Evaero

Aerospace machining, CNC machining, titanium castings

  • Capabilities
  • About Us
  • Visiting Evaero
  • Work For Evaero
  • Contact Us

Purchasing Managers Index: Macroeconomic data to track economic conditions

June 7, 2018 Christian Frueh Topics: Economics

purchasing managers index

Be fearful when others are greedy and greedy when others are fearful. ~ Warren Buffett

Ever mindful of the dangers of extrapolating personal experiences to larger trends in the economy, I take care to corroborate my own observations with macroeconomic data. So you can consider doing the same, I’m going to introduce you to a few of my favorites sources over the next few blogs.

Today, we’ll start with the Purchasing Managers Index (PMI).

The PMI, produced by the Institute of Supply Management (ISM), is derived from surveys of purchasing managers who are asked about new orders, inventory levels, supplier deliveries, the employment environment, and production. When the PMI is greater than 50, it is interpreted to mean the manufacturing sector is expanding (when compared to the previous month) and when it is less than 50, it is contracting.

Although one can simply view historical data over at Ycharts, I find it more valuable to head over to the monthly ISM report to read the summary paragraph and comments left by respondents.

Here, for example, we learn that in March of 2018 the ISM index was 59.3 and:

  • New orders, production, and employment growing
  • Supplier deliveries slowing at slower rate
  • Backlog same raw materials inventories growing
  • Customers’ inventories too low
  • Prices increasing at faster rate
  • Exports and imports growing

From the comments left by survey respondents we learn that in the machinery sector there is:

Much concern in the industry regarding the steel and aluminum tariffs recently [imposed]. This is causing panic buying, driving the near-term prices higher and [leading to] inventory shortages for non-contract customers.

Someone in the food, beverage, and tobacco products sector advises us that:

In the U.S., we continue to struggle with finding carriers and drivers for shipments.

And according to a respondent from the transportation sector:

Production targets continue to be a struggle due to shortages of globally sourced components. Many subtier components are in short supply for multiple OEMs.

It is important to note that, although the PMI cannot tell us if/when the market/economy is going to “correct,” because all of the struggles experienced by the manufacturing sector ultimately show up in the prices of the goods we buy it does it serve as an excellent leading indicator of where things may be heading in the absence of such a correction. As such, whether you manage a household or business, the PMI can offer up useful information when making decisions.

So, the next time you’re on the fence about whether to invest in a car/equipment this year or next year, sign a long-term contract with a customer, or build a cabin in the woods from scratch or buy one that’s gently used, consider taking a look at the PMI report to inform your decision-making process.

On that note, an excellent time to check out for the week and leave you with a song for our Manufacturing Peace of Mind™ playlist. Having run out the door this morning with a piece of toast in one hand and espresso in the other, today I’m going to leave you with a song off of Courtney Barnett and Kurt Vile’s collaboration Lotta Sea Lice titled “Continental Breakfast.” Hope you like it as much as I do.

Cheers…xian

Video not displaying properly? Click here.

Print Friendly, PDF & EmailPrintFriendly
Share this article:
Share on facebook
Facebook
Share on google
Google
Share on twitter
Twitter
Share on linkedin
Linkedin
Share on email
Email
Share on buffer
Buffer

About Christian Frueh

With a Ph.D in Materials Science and Engineering and a minor in Anthropology, Christian is a thoughtful leader who looks at things from a scientific perspective: Solve problems, don’t make assumptions.

Read more about Christian

Latest from the blog

The Role of Weight in Casting to Hog-out Conversions

September 17, 2015

ISO quality management system

Failing More Often: Gaining from Randomness and Volatility

February 5, 2015

Improving Precision CNC Aerospace Machining

January 22, 2015

About Evaero

Evaero is a modern manufacturing firm delivering custom machined components to the aerospace and defense industry.

Learn more

Print Friendly, PDF & EmailPrintFriendly

Connect With Evaero

  • Email
  • RSS

Phone:
775-5EV-AERO
(775.538.2376)

Address: 

3807 E. Kleindale Rd.
Tucson, AZ 85716

Print Friendly, PDF & EmailPrintFriendly
© 2023 Manufacturing Peace of Mind, LLC. All rights reserved.
 Twitter
 Facebook