigerators. Add this to the $50 billion in the works and we’re looking at half what the U.S. buys from China.

Wilbur Ross says he thinks companies are ‘gaming the system’ so some companies are losing hundreds of thousands of dollars, even millions. Most request for exemption are being denied.

China’s monthly trade surplus with the U.S. rose to a record in June of $28.97 billion, the highest in any month back to 1999. Perhaps there is a rush by some manufacturers to sell their goods before tariffs are imposed in July, but there’s not much sign that the U.S. deficit with China will improve any time soon.

Manufacturing Laughs

Whirlpool, shortly after winning anti-dumping against imported washing machines, finds itself in trouble with steel and resin costs. Raw material inflation will reportedly cost the company some $350 million this year.

Meanwhile some U.S. companies are being refused exemptions on steel and aluminum imports because the Trump administration says they can get their products in the U.S., even when they can’t.

Obviously the U.S. steel mills are coming out on the side of the administration. | August 2018

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Metals & Manufacturing Outlook

ENERGY OUTLOOK

BY ROYCE LOWE

Although India is aiming to increase its renewable energy capacity, there is no doubt that the country is, and will be for the foreseeable future, largely dependent on coal to run its electricity grid, its railroads and its steel mills. Coal generates over 75 percent of the country’s electricity.

Coal mining and turning it into power accounts for a tenth of the country’s industrial production.

Coal India, a state-owned coal miner that is the world’s largest, employs some 370,000 people and there are 500,000 people working in the coal industry at large. Coal India does not look to reduce coal production, rather to increase it, from 560,000 tons in 2017 to 1 billion tons by 2020. The government’s target for national production is 1.3-1.9 billion tons by 2030. | August 2018

Coal is a huge political football in India, and there are those who say that Prime Minister Modi should slow down in his quest for more renewable energy and concentrate on increasing coal production for the next 10-15 years.

There is more than coal itself that is not clean in India. The word ‘mafia’ appears frequently in discussions of the business.

In 2017 India, the world’s largest coal consumer after China, consumed an additional 27 million tons, a rise of 4.8 percent, leading to the first increase in global coal consumption in four years, according to BP. The supply and demand for thermal coal, that used for electricity generation, is such that prices

for the product have more than doubled in the past two years.

Coal will be around for a long time in India; and Bangladesh, Pakistan, the Philippines and South Korea.

There will be 40 million charging points globally by 2030 as EVs are forecast to make up 11 percent of auto production/ sales, says a new report by Wood Mackenzie Ltd. The charging infrastructure in North America will run to $18.6 billion by 2030.

The global EV fleet is expected to more than triple to 13 million by the end of the next decade, from 3.7 million in 2017, according to the International Energy Agency.

Sales might jump an average of 24 percent annually through to 2030, with China expected to become the biggest market.

Metals & Manufacturing Outlook

GLOBAL OUTLOOK

BY ROYCE LOWE

15

Crude steel production in Germany in June was at 3.770 Mt, up 4.6 percent y-o-y; in Italy 2.135 Mt, up 1.5 percent y-o-y; in France 1.267 Mt, down 4.4 percent y-o-y and in Spain 1.295 Mt, up 3.4 percent y-o-y.

Russia’s crude steel production for June was at 6.120 Mt, up 8.9 percent y-o-y; Ukraine’s was 1.711 Mt, up 7.5 percent y-o-y.

EUROZONE IIHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) fought its way back from June’s 18-month low of 54.9 to 55.1 in July.

Manufacturing growth stayed subdued at the beginning of the 3rd quarter, with growth in production and new orders far from that seen at the beginning of the year. New export order growth was near a two-year low amid concern over tariffs and trade wars. There was some

improvement in the consumer, intermediate and investment sectors, particularly in the latter two.

Backlogs continued to increase, accompanied by increases in employment which was up for the 47th consecutive month.

Price pressures, both input and output, eased in July.

The Netherlands, Germany and Austria were the strongest performers; business confidence was up in Germany, France, Italy and the Netherlands.

Car sales in Western Europe for the first half of 2018 were up 2.8 percent to 8,461,963 units, with a 2.9 percent increase in Germany, 4.7 percent in France and 10 percent in Spain. Sales in the UK were down 6.3 percent and in Italy 1.4 percent.

Two new emissions tests may be cause for some concern in Europe, namely the WLTP (Worldwide harmonized Light Vehicles Test Procedure) lab test and the accompanying RDE (Real Driving Emissions) on-road screening. Any model not WLTPcertified cannot be sold after September 1.

IHS Markit’s PMI for the UK was down slightly in July to 54.0 from June’s 54.3 figure on the back of weaker increases in production and new orders.

Intermediate goods production fell for the first time in two years.

Domestic growth was weaker, but there were increases in new export orders, with improved demand from Europe, U.S., China and the Middle-East.

Employment was up for the 24th consecutive month, but positive business sentiment was at a 21-month low amid uncertainty over Brexit and the exchange rate.

The UK produced 0.681 Mt of crude steel in June, up 11.6 percent y-o-y. | August 2018

16

Metals & Manufacturing Outlook

GLOBAL OUTLOOK

BY ROYCE LOWE

ASIA

In CHINA, both production and new orders expanded at softer rates in July, as the manufacturing sector saw its slowest improvement for eight months.

New export orders fell at their fastest pace in 25 months. The PMI fell slightly from June’s 51.0 to 50.8 in July.

A further reduction in hiring contributed to a sustained increase in backlogs of work.

Optimism regarding the year ahead is somewhat clouded by concerns over the impact of market conditions, stricter environmental policies and a potential impact of a U.S.-China

Manufacturing Laughs

trade war. Meanwhile supplier deliveries continue to lengthen.

CHINA produced 80.196 Mt of crude steel in June, up 7.5 percent y-o-y; Japan 8.760 Mt, up 4.2 percent y-o-y; India 8.739 Mt, up 7.4 percent y-o-y and South Korea 6.122 Mt, up 3.2 percent y-o-y.

Taiwan produced 1.660 Mt in June, down 8.6 percent.

Chinese light vehicle sales for June were up 4.8 percent y-o-y to 2.274 million units, with a ytd total of 14.066 million units, up 5.6 percent y-o-y. Passenger vehicles were up 2.3 percent y-o-y at 1.874 million units, with commercial vehicle sales up 18.2 percent y-o-y at 399,000 units.

New energy vehicle sales, at 84,000 units, were up 42.9 percent y-o-y, qith EV sales at 62,000 units, up 29.5 percent y-o-y and plug-in hybrid sales up 102 percent y-o-y at 22,000 units.

In July, JAPANESE manufacturers saw business conditions improve at the slowest pace since November 2016, as the PMI fell from 53.0 in June to 51.6 in July, a 20-month low.

Input and output price inflation is up to multi-year highs and business confidence dips significantly.

New orders grew at a much weaker rate and export demand was down for a second consecutive month. This slowing demand was coincident with long increases in input delivery times, which were up at the sharpest extent in over seven years. Supply chain problems led to the fastest rate of input price inflation in that time period. Selling prices could not keep up. Employment was up at a slower rate.

INDIA’s PMI was off in July at 52.3 from June’s 53.1, as production and new orders were up at a slower, but still good pace. As was employment.

Input cost inflation eased from June’s near four-year high.

Market conditions in India are said to be’favorable’ and there is a strong underlying demand.

| August 2018

New export orders are up for the ninth consecutive month.

Metals & Manufacturing Outlook

17

GLOBAL OUTLOOK

BY ROYCE LOWE

SOUTH AMERICA

lowest in a year in July of 52.7, down from June’s 53.0.

BRAZIL saw some recovery from its truckers’ strike, with modest increases in production, new orders and employment. The PMI for July was at 50.5, up from June’s 49.8.

There was weaker growth in the consumer and investment goods industries, where the rates of expansion eased for both production and new orders.

There was some strengthening in the intermediate goods sector in production and new orders compared to June.

Input costs again rose at a nearrecord rate, due in large part to currency depreciation. There was a renewed drop in export sales.

Brazil’s crude steel production for the month of June was 2.590 Mt, a decrease y-o-y of 2.2 percent.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced

by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – dropped to its

The U.S., Canada and the Euro area were relative global bright spots, whereas growth in Asia was somewhat subdued.

Global manufacturing employment rose for the twentythird consecutive month, with levels rising in the U.S., Europe and Japan, but falling in China.

There was also easing of price pressures, with inflation rates slowing for both input prices and output charges.

Global PMI

July 52.7

June 53.0

Production

53.0

53.2

New orders

52.5

52.9

New exports

50.3

50.5

Employment

51.9

52.1

Input prices

61.5

62.2

Output prices

54.4

55.0

‘Future Output’

62.0

61.9

ISO9001:2008 and AS9100C

| August 2018

18

Metals & Manufacturing Outlook

THE STUPID TRUMP TARIFFS

BY TIM GRADY

| August 2018

Metals & Manufacturing Outlook

B

efore you read any further, let me define “stupid” as opposed to ‘ignorant’. Ignorant, in my definition, is being unaware of things such as facts or the obvious. Stupid is being well aware of the facts or the obvious and choosing to ignore them. In my view, the Trump Tariffs are stupid for a myriad of reasons: Tariffs have never worked to benefit any country. They have been used since George Washington first spoke as a U.S. president in favor of protected industries Tariffs have usually made things worse overall for the manufacturing industry as a whole with even large producers like automotive experiencing the adverse impact of, in this case, the cost of steel and aluminum Tariffs benefit the few, in this case – Big Steel, at the expense of the many, like any company currently using steel, aluminum or component parts from China, Canada, Mexico, Russia, or other countries that have agreed to quotas (which will make the supply chain even more lean and uncompetitive) Tariffs cause prices to rise and demand to fall – the simple law of supply and demand still applies in a free market economy, but the vicissitudes of the cycle become amplified by cost increases and supply shortages Tariffs are a partial stimulant to inflation, especially in a booming economy where inflation always rears its ugly head in the latter stages of an economic cycle, which the U.S. is now approaching Tariffs do not support a free market economy; they create a protectionist economy manipulated by the central government that flies in the face of a free market Tariffs, as they are currently being applied, are not for ‘national security’ in general, except for steel and aluminum in particular – maybe; all the other parts and products being

whacked with tariffs have nothing to do with ‘national security’ but rather a ridiculous and unnecessary stand-off Tariffs will make rebuilding America’s infrastructure much more expensive for the American taxpayer; there are already other Acts, such as the Buy American Act of 1933, that can be used to ensure that infrastructure steel be American-made Tariffs on steel and aluminum resulted in Big Steel restarting old blast furnace plants, not investing in new mini-mill production because new plants will take years to build and go into production long after the tariffs have been rescinded and international competition returns to the market Tariffs cost jobs in the country that imposes them – the USA is now seeing the bleeding edge of tariffs cutting into U.S. workers with the

Tax Foundation estimating that nearly 50,000 jobs have already been lost or are scheduled for layoffs and up to 250,000 or more will be lost by the end of 2018 and early 2019, while the balance of 2019 may cause related job loses to rise to over 400,000 Tariffs are not pin-point punishment for China stealing the intellectual property of U.S. companies that chose to produce in China Tariffs will not create or restore a trade balance between our trading partners – the USA has the largest economy in the world and the finest quality goods in high demand overseas; the reciprocal simply isn’t the case for any of our trading partners so a 1:1 parity on imports and exports is just not achievable Tariffs may get a country like China to open more of their country to U.S.

19

products, but you generally don’t build a relationship with a customer by poking them in the eye to get their attention while simultaneously shooting your own foot off and screaming, “There, take that!”

It is almost sickening to go on and on about a ‘trade strategy’ that was doomed from the outset and will likely sway both the mid-term elections this November and the chances for Trump’s re-election in November of 2020, by which time this economic cycle will have played out and the country will likely be in a recession.

And it is not just manufacturing that is taking the hit. Non-manufacturing, which the ISM reports as 78% of our economy, is beginning to feel the pain. People being interviewed on Manufacturing Talk Radio are saying that their company cannot get orders from potential manufacturing customers in some cases because manufacturing is growing uncertain about the shortterm and longterm impacts of the Trump Tariffs. That means fewer orders, less need for people to fulfill orders, and looming layoffs in non-manufacturing, as well.

Thus, the conclusion here is that the Trump Tariffs are stupid as a trade strategy, but the Administration will somehow frame them as a ‘big win’ when they lose enough jobs and enough face which forces them to rescind the tariffs. Now, if someone can come up with a rosey list of reasons why the Trump Tariffs are good for the U.S. – with real facts and not just bloviating, please enlighten me because from my point of view on manufacturing with its inevitable ripple effects into nonmanufacturing, this will not end well for making America great again.

The views expressed in this article are those of the writer, and not endorsed by Manufacturing Talk Radio, the Metals & Manufacturing Outlook eZine, or MBC. | August 2018

20

Metals & Manufacturing Outlook

GLOBAL PMI OUTLOOK

BY NORBERT ORE

Discussions of the global economy often center on risk and uncertainty; the connection being uncertainty is risk that can’t be measured. To add clarity to the subject, we are thinking in terms of “vulnerability.” Which regions or countries are mostleast vulnerable to tariffs? The closer a country’s PMI is to the 50 mid-point, the more likely that country is to be impacted by the tariffs if their trade is U.S. centric (unless they have already made a trade deal). This month, 17 of the 18 surveys that we closely follow indicate growth. Only South Korea (48.3, -1.5) failed to grow so, with this weakness, it should not be a surprise that they entered into a trade deal early on. An overall softness is surfacing as the JP Morgan Chase Manufacturing PMI™ (which summarizes data from 44 countries) posted a 52.7 which continues a slowing trend from a high of 54.5 in December 2017. Supply chain concerns grow with time as vulnerability

| August 2018

increases. Based on the chart below, we would see the countries with PMIs at 54 or higher as being most impervious to tariff impacts, at least in the near term.

Eurozone: The Eurozone PMI (55.1, +0.2) reversed a 7-month trend of deceleration from its lofty apex of 60.6 in December 2017.The EZ’s manufacturing expansion continues to be led by Netherlands (58.0, -2.1), Germany (56.9, +1.0), Austria (56.8, +0.2), and Ireland (56.3, -0.3). The four remaining countries averaged 52.8 percent for the period which is generally a level that is on the borderline of expansionary employment and investment.

United Kingdom: The UK/CIPS PMI (54.0, -0.3) continues to produce respectable readings post-Brexit. In July, the PMI remained in expansionary territory for the 24th consecutive month.

China: China’s Official Report, the

CFLP PMI (51.2, -0.3), reported a slight slowing in growth. The Caixin Manufacturing PMI (50.8, -0.2) shows a similar rate of expansion. The trend from both surveys is for continuing growth consistent with the level of growth started in early 2016.

India: India’s PMI (52.3, -0.9) decelerated somewhat, but managed to post its 12th consecutive month of growth.

Overall, the economy is growing and the stage appears set for further expansion.

South Korea: PMI decelerated further to 48.3 as output and new orders declined at the steepest rates since April. Additionally, firms continued to cut staff and business confidence fell to a tenmonth low.

North America: Canada (56.9, -0.2) expanded for the 29th consecutive month. For Canada, this is a robust period of growth at stands above its 1H 2018 average of 51.9.

Metals & Manufacturing Outlook

21

TAKING IT TO THE NEXT LEVEL

BY ANDREA OLSON

We often define success in a variety of ways. Some people measure it with a promotion.

Others say it’s about money.

However, success can be much more about your personal accomplishments, rather than monetary or social recognition.

“everyday”. We quickly get mired in putting out fires, responding to departmental or CEO requests, or simply trying to get our “to-do” list wrapped up before the end of the week. While we can view this as a “win”, it isn’t a worldchanging success.

The most recent Women in Manufacturing podcasts have focused on this, including a discussion with Paige Kassalen on being a trendsetter, an interview with Jami Bliss on mentorship, and an interview with Amanda Dunlap about growing a third-generation manufacturing company. The thing they all have in common is that they are all successful in their own ways, and in their own right.

Just like our featured interviewees, their successes were tied to bigger goals. Things that impacted the trajectory of the company. Things that drove them to get up everyday and try harder.

Things that kept them up at night, but also fueled their spirit. More often than not, women can easily be drawn to the perception that doing more equals success, rather than doing a few things exceptionally well.

It can be difficult to think about success in the abstract, but as manufacturers, we face constant challenges. Economic, regulatory, personnel, financial, or simply production can make one feel as though success is a pipe dream.

But success is only as fleeting as you make it.

As leaders and aspiring leaders in manufacturing, we need to focus on the long-view. The bigger goal that goes beyond the

Think about any leaders you admire – do they really conquer all challenges, or do they select a handful of which they focus on and pursue with unfettered passion? If we want to truly grow, and gain success beyond promotions and raises, we as leaders need to find a bigger goal to aspire to. Something that will change your organization, change your impact, or change the business in a new way.

Because when we think about success, it might not be about the amount of trophies, certificates or credentials you collect, but the impact you have on people, business, and your passion. The first step is to understand how that passion can be transformed into something, which, at the end of the day, becomes more satisfying than anything else. The promotions and raises are often just a manifestation of success, anyway.

Andrea Olson is CEO and Founder of Prag’madik and the author of No Disruptions: The New Future For Mid-Market Manufacturing.

A 4-time ADDY® award-winner, she began her career at a tech start-up and led the strategic marketing efforts at two global industrial manufacturers. In addition to writing, consulting and coaching, Andrea speaks to leaders and industry organizations around the world on how to craft an effective marketing and communications programs to discover new sources of revenues and savings. She can be reached via www.pragmadik.com. | August 2018

22

Metals & Manufacturing Outlook

THE INSTITUTE FOR SUPPLY MANAGEMENT’S MANUFACTURING REPORT ON ® BUSINESS

BREAKING NEWS

ISM PMI at 58.1% ISM PMI for the past 5 years

| August 2018

Metals & Manufacturing Outlook

23

ISM® REPORT ON BUSINESS®

MANUFACTURING E

conomic activity in the manufacturing sector expanded in July, and the overall economy grew for the 111th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The July PMI® registered 58.1 percent. The New Orders Index registered 60.2 percent, a decrease of 3.3 percentage points from the June reading of 63.5 percent. The Production Index registered 58.5 percent, a 3.8 percentage point decrease compared to the June reading of 62.3 percent.

The Employment Index registered 56.5 percent, an increase of 0.5 percentage point from the June reading of 56 percent. The Inventories Index registered 53.3 percent, an increase of 2.5 percentage points from the June reading of 50.8 percent. The Prices Index registered 73.2 percent in July, a 3.6 percentage

JULY 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

point decrease from the June reading of 76.8 percent, indicating higher raw materials prices for the 29th consecutive month. Of the 18 manufacturing industries, 17 reported growth in July, in the following order: Textile Mills; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Computer & Electronic Products; Petroleum & Coal Products; Paper Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Miscellaneous Manufacturing‡; Fabricated Metal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Chemical Products; Wood Products; and Transportation Equipment.

PMI @ 58.1% ®

‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

MANUFACTURING AT A GLANCE Jul Index 58.1 60.2 58.5 56.5 62.1 53.3 39.4 73.2 54.7 55.3 54.7

Jun Index 60.2 63.5 62.3 56.0 68.2 50.8 39.7 76.8 60.1 56.3 59.0

% Point Change -2.1 -3.3 -3.8 0.5 -6.1 2.5 -0.3 -3.6 -5.4 -1.0 -4.3

Growing Growing Growing Growing Slowing Growing Too Low Increasing Growing Growing Growing

Rate of Change Slower Slower Slower Faster Slower Faster Faster Slower Slower Slower Slower

Trend* (months) 23 31 23 22 22 7 22 29 18 29 18

OVERALL ECONOMY

Growing

Slower

111

Manufacturing Sector

Growing

Slower

23

Index PMI® New Orders Production Employment Supplier Deliveries Inventories Customers’ Inventories Prices Backlog of Orders New Export Orders Imports

Direction

*Number of months moving in current direction. Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes.

PMI 2016

2017

2018

58.1%

50% = Manufacturing Economy Breakeven Line 43.2% = Overall Economy Breakeven Line

PMI® Manufacturing expanded in July as the PMI® registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 percent. This indicates strong growth in manufacturing for the 23rd consecutive month, led by continued expansion in new orders, production and employment. Inventories are expanding at a faster rate as a result of supplier deliveries improving compared to the prior month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

COMMODITIES REPORTED Commodities Up in Price: Aluminum (21); Aluminum Based Products (3); Capacitors (2); Caustic Soda (13); Chemicals; Copper* (9); Corrugate (22); Corrugated Boxes (2); Diesel (2); Fabricated Metal Products; Freight (6); Hydraulic Valves (2); Lumber; Machine Components; Natural Gas (2); Nylon (2); Paper (3); Resistors; Silicone Fluids; Solvents (2); Steel; Steel — Galvanized (2); Steel — Hot Rolled (20); Steel — Stainless (4); and Steel Based Products (3).

Commodities Down in Price: Copper*. Commodities in Short Supply: Aluminum (3); Capacitors (13); Electrical Components (4); Electronic Components (3); Fabricated Metal Products; Freight (3); Integrated Circuits; Memory; Nylon; Resistors (9); and Steel Based Products (3).

12

Note: The number of consecutive months the commodity is listed is indicated after each item. *Reported as both up and down in price.

AUGUST 2018

| August 2018

24

Metals & Manufacturing Outlook

ISM Report On Business ®

®

manufacturing

July 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

New Orders (Manufacturing) 2016

2017

New Orders

2018

60.2% 52.4% = Census Bureau Mfg. Breakeven Line

ISM’s New Orders Index registered 60.2 percent. Sixteen of 18 industries reported growth in new orders in July, listed in the following order: Printing & Related Support Activities; Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Textile Mills; Machinery; Furniture & Related Products; Petroleum & Coal Products; Chemical Products; Paper Products; Fabricated Metal Products; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing‡; and Food, Beverage & Tobacco Products.

Production (Manufacturing) 2016

2017

Production

2018

58.5%

51.5% = Federal Reserve Board Industrial Production Breakeven Line

ISM’s Production Index registered 58.5 percent. The 15 industries reporting growth in production during the month of July — listed in order — are: Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Wood Products; Textile Mills; Petroleum & Coal Products; Computer & Electronic Products; Furniture & Related Products; Nonmetallic Mineral Products; Chemical Products; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing‡; Paper Products; Food, Beverage & Tobacco Products; and Plastics & Rubber Products.

Employment (Manufacturing) 2016

2017

Employment

2018

56.5% 50.8% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2016

2017

2018

62.1%

Inventories (Manufacturing) 2016

2017

2018

43% = B.E.A. Overall Mfg. Inventories Breakeven Line

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

| August 2018

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed in July, as the Supplier Deliveries Index registered 62.1 percent. The 15 industries reporting slower supplier deliveries in July — listed in order — are: Machinery; Apparel, Leather & Allied Products; Paper Products; Computer & Electronic Products; Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Chemical Products; and Transportation Equipment.

53.1%

53.3%

‡Miscellaneous

ISM’s Employment Index registered 56.5 percent. Of the 18 manufacturing industries, the 13 reporting employment growth in July — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Machinery; Fabricated Metal Products; Paper Products; Transportation Equipment; and Chemical Products.

Inventories The Inventories Index registered 53.3 percent. The 12 industries reporting higher inventories in July — listed in order — are: Textile Mills; Printing & Related Support Activities; Nonmetallic Mineral Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Paper Products; Plastics & Rubber Products; Miscellaneous Manufacturing‡; Chemical Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Fabricated Metal Products.

Metals & Manufacturing Outlook

ISM Report On Business ®

®

manufacturing

25

July 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2016

2017

2018

Customers’ Inventories ISM’s Customers’ Inventories Index registered 39.4 percent. Only three manufacturing industries reported customers’ inventories as too high during the month of July: Apparel, Leather & Allied Products; Wood Products; and Furniture & Related Products.

39.4%

Prices (Manufacturing) 2016

2017

2018

73.2%

52.4% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2016

2017

2018

54.7%

Prices The ISM Prices Index registered 73.2 percent. Seventeen of the 18 industries reported paying increased prices for raw materials in July, in the following order: Apparel, Leather & Allied Products; Textile Mills; Fabricated Metal Products; Machinery; Furniture & Related Products; Petroleum & Coal Products; Paper Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Computer & Electronic Products; Miscellaneous Manufacturing‡; Primary Metals; Printing & Related Support Activities; Nonmetallic Mineral Products; Chemical Products; Transportation Equipment; and Food, Beverage & Tobacco Products.

Backlog of Orders ISM’s Backlog of Orders Index registered 54.7 percent. The 10 industries reporting growth in order backlogs in July — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Paper Products; Chemical Products; and Miscellaneous Manufacturing‡.

New Export Orders (Manufacturing) 2016

2017

2018

55.3%

New Export Orders ISM’s New Export Orders Index registered 55.3 percent. The seven industries reporting growth in new export orders in July — listed in order — are: Petroleum & Coal Products; Nonmetallic Mineral Products; Computer & Electronic Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; and Chemical Products.

Imports (Manufacturing) 2016

2017

2018

54.7%

‡Miscellaneous

Imports ISM’s Imports Index registered 54.7 percent. The 11 industries reporting growth in imports during the month of July — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Chemical Products; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Food, Beverage & Tobacco Products; Computer & Electronic Products; Transportation Equipment; Plastics & Rubber Products; and Miscellaneous Manufacturing‡.

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

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