PMI index slips again due to supply slowdown
Despite overall growth, the dock workers' slowdown in California are impacting inventories.
The fundamental strengths of manufacturing remain in place, but the effect of the months-long West Coast dock slowdown has had more serious effects on the overall manufacturing growth curve.
The January PMI report from the Institute for Supply Management slipped 1.6 percentage points to 53.5%, the third straight month of decline after the index hit 57.9% in October. It was still the 20th straight month the index finished above the manufacturing growth mark of 50%, and ISM officials said there was overall optimism among ISM committee members who commented for this month's index.
"Comments from the panel indicate that most industries, but not all, are experiencing strong demand as 2015 kicks off," said Bradley Holcomb, chairman of the ISM's Business Survey Committee. "The West Coast dock slowdown continues to be a problem, negatively impacting both exports and imports as well as inventories." Still, 14 of the 18 manufacturing industries showed growth in January.
Each of the indices fell in January. The Production Index dropped 1.2 percentage points to 57.7%, the Employment Index fell 1.9 percentage points to 54.1%, and the New Orders Index dropped 4.9 percentage points to 52.9%.
Among the comments from committee members:
- "Strong customer demand for our products continues to grow." (Food, Beverage & Tobacco Products)
- "Consumer demand remains strong for automotive. Seeking alternatives to maximize production with existing production capacity." (Transportation Equipment)
- "Sales have stayed very strong even with the dip in oil prices." (Computer & Electronic Products)
- "Dock problems in California continue to delay shipment out of the West Coast. Most material prices are the same except resin prices are down." (Chemical Products)
- "Business conditions are good, stable to improving." (Miscellaneous Manufacturing)
- "West Coast port slowdown is getting serious. Mill has 40+ days of production at the ports and various warehouses." (Paper Products)
- "Business in 2015 has started off on a fast pace. Very busy." (Primary Metals)
The PMI Index finished above the overall economic growth level of 43.2% in January, making it 68 straight months the index was above that threshold.
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Annual Salary Survey
Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey