Latest Monthly Manufacturing Indices Diverge
According to the latest data released by Gardner Business Media, activity levels for North American moldmakers decline in August. The latest reading for their monthly MoldMaking Business Index is 46.1. For this index, a value above 50 indicates that business levels increased while a value below 50 indicates a decline. This was the second consecutive month that activity levels registered a drop, and it was the fourth time this year that the index was below the 50 level.
On a regional basis, the South Atlantic states reported the strongest activity levels within the index of exactly 50.0 for their region. The upper Midwest reported the weakest readings.
If we breakdown the MoldMaking Business Index into its sub-indices, it indicates that production levels and payrolls for the moldmaking industry were steady, but there was a sharp drop in new orders. Despite this decline in new business, the future expectations sub-index reached its highest level of the year. Prices received for new molds held steady, while materials prices continued to rise.
The decline in the MoldMaking Business Index is a sharp contrast to the increase that was indicated for the entire manufacturing sector in August. The ISM Manufacturing Index, which is also calculated so that a value above 50 indicates an expansion in activity, is a robust 55.7 for August. This was the third consecutive month that this index was above the 50 level, and it now stands at the highest level of the year.
Taking a closer look at the ISM index, there was a sharp increase in new orders, while the production levels were sustained at a very strong rate. Inventory levels declined modestly. The difference between new orders in inventories is at its widest level since May 2010. This bodes well for future production activity. A strong majority of manufacturers believe that their customers’ inventories are too low.
It is difficult to resolve the difference in these two indicators. Some analysts have already expressed the opinion that the ISM index was too high and should be considered as an outlier, and it may be that the MoldMaking Business Index was too low. If either of these scenarios is true, or if it is some combination of both, future readings will most likely correct the trend.
If anybody out there has a strong opinion about the recent trend(s) in one of these indices, or both, then I would like to hear about it. Rest assured that I will continue to monitor the trends in both of these indicators, and I will continue to report my findings on this website.