The headlines on global manufacturing in early 2016 tell a tough story…
- Global Manufacturing PMI Signals Stagnation (Seeking Alpha, March 4th)
- The manufacturing slowdown has spread to the services sector (Business Insider March 2016)
- Britain’s factories engulfed in global manufacturing slump (The Telegraph, March 1st)
- Manufacturing: A hard pounding (The Economist, February 18th)
- China Manufacturing Slows More Than Expected (WSJ, Feb 29th)
… and the news in the US has been mixed. The manufacturing sector contracted in February for the fifth consecutive month, even while the overall US economy grew for the 81st consecutive month (ISM Report On Business). The PMI came in at 49.5% in February, an increase of 1.3% from the January reading of 48.2%, indicating contraction in manufacturing for the fifth consecutive month.
Where are some of the bright spots? Automotive for one. The industry expects to sell or lease 17.7 million light-duty vehicles in 2016, up from 17.4 million in 2015. (NADA Forecast January 2016). In addition, new orders for goods were up broadly in February. Bradley Holcomb, chairman of the ISM’s factory survey, said in a conference call that manufacturing might have found “a bottom and a turning point”. Hiring was up in February, while wages were down 0.1% from the prior month.
All in all, a bag of mixed messages, but with the momentum looking positive as we move towards Q2. Perhaps this is one of those years where “flat is the new up” for US manufacturing.
Alan Fullerton is a partner with Mirus Capital Advisors. He works with owners of middle market businesses and can be reached at email@example.com.