Supply-Side News
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Purchasing Managers Index up 1% in January
Freight Rates on the Rise
U.S. Industrial Outlook: Growth to Outperform Overall GDP Growth
Orders, Production, Employment Up
Durable Goods Orders Fell 0.7 Percent In October
Purchasing Managers Index up 1% in January
Reprinted from Institute for Supply Management
Economic activity in the manufacturing sector expanded in January for the 30th consecutive month, and the overall economy grew for the 32nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®
The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 54.1 percent, an increase of 1 percentage point from December's seasonally adjusted reading of 53.1 percent, indicating expansion in the manufacturing sector for the 30th consecutive month. The New Orders Index increased 2.8 percentage points from December's seasonally adjusted reading to 57.6 percent, reflecting the 33rd consecutive month of growth in new orders. Prices of raw materials increased for the first time in the last four months. Manufacturing is starting out the year on a positive note, with new orders, production and employment all growing in January."
Performance by Industry
Of the 18 manufacturing industries, nine are reporting growth in January, in the following order: Apparel, Leather & Allied Products; Petroleum & Coal Products; Machinery; Computer & Electronic Products; Transportation Equipment; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; and Primary Metals. The seven industries reporting contraction in January — listed in order — are: Plastics & Rubber Products; Furniture & Related Products; Wood Products; Chemical Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Textile Mills.
Freight Rates on the Rise
Reprinted from Supply Chain Digest
Public Rail Carriers Show Profit Growth Well Above Changes in Volumes; LTL Carriers are Slowly Turning the Financial Ship Around On Rate Increases, Business Discipline
As always, we enjoyed reviewing the quarterly "State of the Freight" report from the transportation industry analysts at Wolfe Trahan. Though the survey of several hundred shippers is meant to support the needs of investors in the transportation sector, always there is some great insight and data of use to logistics professional as well.
Included in the report was the firm's own analysis of pricing trends across several modes. It found that truckload pricing across a group of six large TL carriers was up an average of 3.6% in Q3 versus a year ago, and 1.6% versus Q2. Rates on a year-over-year basis had been up between 4.7-5.3% over the previous four quarters, and were up sequentially 2.6% in Q2 after dipping 1.1% sequentially in Q1.
The story was even stronger in the LTL sector, which saw average rates increases of 6.9% in Q3 year-over-year, and 3.4% versus Q2. LTL Rates had been dropping sharply on a year-over-year basis from at least Q1 2010 and most likely before that until the sector ended the slide in Q2 of this year, when rates also rose by a strong 5.1% over 2011. (These numbers are all net of fuel surcharges.)
Interestingly, that 6.9% growth in rates in the LTL sector exactly matched the level of the general rate increase many LTL carriers announced in August and September, meaning those price hikes appear to have been realized in the market.
The report notes that LTL carriers such as Con-Way and FedEx Freight have culled much unprofitable customers and freight from their networks in recent quarters.
Shippers, however, have relatively modest expectations for rate increases in 2012, the survey found.
On average, shippers expect truckload rates to rise 2.6% in 2012, down a bit from the expectations for a 3% rise in the Q2 survey. The expectations for LTL are for an average 2.1% rise next year, again down a bit from the predictions for a 2.5% rise in the previous quarter's survey.
U.S. Industrial Outlook: Growth to Outperform Overall GDP Growth
Reprinted from Modern Distribution Management
U.S. manufacturing industrial production rebounded in the third quarter of 2011, growing by 4 percent, and is extending into the final months of the year, according to the Manufacturers Alliance for Productivity and Innovation (MAPI) U.S. Industrial Outlook, a quarterly report that analyzes 27 major industries.
"The growth is being led by the energy, transportation, and industrial equipment industries," said Daniel J. Meckstroth, Ph.D., MAPI chief economist and author of the analysis. "We believe the continuing pickup in domestic auto production will also be a major driver of overall economic growth next year."
"We project that the pace of manufacturing growth will outperform overall GDP growth. Pent-up demand for postponed consumer durable goods continues to exist, particularly in motor vehicles," he added. "In addition, firms are profitable and have the need to spend more for both traditional and high-tech business equipment, and reasonably strong growth in emerging economies is still driving U.S. exports."
The report offers economic forecasts for 24 of the 27 industries. MAPI anticipates that 18 of the 24 industries will show gains in 2012, led by housing starts with 20 percent growth, albeit from severely depressed levels in 2011. Three industries will remain flat, and three will decline, including public construction the most, by 6 percent. Broad-based advances should occur in 2013 with growth likely in 23 of 24 industries, again led by housing starts at 32 percent. Public works construction is the lone industry expected to decline in 2013, by 2 percent.
Orders, Production, Employment Up
Reprinted from Institute for Supply Management -- December 1, 2011
Economic activity in the manufacturing sector expanded in November for the 28th consecutive month, and the overall economy grew for the 30th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 52.7 percent, an increase of 1.9 percentage points from October's reading of 50.8 percent, indicating expansion in the manufacturing sector for the 28th consecutive month. The New Orders Index increased 4.3 percentage points from October to 56.7 percent, reflecting the second month of growth after three months of contraction. While the Prices Index, at 45 percent, increased 4 percentage points from the October reading of 41 percent, prices of raw materials continued to decrease (registering below 50 percent) for the second consecutive month. Respondents cite continuing concerns about the general economic environment, government regulations and European financial conditions, but are cautiously more optimistic about the next few months based on lower raw materials pricing and favorable levels of new orders."
Performance by Industry
Of the 18 manufacturing industries, eight are reporting growth in November, in the following order: Wood Products; Textile Mills; Petroleum & Coal Products; Primary Metals; Food, Beverage & Tobacco Products; Computer & Electronic Products; Apparel, Leather & Allied Products; and Paper Products. The nine industries reporting contraction in November — listed in order — are: Miscellaneous Manufacturing; Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Chemical Products; Fabricated Metal Products; Transportation Equipment; and Machinery.
Durable Goods Orders Fell 0.7 Percent in October
Reprinted from Industrial Distribution -- November 23, 2011
U.S. business orders for long-lasting manufactured goods fell for a second straight month in October. While much of the weakness came from a big drop in demand for commercial aircraft, a key category that tracks business investment spending fell by the largest amount since January.
The Commerce Department reported Wednesday that orders for durable goods fell 0.7 percent following a September decline of 1.5 percent. Orders for core capital goods, considered a good proxy for business investment spending, dropped 1.8 percent, the biggest decline since a 4.8 percent fall in January.
Manufacturing has been one of the strongest sectors in the economy in this sub-par recovery, but this sector slowed this year as consumer demand faltered and auto factories had trouble getting parts following the March natural disasters in Japan.
The October drop in core capital goods, non-defense products excluding aircraft, was expected to be a temporary setback. This category has been surging this year, spurred by tax breaks that are allowing companies to write-off their investments all in one year as long as the purchases are made before the end of 2011. That has provoked a rush by companies to take advantage of this tax break which Congress passed in an effort to spur the sluggish economy.
For October, orders for transportation products fell 4.8 percent, reflecting a 16.4 percent drop in demand for commercial planes. Orders for autos showed a solid 6.2 percent increase, reflecting solid sales gains in recent months.
Excluding transportation, durable goods orders posted a 0.7 percent increase. This gain reflected increases in such areas as primary metals such as steel and heavy machinery.
The Institute for Supply Management's manufacturing index grew more slowly in October than September but still remained at a level indicating manufacturing is continuing to expand. Manufacturing, one of the first sectors to start growing after the recession officially ended in June 2009, has posted growth for 27 consecutive months, according to the ISM index.
The overall economy grew at a 2 percent rate in the July-September quarter, the Commerce Department said Tuesday, revising down its initial estimate of 2.5 percent growth. That was still a better performance than the 0.9 percent growth during the first six months of this year, the slowest activity in two years.
The revision in growth reflected even a bigger drop in inventories that initially estimated.
Analysts said that should set the stage for better growth of around 3 percent in the current October-November quarter as companies work to restock depleted shelves. Businesses had been caught by surprise by the stronger demand in the summer and that led to a reduction in their stockpiles.
U.S. automakers reported stronger sales in October, which should give a boost to manufacturing in future months. Sales are now back to the same pace as before the March earthquake in Japan, which had disrupted supplies and left many U.S. dealers with a shortage of popular Japanese models.
The Federal Reserve reported last week that factory production increased by a solid 0.5 percent in October, the fourth straight monthly gain. Overall industrial production, which includes output at utilities and the mining sector, was up 0.7 percent and has risen by 13.4 percent from its recession trough in June 2009. It remains 5.3 percent below its pre-recession peak reached in September 2007.
Factory activity slowed in the spring, reflecting the Japanese supply disruptions and a big spike in energy and food prices, which cut into consumer demand for other items. But in recent months, there have been signs of improving consumer and business demand.
