By James M. Borneman, Editor In Chief
The increased business volatility associated with U.S./China rumblings on trade seems to be leaking into the latest Manufacturing ISM® Report On Business® published by the Tempe, Ariz.-based Institute for Supply Management® (ISM®) and issued by Timothy R. Fiore, CPSM, C.P.M., Institute Chair Manufacturing Business Survey Committee.
“Economic activity in the manufacturing sector contracted in August, and the overall economy grew for the 124th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business,”Fiore reported.
“The August PMI® registered 49.1 percent, a decrease of 2.1 percentage points from the July reading of 51.2 percent. Comments from the panel reflect a notable decrease in business confidence. August saw the end of the PMI expansion that spanned 35 months, with steady expansion softening over the last four months.
However, Fiore also reported some good news for textile mills.“Of the 18 manufacturing industries, nine reported growth in August, in the following order: Textile Mills; Furniture & Related Products; Food, Beverage & Tobacco Products; Wood Products; Petroleum & Coal
Products; Nonmetallic Mineral Products; Machinery; Miscellaneous Manufacturing; and Chemical Products.”
He also pointed to bad news for the apparel sector, which led the seven sectors
reporting business contraction. Buried in the report is news of textile mills reporting contraction in new orders, lower delivery performance of suppliers, a decrease in order backlogs and reports that customers’ inventories are too low. At the same time, textile mills report growing production, employment, and building higher inventories while seeing a growth in imports.
So, it’s a mixed bag, but with textile mills still moving forward.Trade tensions, adapting supply chains, and a strong dollar are all in the mix and can be either positive, neutral or negative business factors.
Take China’s devaluation of the yuan. A strong dollar could lessen the impact of tariffs on Chinese goods, but long term, a low yuan isn’t terrific for China. But the volatility caused by the trade tensions might also mean it’s worth taking another look at moving supply chains out of China.
On the other hand, coming off ITMA,the strong dollar can help make imported machinery scoped-out at the show a little more affordable to dollar denominated Americans.
The U.S. industry, after its consolidation post NAFTA, seems to have grown a thicker skin. It’s not that company leadership is unaware of risks or ignorant of the risks of global economic impacts, it’s just that many companies have been battle-tested.
They don’t shy away, instead focusing on innovation, product quality and productivity. They are not completely insulated from the challenges afoot, but they show great discipline and focus.
Investment, as demonstrated by surprisingly high turnout and interest at the recent ITMA, (see “ITMA 2019: Expansive & Diverse,” TW, this issue), is a long-term decision that’s not taken lightly.
And while there are those talking recession, it’s a difficult extrapolation. Maybe it’s political, maybe it’s some fancy crystal ball work, but keep in mind as reported earlier, the “ … overall economy grew for the 124th consecutive month.”