Metals & Manufacturing Outlook January 2019

WOMEN AND MANUFACTURING HOST

ANDREA OLSON PAGE 18 PAGE 26

PLUS PAGE 26

THE CREDIT MANAGER’S INDEX PAGE 8

NORTH AMERICAN OUTLOOK PAGE 10

METALS OUTLOOK PAGE 12

AND

PAGE 26

DECEMBER

Brought to you by

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ISM PMI:

54.1%

Released January 3rd The Full Report Page 27

presents

TABLE OF CONTENTS

Publisher LEWIS A WEISS

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PUBLISHER’S STATEMENT

COVER STORY

A word from our publisher

Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE TIM GRADY NORBERT ORE ANDREA OLSON CHRIS KUEHL Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office MANUFACTURING BROADCASTING CORPORATION 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

06 MANUFACTURING OUTLOOK A global look at manufacturing

08 THE CREDIT MANAGER’S OUTLOOK

by Chris Kuehl

10 NORTH AMERICAN OUTLOOK Manufacturing in the US, Canada and Mexico

12 METALS OUTLOOK The cost, making and treating of metals

14 AEROSPACE OUTLOOK Trouble for Rolls Royce

15 AUTOMOTIVE OUTLOOK

Open call for Contributing Writers for new and existing content. Let’s start a conversation – Contact us at editorialdept@mmoezine.com or visit mfgtalkradio.com/writer for more information. © 2019 MBC – Manufacturing Broadcasting Corporation. No part of this publication may be reproduced or used in any form without the prior written permission of the publisher. Metals & Manufacturing Outlook is a registered trademark of MBC.

EV’s everywhere

16 ENERGY OUTLOOK Energy and the environment

WAM Host Andrea Olson

22 ISSUES OUTLOOK The Global MFG PMI

23 GLOBAL PMI OUTLOOK

by Norbert Ore

24 EURO OUTLOOK A look at Europe

25 ASIA OUTLOOK China sees little change

26 SOUTH AMERICA OUTLOOK Brazil in the spotlight

28 THE DECEMBER ISM REPORT The Manufacturing ROB

PUBLISHERS STATEMENT

PUBLISHER’S STATEMENT

The reports of a looming recession are greatly exaggerated. The fundamentals of Production, New Orders, Employment, Supplier Deliveries and Inventory levels, as reported by the Institute for Supply Management, and the 312,000 jobs added in December (32,000+ in Manufacturing) as reported by the Bureau of Labor Statistics, simply do not support that a recession is at our shores.

Manufacturing added 284,000 jobs in 2018 on top of 207,000 in 2017.

While there may be a recession on the horizon, it has not made landfall – yet. Let me share with you what I think you should be watching for since all expansions are cyclical and recede. There is a leading indicator in manufacturing that has been valid for the last 50 years. It has often been tagged as a lagging indicator, but a study of recessions and expansions and the beginning of recessions, as reported in hindsight by the U.S. government, and the beginning of the rise in unemployment levels, reveals that manufacturing begins to thin their employment ranks as they look out across their new orders and subsequent deliveries to see if demand is rising or falling. Why/How? Here is the basis for this discussion. Manufactured goods are not ordered, made and delivered within days or weeks. The production cycle of durable goods is much longer. They are ordered, made and delivered in months – usually 6 to 9 months.

Consumer durable goods, in particular, have months long production times. Industrial equipment production times, such as for machinery, may be even longer. Manufacturers determine their production staffing needs based on how much product they have to make looking forward in time. If new orders are falling, then manufacturers will begin to reduce their production employment levels downward so that six months later they are not overstaffed on their production lines.

Manufacturers will also reduce their purchases of raw materials from suppliers. Raw materials may take weeks or months to arrive, so manufacturing is always looking into the future to balance the inflow of inventoried raw materials with production of the actual goods so as to tie up the least amount of capital in the factory pipeline. As orders from suppliers wane, suppliers begin to reduce their staffing in response, often as layoffs if normal attrition alone is insufficient. So, manufacturers actually have a crystal ball view into the future, and manufacturing slows and grows first, ‘leading’ into every recession and leading out into every expansion when examining these economic ebbs and flows since 1940.

As more people arrive on the unemployment line, consumer confidence falls along with household purchasing power.

Unemployment compensation cannot replace a full-time income; it has always been intended as a stop-gap measure. And, as purchasing power declines, other industry sectors feel the consumer demand decline and begin to react by reducing their own staffing needs. By the time the federal government reports on this employment/unemployment activity, the economic ebb has already been in motion for some months.

The government defines a recession as two consecutive quarters of falling GDP – but, that gets reported well after the fact. And, the government adjusts GDP at least twice as updated data comes in. So, if you rely on government reporting, you will be about 9 months down the road and deep into quicksand before you realize a recession began much earlier. It makes for dire mainstream media headlines, but it’s a little late – actually, a lot late.

For over 40 years, as President of All Metals & Forge Group, I have read with great interest the ISM’s Manufacturing Report on Business® because it presents the key economic indicators each month, not just the PMI number known as the Purchasing Manager’s Index, but the sub-indices of Production, New Orders, Employment, Supplier Deliveries and Inventory that are weighted and calculated to determine that number. In particular, if you keep an eye on New Orders and Employment each month, you will see when economic expansion has run its course and a contraction is now in the offing.

This information is so critical for both manufacturers and non-manufacturers in every industry segment that I report on it with my co-host, Tim Grady on Manufacturing Talk Radio each month by interviewing Tim Fiore, the Committee Chair of the ISM’s Manufacturing Report on Business®, and Anthony Nieves, Committee Chair of the ISM’s Non-Manufacturing Report on Business®. We also post it in each issue of Metals & Manufacturing Outlook ezine, on our open die forging and seamless rolled ring website, www.steelforge.com, and on mfgtalkradio.com. We send it out in emails frequently to raise awareness of this vital information.

Based on current information, right now is not the time to begin reductions in force. The economy is still expanding and it may well expand throughout 2019, even if the PMI dips for a month or two, consecutively or non-consecutively. It could continue to expand into 2020. But you will be missing a serious piece of business if you curtail your plans and begin to hunker down now. The wave is still one you can surf for awhile. Ride it closer to the shore, and enjoy this issue of Metals & Manufacturing Outlook ezine.

Lewis A Weiss, Publisher Contact laweiss@gmail.com for comments, suggestions and ideas.

Metals & Manufacturing Outlook / January 2019

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MANUFACTURING OUTLOOK

JANUARY 2019

MANUFACTURING OUTLOOK THE GLOBAL PMI CONTINUES ITS DOWNWARD TREND, WITH CHINA AND FRANCE JOINING ITALY IN CONTRACTION. U.S. MANUFACTURING RETREATS TO WHERE IT HASN’T BEEN IN QUITE A WHILE. THERE IS STILL MUCH TRADE UNCERTAINTY.

by ROYCE LOWE The month of December saw what might be called an easing in global manufacturing, with the U.S. PMI at over a two-year low. This in spite of December job figures that were much higher than forecast: the unemployment rate also grew somewhat.

Global trade uncertainty still reigns, with active wars in the Middle East and scuffles between the U.S. and China and the U.S. and Europe on tariffs.

Brexit is not fixed as yet, and to try to predict the outcome would be a wasted effort. Suffice it to say that at the moment it is not even 100 percent certain that Britain WILL leave the EU on March 29.

The BLS jobs report for December shows the addition of 312,000 non-farm payroll jobs. The unemployment rate rose to 3.9 percent. This was the 99th consecutive month of job growth in the U.S., with 38,000 jobs added in construction, for a

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Metals & Manufacturing Outlook / January 2019

total for 2018 of 280,000 jobs - versus 250,000 in 2017, and 32,000 jobs added in manufacturing, for a 2018 total of 284,000 jobs - some 75 percent of durable goods - versus 207,000 in 2017.

The Bureau of Economic Analysis recently released its ‘third’ estimate for the annual rate of Real GDP growth in the third quarter of 2018, putting it - 0.1 percent down from the second estimate - at 3.4 percent. The figure for the second quarter of 2018 was 4.2 percent.

The ISM PMI figure for U.S. manufacturing rolled up to 54.1 percent in December compared to November’s 59.3 percent, representing the 28th consecutive month of growth in manufacturing.

The overall economy grew for the 116th consecutive month. See NORTH AMERICAN OUTLOOK. IHS Markit’s remarks on the U.S. noted the

MANUFACTURING OUTLOOK weakest improvement in operating conditions since September 2017, with new order growth back to a 15-month low and slower growth in production. There was an 18-month low in job creation, despite a further rise in backlogs.

The PMI was down from 55.3 percent in November to 53.8 percent in December, according to IHS. New export orders grew at a faster pace in December.

Business confidence is at its lowest level in over two years.

STEEL PRODUCTION IS STILL INCREASING. World crude steel production for the 64 reporting countries – which represent 99 percent of world crude steel production – for the month of November, continues to rise and was 148,617 MT, up 5.8 percent year-over-year.

Primary Global Aluminum Production in November 2018 was reported at 5.312 million tons, with production in China, at 3.025 million tons, representing 57 percent of world total.

Production was 433,000 tons in GCC; 361,000 tons in the rest of Asia; 309,000 tons in Western Europe; 318,000 tons in North America and 332,000 tons in Eastern and Central Europe.

U.S. LIGHT VEHICLE SALES……..Car sales at 31 percent were at the lowest level recorded since the late 1950’s. Car sales (5.36 million in 2018) have not been this low since 1958 (4.6 million).

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), 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 percent change on the previous quarter, annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted.

U.S. crude steel production for November 2018 was 7.425 MT, up 11.8 percent year-over-year.

Metals & Manufacturing Outlook / January 2019

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CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK

by DR. CHRISTOPHER KUEHL MANAGING DIRECTOR OF ARMADA CORPORATE INTELLIGENCE Combined Sectors It can be tempting to read too much into the monthly changes that take place in the Credit Managers’ Index (CMI). Not that these fluctuations are unimportant, but longer-term trends tend to be more informative when it comes to the status of the overall economy. December saw the combined score fall back to levels seen in October. On one level, this is disappointing. It would have been nice to see the index continue tracking upwards, but it is important to remember that any reading over 50 suggests growth, so a reading of 54.2 is certainly respectable. There is a lot about last month that seems to signal changes are coming, and one could reasonably add the CMI data as another indicator. “As we leave the last of 2018 behind,” said NACM Economist Chris Kuehl, Ph.D., “there are growing concerns over everything from trade to the specter of inflation; all against a backdrop of labor shortage and possible government engagement, including regulation and future stimulus.”

movement in the unfavorable factors (50.9 to 50.8).

The overall score for the CMI fell to 54.2 from the previous month’s 55.8. This is certainly not a major drop, but it is not the trend that had been hoped for. The last time the overall score was this low was in April when it fell to 53.7. Over the last several months, the reading has been very close to 55 or 56. The favorable factors also trended down in December. In fact, this was the movement that pulled the overall numbers down. The reading in December went from 63.2 to 59.4—the first time the data has been under 60 since December 2017 (also at 59.4). There was, however, only a slight

The combined score for the unfavorable factors was a little less threatening, but the numbers are still not good. The score went from 50.9 to 50.8—virtually no change. There was similar activity in the sub-index readings. The rejections of credit applications stayed exactly where it was last month with a reading of 51.4. This is especially good news given that new applications are generally down. The accounts placed for collection actually improved a little, but still fell short of escaping the contraction zone. It was at 48.2 last month and is now at 49.7. The disputes

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Metals & Manufacturing Outlook / January 2019

As usual, the details paint a clearer picture. The dip in the favorable factors may be the most important development this month. All of the favorable subcategories also fell out of the 60s, except for amount of credit extended, which tracked at a lower level than the month prior. The sales reading went from 64.5 to 59, a mark not seen since December 2017 when it hit 59.2. The new credit applications number fell from 62.2 to 57.5. It was last at that level in December 2017 (57.3). The dollar collections number dropped from 60.9 to 59.3—not quite as dramatic as some of the other readings, though. The amount of credit extended stayed in the 60s, but went from 65.3 to 61.9. “The slide in all these factors suggests there has been a slowdown, which is consistent with some of the other data that has been seen in the Purchasing Managers’ Index (PMI), durable goods orders and capacity utilization,” Kuehl said.

CREDIT MANAGERS’ OUTLOOK numbers fell a little and dropped out of the expansion zone with a reading of 49.6 after one of 50.1 the month before. The dollar amount beyond terms also slipped from 52.3 to 49.3. This drop is more worrisome, as this is often the first sign of impending credit issues. The dollar amount of customer deductions stayed very close to last month, but improved slightly with a reading of 49.7 compared to 49.6. The filings for bankruptcies reading improved quite a bit with a reading of 55 after one of 53.6. Kuehl concluded that, “Overall, the nonfavorables are stable enough, but they are still very close to contraction territory.”

Manufacturing Sector The manufacturing sector has been a subject of intense interest for most of this year. Kuehl noted that the U.S. economy is still very dependent on its service sector for jobs and the total GDP. All by itself, the GDP of manufacturing in the U.S. is as large as the eighth-biggest country in the world.

“The sector is often seen as a kind of symbol for the overall success of the U.S. economy,” he said.

“The numbers look a bit weaker in December, which is a bit worrying for the coming year.”

The combined score for the whole index slipped from 55.6 to 54.1, taking the reading back to where it was in October. The index of favorable factors fell out of the 60s for the first time since December 2017. It is now at 58.9; whereas it was 63.2 the month before. The sub-index numbers showed the same kind of retreat. The sales numbers went from 64.2 to 59, while the new credit applications data shifted from 61.7 to 56.8—a number that has not been seen since December 2017. The dollar collections number fell from 61.6 to 59 and the amount of credit extended remained in the 60s, but only by a hair

as it went from 65.4 to 60.9. “The general sense is there was a slowdown in the manufacturing sector at the end of this year, but as these numbers are similar to what they were in 2017, this is also a seasonal reaction,” Kuehl explained. “The retail community may come to life at the end of the year, but the manufacturing community slows as the holidays tend to chew into productivity.”

The combined score for the nonfavorables improved very slightly from what it had been the month before, moving from 50.5 to 50.7. The sub-index numbers showed a bit more variety.

The rejections of credit applications slipped from 53.1 to 51.6, but at least managed to stay in the expansion zone. The accounts placed for collection improved and entered expansion territory by a small margin, going from 49.2 to 50.3. The disputes category sagged a little, with a reading of 48.6 compared to the 49.6 reading the month before.

The dollar amount beyond terms stayed very close to what it had been the month prior with a reading of 50 compared to 50.3. The best news here is the category stayed out of the contraction zone, albeit by the slightest margin. The dollar amount of customer deductions improved a bit, but remained in contraction territory with a reading of 49.1 compared to 48.6. The filings for bankruptcies reading improved slightly, as it went from 52.2 to 54.4.

Source: National Association of Credit Management

Manufacturing Laughs

All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.

Metals & Manufacturing Outlook / January 2019

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NORTH AMERICAN OUTLOOK

JANUARY 2019

NORTH AMERICAN OUTLOOK

by ROYCE LOWE

The Institute of Supply Management PMI figure rolled up to 54.1 in December compared to 59.3 in November, its lowest reading in over two years.

All indices were less robust with the exception of New Exports. New Orders and Production grew at significantly slower rates than in November.

Of the 18 manufacturing industries, 11 reported growth in December, in the following order: Textile Mills; Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Computer & Electronic Products; Wood Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Primary Metals. The six industries reporting contraction in December — in the following order

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Metals & Manufacturing Outlook / January 2019

— are: Printing & Related Support Activities; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; and Plastics & Rubber Products.

Comments from the manufacturing industry are of a less optimistic nature than we have seen so far in 2018, with the words uncertainty and tariffs to the fore, together with such phrases as: pace of incoming orders slowing; growth appears to have stopped and customer demand continues to decrease.

Commodities Up in Price Chemicals; Electrical Components (2); Electronic Components (5); Freight; Labor — Construction; Metal-Based Products; Natural Gas; PET Resin; Printed Circuit Boards; Steel* (4); and Steel-Based Products (8).

NORTH AMERICAN OUTLOOK Commodities Down in Price Aluminum (3); Caustic Soda (3); Crude Oil; Gasoline; Steel* (4); and Steel — Hot Rolled (4).

Commodities in Short Supply Capacitors (18); Electronic Components (8); Hardwood; Labor; Resistors (14); Steel; and SteelBased Products (3).

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

THE COMPLETE ISM REPORT ON BUSINESS MAY BE FOUND BEGINNING ON PAGE 27.

CANADIAN manufacturers experienced a slowdown at the end of 2018, with both production and new orders expanding at slower rates than in November and a moderation in the pace of job creation.

The PMI was slightly less expansionary in December, at 53.6, from November’s 54.9.

Higher backlogs were recorded for the third consecutive month, driven by ongoing capacity pressures. Input cost inflation moderated, as lower oil costs offset higher steel costs.

There was broad-based manufacturing growth across Canada, with Quebec recording the fastest improvement in business conditions. There was a marked loss of momentum in Alberta and B.C. Canada produced 1.125 MT of crude steel in November, down 4.1 percent year-over-year.

Canadian light vehicle sales fell in December for a tenth straight month of decline, with sales of 114,289 units versus 124,247 in December 2017.

Passenger car sales were down 12.1 percent, light truck sales down 6.5 percent. Total sales for 2018 were 1.985 million units, down 2.6 percent yearover-year with light trucks up 0.6 percent and passenger cars down 9.7 percent.

MEXICO saw a decline in production in December and the PMI stayed in contraction, unchanged in December from November’s 49.7 percent.

Total new orders and exports continued in expansion but at slower rates. Production, employment and business confidence were all down.

Mexico produced 1.5 MILLION MT of crude steel in November, down 8.2 percent year-over-year.

ISO9100:2015 and AS9100D

Metals & Manufacturing Outlook / January 2019

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METALS OUTLOOK

JANUARY 2019

METALS OUTLOOK THE COST, MAKING, TREATING AND APPLICATIONS OF METALS

by ROYCE LOWE Hot-rolled steel coil in the U.S. was recently priced at just over $36 per cwt. It has dropped by $200 per ton since mid-year. Pricing in early 2019 is presently an unknown.

Copper fell slightly from $2.78 per lb to $2.65 from early December to early January, and from $2.90 to $2.65 in the past six months; aluminum from $0.88 to 0.85 in the same monthly period, from $0.95 to 0.85 in the past six months; nickel from $4.92 to $4.96 and from $6.40 to $4.96 and zinc from$1.23 to $1.13 and from $1.20 to $1.13.

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Metals & Manufacturing Outlook / January 2019

FORGING magazine recently published a 2019 business outlook, offering data on, and concerns of, members of the U.S. Forging and Forming Community in the past year, and their thoughts on the economy, their markets and their business prospects. The survey further looks at expectations and business decisions for the coming year.

North America’s forging industry forges and forms a wide range of metals and alloys, through carbon, alloy and stainless steels, aluminum and its alloys, brass and copper alloys, high-temperature alloys and titanium and its alloys. Its major markets are automotive components, 24 percent; aircraft/

METALS OUTLOOK raw material costs, 55 percent; raw material lead times, 34 percent; energy costs, 35 percent; import penetration, 30 percent and delivery times for forgings, 25 percent.

There is concern regarding availability There is a concern, as with most U.S. manufacturing industries, regarding availability of workers, with 37 percent concerned with increased availability of qualified workers and 14 percent with the inability to retain current workers. The lack of continuing education and training for the existing workforce is of concern to a further 14 percent, and 26 percent lament the lack of programs to grow incoming workers, such as internships and scholarships. All are agreed on the overall need for collaboration with trade groups, colleges and universities.

aerospace, 23 percent and oil and gas, 17 percent.

Just over 70 percent of respondents to the survey are expecting significant increases in 2019 shipments over 2018, with some 7 percent expecting a decline in shipments. For the year 2019, 60 percent are looking for an increase, 32 percent looking for things to stay basically the same and 8 percent looking for a decline. Faith in the future is exemplified by the 70 percent of respondents who plan capital expenditures on new equipment in 2019, with some 30 percent looking to new forging machines and some 30 percent to new heat-treating equipment.

There are a number of major concerns on the part of the North American forging industry, namely Metals & Manufacturing Outlook / January 2019

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AEROSPACE OUTLOOK

JANUARY 2019

AEROSPACE OUTLOOK

by ROYCE LOWE

In mid-December, Boeing delivered its first plane, a 737 MAX to Air China, from its first finishing plant in China, thus committing itself to the world’s largest aircraft market: all in the midst of global trade turbulence. A recently-inaugurated facility in Zhoushan, 90 miles southeast of Shanghai, is the home of a completion and delivery center, following over a year of construction. In addition to all this, Boeing has entered into a joint venture with stateowned Commercial Aircraft Corp. of China Ltd. The plant was in motion before Trump’s election but its recent inauguration was performed to the backdrop of Sino-U.S. trade turbulence whose potentially wide-ranging effects are as yet unknown.

Chinese workers at the new plant will put finishing touches on U.S.-built planes flown over from the Seattle area, before their delivery to local customers.

This is a huge market Boeing is getting into: one in every four jets they build goes to China, whose airlines are the biggest buyers of 737s, Boeing’s biggest source of profit. According to Bloomberg, the forecast of Chinese demand over the next

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Metals & Manufacturing Outlook / January 2019

two decades is 7,700 planes, or around a $1 trillion market for Boeing, Airbus and Chinese planemakers such as Comac.

The Zhousan complex marks Boeing’s first manufacturing venture outside the U.S. Airbus has been assembling its narrow-body 320 series in China for around a decade and recently expanded its Tianjin facility to include a completion and delivery center for its wide-body A330s. Airbus has three other factories world-wide.

There is, in fact, a race between Boeing and Airbus as to who can sell the most planes the fastest.

In any event, there’s a huge market out there, so both companies will doubtless end up winners for some years to come.

Meanwhile Brazil’s new president, Jair Bolsonara, voiced his concern that a proposed sale of Embraer’s commercial aviation business to Boeing could lead to the U.S. company taking over the division. A recent deal between the two companies would see Embraer keeping 20 percent of its commercial division with an option to sell that stake to Boeing within the next ten years for around $1 billion.

AUTOMOTIVE OUTLOOK

JANUARY 2019

AUTOMOTIVE OUTLOOK

by ROYCE LOWE almost 60 percent of whose output is supplied from South Korea, with GM itself producing just 11 percent, compared with about 20 percent for a regular internal combustion engine car.

The whole EV scenario, for GM and its competitors, may boil down to costs, hence selling price, hence affordability. It’s certain that costs will rise in 2019, with tariffs on steel and aluminum already hurting and scheduled to continue to do so.

When new in her job as GM’s CEO, Mary Barra presided over the recall of about three million small vehicles that were suspected of being defective. GM had failed to disclose defects for more than a decade. The crisis broke trust in GM, some five years after it came out of Chapter 11 and a $50 billion government bailout.

Fast forward half a decade and this same lady goes up against Donald Trump and his tariffs, while preparing GM for an all-electric future that will most probably be centered on China.

Drastic changes were recently announced at GM, shutting down, laying off, U.S. and Canada, phasing out sedans, all looking to final savings of some $6 billion by the end of 2020. Restructuring will cost almost $4 billion. Cost cutting is not new to GM, nor to the auto industry as a whole: it’s called survival. These days it’s all about technology, and the words electric, battery, autonomous that will likely very soon be on the lips of all who are involved in the automobile-andother-vehicles industry. GM is committing to at least 20 new battery EV models by 2023.

When we think of EVs we naturally think of China, one of GM’s favored bases, where the first nine months of 2018 saw it sell, through joint ventures, 2.7 million vehicles. Less than one percent of this total are pure electric, namely the Chevy Bolt,

GM will be diving into a pool already filled with others, for which read the rest of the auto industry, and the fittest will survive. One of the determining criteria will be whether or not their cars please the Chinese consumer.

It should be noted in passing that Tesla is breaking ground on a new factory near Shanghai. More on this later.

Thanks to Bloomberg Opinion - and our own.

Manufacturing Laughs

All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.

Metals & Manufacturing Outlook / January 2019

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ENERGY OUTLOOK

JANUARY 2019

ENERGY OUTLOOK

by ROYCE LOWE

In 1979, president Jimmy Carter, looking for alternative energy following the Arab oil embargo, installed solar panels on the White House. His successor, Ronald Reagan, removed them seven years later and did away with the solar budget.

Rooftop solar makes sense. There is no carbon dioxide and electricity is generated where it is consumed. In spite of tariffs (on imported panels) the price of a residential solar system is less than half what it was in 2010. A homeowner in Florida who leases solar panels from Sunburn, saw his electricity bill drop from $100 in August to $15 in October. In 2017, rooftop solar installations in the U.S., measured by gigawatts of capacity, were nearly ten times what they were in 2010.

Although nearly two million homes are equipped, home roof solar panels still generate less than one percent of America’s total electricity, and recent growth has been slow.

California officials recently upheld a mandate to require rooftop panels on new homes from 2020, boosting demand. A generous subsidy in the form of a federal tax credit, may be thrown

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Metals & Manufacturing Outlook / January 2019

in. Under a policy called net metering, a utility has to pay a homeowner retail rates for any extra energy generated, which can substantially lower a household’s monthly bill. The problem is that power companies shoulder the fixed costs for maintaining the grid but, under net metering earn less from customers with solar panels, thus hurting those without panels, a situation that might prompt more people into using solar panels.

And for those with a battery, there’s storage, rather than selling it back to the utility.

In some states, utilities have lobbied for changes that may suffocate rooftop solar.

In some states, utilities have lobbied for changes that may suffocate rooftop solar. In September, Kansas approved new fees for customers with solar panels on their roofs, with Montana proposing something similar. Success in the business depends on a number of factors, including delivery rates, sunshine, state incentives and installation fees.

ENERGY OUTLOOK

Elon Musk’s solar roof tiles, unveiled to much brouhaha, really failed to take off, and instead of leasing, Tesla has put them on sale in stores. So Sunrun [NASDAQ: RUN], with 15 percent of the U.S. solar roof market, has the upper hand here, and the falling cost of batteries, which it also leases, may be what is needed to push the industry forward. Batteries allow use of solar power at night and during outages.

Solar panels and their batteries are facing the same uphill fight as electric vehicles. We all know they work and that they are eco-friendly, but will we buy them. Similarly, lots of people don’t want us to buy them. This looks like another long-winded fossil fuel versus alternate energy battle.

Manufacturing Laughs

All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.

Metals & Manufacturing Outlook / January 2019

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WAM HOST PROFILE: ANDREA OLSON

COVER STORY WOMEN AND MANUFACTURING HOST PROFILE:

ANDREA OLSON CEO of Pragmadik, Co-Host of Riveting Exchanges and Host of The Customer Mission

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Metals & Manufacturing Outlook / January 2019

WAM HOST PROFILE: ANDREA OLSON Andrea Olson is the host of two of the Women And Manufacturing Podcast series. “Riveting Exchanges”, which she co-hosts with Desiree Grace, discusses the details, strategies, and nuances of being a woman in the manufacturing industry. Drawing from real-life stories and experiences, they discuss practical tips and tricks on how to navigate culture and build a successful career in the industry. Her second podcast, “The Customer Mission”, she shares best practices, case studies, and interviews with industry leaders on how to use customer intelligence to grow faster, more competitively, and more profitably.

With a 10-year career in the technology industry, a transition into manufacturing seemed like an odd turn of events. Yet, this is exactly what Andrea Olson did. Moving into manufacturing wasn’t by accident, but a strategic decision, which spawned a myriad of new opportunities, including the creation of a new business.

“Coming from a technology company, where change occurred virtually every minute, manufacturing was a dramatic change of pace,” said Andrea. “Yet, to me, it was an opportunity to bring a new perspective to the industry, which was ripe for change and modernization.”

Andrea led the global communications, digital strategy, and marketing efforts for two Fortune 1000 Midwest industrial companies. Through her next 8 years, she implemented a series of major initiatives, including a global rebrand, CRM implementation, development of a predictive sales platform, global employee engagement strategies, and a multi-lingual website, to name a few.

“While my time building a tech firm helped me learn essential skills including agile design, lean operations, and adaptation, working in the manufacturing sector brought the opportunity to expand my exposure to other countries, cultures, and communities,” said Olson. “Working with a multitude of teams including product development, sales, field support, and customer service, provided me with insight to the customer journey, and ways where we could make serving our customers simpler, easier, more efficient, and most importantly, add more value.”

With this insight, she decided to create a Management and Communications Consulting Firm, called Pragmadik, to address this gap in the market. Andrea now helps clients discover “customer needs” through

speaking from the stage, leading Culture Camps, Mission Labs and Customer Labs for organizations, and teaching others the art and science of customer centricity. She is also literally a world traveler, having worked in over 12 different countries throughout her career.

“Manufacturers by nature are change resistant.

Production inherently is all about stability, consistency, and repetition. As technology advances, and new generations come into the workforce, manufacturing has to start identifying how they can utilize these changes to their advantage,” said Andrea.

“It’s not simply selecting and rolling out a new piece of software to improve efficiency and competitiveness. It’s understanding how to use these new tools and resources strategically to gain an edge on the competition and build customer loyalty.”

An avid writer and author, Andrea publishes over 100 articles and white papers each year, across a spectrum of customer-centric topics. She is known for her easy-to-read writing style, and a knack for diving deep into areas others are afraid to discuss.

Andrea has also been a contributor to over 20 national publications, including Industry Week, St. Louis Business Today, IISE, Iowa Association of Business & Industry, Consulting & Specifying Engineer, and Global Manufacturing, to name a few.

Olson believes that manufacturing needs to take the leap in changing from a “command and control” structure to “collaboration and empowerment.” “If Lean was the focus in the past, Communication is the focus today,” said Andrea. “Employees today are

Manufacturing Laughs

All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.

Metals & Manufacturing Outlook / January 2019

19

WAM HOST PROFILE: ANDREA OLSON

“It’s not just about reducing overhead or streamlining processes, but about how to find new ways to add value to your products and services, outside of the traditional features and benefits.”

- ANDREA OLSON

demanding more from their employers than ever before, and with our current unemployment rates, the competition for talent is fierce.”

- How can we improve internal communications and culture?

Andrea now focuses her time helping manufacturers and other industry leaders answering and addressing critical business questions, including:

At Pragmadik, Andrea believes that customers and employee engagement is at the heart of profitable growth. She continually seeks companies that are ready to make real, profitable, and lasting organizational changes.

- How do we improve communications between internal teams?

- How can we capture and leverage customer intelligence and insights?

- What can we do to innovate quickly and more effectively?

- How can we better engage and empower our employees?

- How can we help customers better understand our differentiators?

20

Metals & Manufacturing Outlook / January 2019

“We don’t seek just any new client,” said Olson. “We’re looking for organizations that are in the right mindset for change, and are ready to take that leap.” “While we have many companies approach us for marketing, branding, and promotional services, our focus is to ensure we’re helping them address the right challenges first, instead of simply putting a BandAid on a gaping wound….We don’t want our clients throwing good money after bad.”

WAM HOST PROFILE: ANDREA OLSON The firm has been in practice since 2009, and has a team of 12, with each member specializing in their practice area, whether it is customer research, strategy, communications design, technology implementation or employee engagement. “We practice what we preach….we talk with and train organizations about creating and embracing “steady change” as part of their team’s DNA…and we live that each and every day in our own company.”

Pragmadik also works with companies to help capture their biggest untapped customer growth opportunities. “We help organizations to build more effective teams through ‘communicating for understanding’,” said Olson.

In addition to being the host of two Women And Manufacturing podcasts, Andrea is also the author of two books: “No Disruptions: The New Future for Mid Market Manufacturing” and “The Customer Mission”, both available on Amazon.com in Kindle or Paperback.

The first book holistically examines the challenges of the skeptical, change-resistant mid-market manufacturer. It examines the critical factors to “future-proof” mid-market manufacturing, including recruitment, technology, marketing, branding and diversification. The second book examines the concept of redefining the customer, and redesigning your organizational growth strategy around the customer, creating a culture of innovation and uncontested differentiation.

“We want to empower our clients with choice….providing the tools and insights in a variety of formats so they can choose the approach that works for their unique situation,” said Andrea. “If we’re not designing our communications, product offerings, and strategies around our customer, then we’re hypocrites.”

Andrea also recalls the challenges in being a woman in a typically maledominated manufacturing industry. “The experience was challenging, but one that I would do all over again,” said Olson. “Manufacturers are a unique group of folks…who are extremely passionate and take pride in their craft. As craftsmen, it can be sometimes hard to take input and criticism from a customer, since it can feel personal,” Andrea said. “But it’s that mindset of service and customer focus that I’ve seen time and time again, that separates the men from the boys of industry.”

Olson looks forward to continuing to expand the business in 2019.

“Manufacturers have untapped growth at their fingertips…it simply requires taking a new look at the people side of the business. And people – both employees and customers - are the new strategic differentiator.”

You can find more about Andrea Olson and Pragmadik at www.pragmadik. com, www.thecustomermission.com, or connect with her on LinkedIn at www.linkedin.com/in/olsonandrea1

Metals & Manufacturing Outlook / January 2019

21

ISSUES OUTLOOK

JANUARY 2019

ISSUES OUTLOOK

by ROYCE LOWE

“The question is how are you going to pay for it and that always becomes very challenging because there’s no sort of easy way to pay for infrastructure without impacting an awful lot of Americans,’’ commented Senate Majority Leader Mitch McConnell, after the recent U.S. mid-term elections.

Of course infrastructure will impact an awful lot of Americans and of course if the infrastructure bill ever gets off the ground they’ll surely end up paying for it, one way or another. For example, the last time the fuel tax was increased was in 1993, and the 18.24 cents per gallon on gas and 24.4 cents per gallon on diesel hasn’t changed since. President Trump says he won’t budge on infrastructure until he gets his wall.

In the meantime, and not without warning, America’s infrastructure is deteriorating at a regular and rapid rate, and all reports that back this up are falling by the wayside. The American Society of Civil Engineers (ASCE), the U.S. Chamber of Commerce, and the American Association of State Highway and Transportation Officials (AASHTO) are all telling Congress to advance an infrastructure package in 2019.

“We believe that it is now time for all transportation stakeholders, led by Congress and the President, to begin work on reauthorizing the FAST Act [2015 highway law] and to ensure a smooth transition to the next long-term bill without the need for disruptive extensions,” Carlos Braceras, AASHTO’s president recently stated.

22

Metals & Manufacturing Outlook / January 2019

The ASCE publishes a report card every four years on the state of America’s infrastructure. Its last report, in 2017, gave U.S. infrastructure a D+, the same grade as in 2013. The ASCE estimated back in 2017 that the U.S. needs to spend some $4.5 trillion by 2025 to fix the country’s roads, bridges, dams, drinking water, schools and other infrastructure. So add to that cost overruns and the recent Trump tariffs on steel, and the total could easily soar to $5.5 to $6 trillion.

The infrastructure bill presently being floated is for $1.5 trillion, but it’s going up against Trump’s insistence on $5 billion for his wall. This will be a long, long row to hoe and who knows when or if such a bill will pass. Of course if the U.S. trimmed the $56 billion it gives away to other countries to take care of their needs, and channels that money into the needs of the American people, the funding for both projects is at hand.

The need is dire. There are some 615,000 bridges in the U.S. of which over 200,000 are more than 50 years old; 15,500 dams are high-hazard; one million pipes, many of which are almost 100 years old, carry America’s drinking water and water breaks lead to the loss of two trillion gallons of treated water per year. Thirty-two percent of urban roads and 14 percent of rural roads are in poor condition, causing losses in billions for repairs and extra fuel. And the list goes on through schools and railroads, energy and airports.

Whoever pays, be it federal, state, municipal or individual, something must be done, and quickly.

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS We like charting the annual averages the monthly ISM Manufacturing PMI® for each of the past 25 years. It serves as a reminder that change is to be expected.

Through November, 2018 was tracking as the best year in the last 25 with an average reading of 59.2. However, 2018 faltered at the finish with a weaker December PMI (54.1) and became the second best (58.8) year behind 2004 (59.1). Still a spectacular showing by any measure!

While manufacturing slowed somewhat, nonmanufacturing continued to generate strong performance in business activity and new orders which have averaged 61.5 and 61.4, respectively for the year. Since nonmanufacturing is 4 times the size of manufacturing, it plays the greatest role in job creation, which is staying strong as evidenced by recent BLS numbers.

Eurozone: The Eurozone PMI (51.4, -0.4) hit a 30-month low in December as the PMI weakened for the fifth consecutive month. The Netherlands, Ireland, Austria, Greece, and Germany together averaged 54.2 while Spain, France, and Italy averaged 50.

United Kingdom: The UK/CIPS PMI (54.2, +0.7) rose in December largely from “buyer panic”. The uncertainty generated by BREXIT continued to weigh heavily on prospects for strong economic growth.

China: China’s Official Report, the CFLP PMI (49.4, -0.6), and the Caixin Manufacturing PMI (49.7, -0.5) both fell below the 50-mark for the first time since February 2016!

India: India’s PMI (53.2, -0.8) decelerated slightly while posting its 17th consecutive month of growth. Continued growth appears likely in 2019.

South Korea: New orders and output weakness hurt the PMI (49.8, +1.2), printing below 50 for a second consecutive month. Business confidence remains historically low.

Taiwan: Taiwan’s CIER-SMIT PMI (44.8, -3.2) was in contractionary territory for a second consecutive month after 33 consecutive months of expansion. The Export and Import indexes rapidly contracted posting 38.7 and 39.0, respectively. Taiwan is very dependent upon trade with China and a good proxy for actual conditions in China.

North America: Canada’s PMI (53.6, -1.3) expanded for the 34th consecutive month. Mexico’s PMI (49.7, 0.0) remained unchanged, slightly diminishing a solid year in which the PMI averaged 51.3.

Metals & Manufacturing Outlook / January 2019

23

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by ROYCE LOWE

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) eased further in December to 51.4, from November’s 51.8. There was a fall in new orders for the third consecutive month and future business confidence hit a six-year low.

There was solid growth in the consumer goods sector, but deterioration of operating conditions for intermediate goods producers. There was marginal growth in the investment goods sector.

Recent anti-pollution standards are affecting the auto industry, particularly in Germany, where manufacturers are presently pessimistic.

Through all this, employment growth was maintained in November.

Crude steel production in Germany in November was at 3.450 MT, down 2.9 percent year-over-year; in Italy 2.186 MT, down 1.0 percent year-over-year; in France 1.352 MT, up 12.8 percent year-over-year and in Spain 1.302 MT, down 0.7 percent year-over-year.

Russia’s crude steel production for October was at 5.680 MT, down 4.0 percent year-over-year;

24

Metals & Manufacturing Outlook / January 2019

Ukraine’s was 1.658 MT, down 11.2 percent yearover-year.

IHS Markit’s PMI for the UK was up from November’s revised 53.6 figure to December’s 54.2, a six-month high. Brexit preparations are said to be the reason for strengthening in new orders, new export orders and stocks of finished goods.

Sterling weakness was linked to increases in new export orders.

The UK produced 0.455 MT of crude steel in November, down 23.1percent year-over-year.

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by ROYCE LOWE CHINA’s PMI slipped into contraction in December, at 49.7, down from November’s 50.2, for the first time since May 2017.

Manufacturing production was up slightly at the end of 2018 amid signs of softer demand as total new orders slipped marginally and companies reduced their selling prices for the second consecutive month. The month saw the first drop in input costs in just over a year-and-a-half.

Business confidence was slightly subdued as companies laid off workers for the 62nd consecutive month.

CHINA produced 77.621 MT of crude steel in November, up 10.8 percent year-over-year; Japan 8.658 MT, down 0.5 percent year-over-year; India 8.490 MT, down 1.3 percent year-over-year and South Korea 5.928 MT, up 1.1 percent year-overyear. Taiwan produced 1.880 MT in November, up 8.4 percent.

improvements in new orders and employment.

There were inventory shortages and higher raw material demand.

Manufacturers remain optimistic on future production, but business confidence was down, due mostly to an impending sales tax increase.

INDIA saw its second-fastest increase in new orders in 2018 in December, and a solid but softer increase in production. Input costs increased at their weakest rate in 34 months.

The PMI eased back in December to 53.2 from November’s 54.0 figure. Export sales were up for the 14th consecutive month. Employment was up but backlogs increased along with this.

Manufacturing Laughs

Chinese total vehicle sales for November were down for a fifth consecutive month, 13.9 percent year-over-year, to 2.55 million. Total vehicle sales for the first eleven months were down 1.7 percent to 25.42 million. Electric vehicle sales for the first eleven months were up 68 percent year-over-year to 1.03 million units.

JAPAN saw an improvement in business conditions in December, with production rising at a stronger rate. The PMI rose slightly to 52.6 in December from November’s 52.2 amidst generally soft

All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.

Metals & Manufacturing Outlook / January 2019

25

SOUTH AMERICA OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA

by ROYCE LOWE

BRAZIL saw its strongest increase in new orders and production since March 2018, with the PMI little changed at 52.6 from November’s eightmonth high of 52.7. Most demand increase was domestic.

There is a very high level of business sentiment, but a renewed fall in employment. People are expecting good things from the new government.

Brazil’s crude steel production for the month of November was 2.844 MT, a decrease year-overyear of 6.1 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) – was at its lowest level in December, at 51.5, since September 2016.

Production growth was weak and there were slowing rates of expansion in new orders and employment.

Manufacturing Laughs

The consumer goods sector was the bright spot for global manufacturing, but intermediate and investment goods showed only mild growth.

All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.

26

Metals & Manufacturing Outlook / January 2019

ISM REPORT OUTLOOK

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

ISM PMI at 54.1% ISM PMI for the past 5 years

2014

2015

2016

2017

2018

Metals & Manufacturing Outlook / January 2019

2019

27

ISM REPORT OUTLOOK

ISM® REPORT ON BUSINESS®

MANUFACTURING E

conomic activity in the manufacturing sector expanded in December, and the overall economy grew for the 116th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The December PMI® registered 54.1 percent. The New Orders Index registered 51.1 percent, a decrease of 11 percentage points from the November reading of 62.1 percent. The Production Index registered 54.3 percent, 6.3-percentage point decrease compared to the November reading of 60.6 percent. The Employment Index registered 56.2 percent, a decrease of 2.2 percentage points from the November reading of 58.4 percent. The Supplier Deliveries Index registered

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

57.5 percent. The Inventories Index registered 51.2 percent, a decrease of 1.7 percentage points from the November reading of 52.9 percent. The Prices Index registered 54.9 percent, a 5.8-percentage point decrease from the November reading of 60.7 percent, indicating higher raw materials prices for the 34th consecutive month. Of the 18 manufacturing industries, 11 reported growth in December, in the following order: Textile Mills; Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Computer & Electronic Products; Wood Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing ‡; Electrical Equipment, Appliances & Components; and Primary Metals.

PMI @ 54.1% ®

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

MANUFACTURING AT A GLANCE Dec Index 54.1 51.1 54.3 56.2 57.5 51.2 41.7 54.9 50.0 52.8 52.7

Nov Index 59.3 62.1 60.6 58.4 62.5 52.9 41.5 60.7 56.4 52.2 53.6

% Point Change -5.2 -11.0 -6.3 -2.2 -5.0 -1.7 +0.2 -5.8 -6.4 +0.6 -0.9

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

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

Trend* (months) 28 36 28 27 27 12 27 34 1 34 23

OVERALL ECONOMY

Growing

Slower

116

Manufacturing Sector

Growing

Slower

28

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 2017

2018

2019

54.1%

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

PMI® Manufacturing expanded in December, as the PMI® registered 54.1 percent, a decrease of 5.2 percentage points from the November reading of 59.3 percent. This indicates growth in manufacturing for the 28th consecutive month. The PMI® recorded a substantial softening in December and retreated to a level not seen since November 2016, when it registered 53.4 percent. 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: Chemicals; Electrical Components (2); Electronic Components (5); Freight; Labor — Construction; Metal-Based Products; Natural Gas; PET Resin; Printed Circuit Boards; Steel* (4); and Steel-Based Products (8).

Commodities Down in Price: Aluminum (3); Caustic Soda (3); Crude Oil; Gasoline; Steel* (4); and Steel — Hot Rolled (4).

Commodities in Short Supply: Capacitors (18); Electronic Components (8); Hardwood; Labor; Resistors (14); Steel; and Steel-Based Products (3).

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

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Metals & Manufacturing Outlook / January 2019

ISM Report On Business ®

®

manufacturing

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

New Orders (Manufacturing) 2017

2018

2019

New Orders ISM’s New Orders Index registered 51.1 percent. Six of 18 industries reported growth in new orders in December, in the following order: Machinery; Electrical Equipment, Appliances & Components; Primary Metals; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Transportation Equipment.

51.1% 52.4% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2017

2018

2019

Production ISM’s Production Index registered 54.3 percent. The 10 industries reporting growth in production during the month of December — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Primary Metals; Textile Mills; Machinery; Transportation Equipment; Computer & Electronic Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; and Chemical Products.

54.3%

51.5% = Federal Reserve Board Industrial Production Breakeven Line

Employment (Manufacturing) 2017

2018

2019

ISM’s Employment Index registered 56.2 percent. Of the 18 manufacturing industries, the nine reporting employment growth in December — listed in order — are: Textile Mills; Paper Products; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Machinery; and Miscellaneous Manufacturing.

56.2% 50.8% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2017

2018

Employment

2019

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed in December, as the Supplier Deliveries Index registered 57.5 percent. The 12 industries reporting slower supplier deliveries in December — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Paper Products; Chemical Products; Computer & Electronic Products; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing‡; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Plastics & Rubber Products.

57.5%

Inventories (Manufacturing) 2017

2018

2019

51.2%

Inventories The Inventories Index registered 51.2 percent. The nine industries reporting higher inventories in December — listed in order — are: Textile Mills; Wood Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Transportation Equipment; Computer & Electronic Products; Machinery; Miscellaneous Manufacturing‡; and Chemical Products.

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

‡Miscellaneous

Manufacturing (products such as medical equipment and

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

Metals & Manufacturing Outlook / January 2019

29

ISM REPORT OUTLOOK

ISM Report On Business ®

®

manufacturing

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

Customer Inventories (Manufacturing) 2017

2018

2019

Customers’ Inventories ISM’s Customers’ Inventories Index registered 41.7 percent. No industry reported customers’ inventories as too high during the month of December. The 13 industries reporting customers’ inventories as too low during December — listed in order — are: Textile Mills; Wood Products; Machinery; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Primary Metals; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Plastics & Rubber Products; Fabricated Metal Products; Miscellaneous Manufacturing‡; and Transportation Equipment.

41.7%

Prices (Manufacturing) 2017

2018

2019

Prices The ISM Prices Index registered 54.9 percent. Eight of the 18 industries reported paying increased prices for raw materials in December, in the following order: Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Transportation Equipment; Computer & Electronic Products; Machinery; and Primary Metals.

54.9%

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

Backlog of Orders (Manufacturing) 2017

2018

2019

Backlog of Orders

2019

New Export Orders

50%

ISM’s Backlog of Orders Index registered 50 percent. The six industries reporting growth in order backlogs in December — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; and Transportation Equipment.

New Export Orders (Manufacturing) 2017

2018

ISM’s New Export Orders Index registered 52.8 percent. The six industries reporting growth in new export orders in December — listed in order — are: Chemical Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; Transportation Equipment; and Miscellaneous Manufacturing‡.

52.8%

Imports (Manufacturing) 2017

2018

2019

52.7%

‡Miscellaneous

Manufacturing (products such as medical equipment and

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

30

Metals & Manufacturing Outlook / January 2019

Imports ISM’s Imports Index registered 52.7 percent. The 10 industries reporting growth in imports during the month of December — listed in order — are: Textile Mills; Wood Products; Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; Machinery; and Chemical Products.

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