The Purchasing Managers’ Index posted an April figure of 54.8, the eighth month in a row that the index exceeded the expansion level basis of 50. While April’s number fell slightly from March, key components of the index such as the production index continued to expand. The new orders, employment and inventories of raw materials components of the composite index also expanded in April, yielding a positive outlook on the likelihood of continued expansion of the manufacturing sector.
Orders for durable goods moved up by a $1 billion in March over February, led primarily by a strong pickup in the transportation industry, particularly aerospace orders. Housing starts fell slightly but remain above one million units, which outpaced March 2016 by 9 percent. Permits approved for new starts suggest that the April number will rebound markedly in next month’s report. The only negative in the customer industry segment is the lower production and sales of light vehicles. Trucks and SUVs posted increased sales in March and nearly offset the decline in small cars, small trucks and minivans. Still, light vehicle sales at an annual pace of 16.5 million units is a rate that generates production machinery demand.
The environment for capital expenditures, trade, and other intangible indicators have softened or not improved significantly in the past quarter. Indicators like capital goods expenditures are sensitive to interest rates as they impact consumers’ ability to buy durable goods and the manufacturers of those goods to be able to acquire new production resources. This is the first time that rates have been an issue in a while, as for much of the past decade they vacillated around historical lows. The Michigan Consumer Sentiment index continues to grow to levels not recorded in decades.
On the negative side, the Baltic Dry Index decline reflects lower capacity utilization of the merchant fleet, which likely means lower international trade levels. Normally, this would create a neutral situation but the strength of the consumer sentiment index is such that as a group the net result of the ten indicators is a positive one.
I urge you to take a hard look at the benchmarking data that you receive from the market surveys you participate in. The data is instrumental in helping you break down the expanding market by industry and region. If you don’t already participate in the U.S. Manufacturing Technology Orders survey, the Advanced Workholding Technology survey, or the Cutting Tool Product Group survey, contact Jackie McFarland at 703-827-5206 about how to access these programs. The value of these programs is at its highest when markets begin to move up or down.