The Institute for Supply Management (SMI) has announced a 61.4 percent Purchasing Managers Index (PMI) rating in its February 2011 Report on Business causing many to believe that U.S. manufacturing is gaining strength.
SMI reported that supply executives are claiming economic activity in the manufacturing sector has expanded in February for the 19th consecutive month, and the overall economy has grown for the 21st consecutive month. Norbert J. Ore, CPSM, C.P.M., was chair of the ISM Manufacturing Business Survey Committee that issued the report on March 1. February's report from the manufacturing sector indicates continuing strong performance as the PMI registered 61.4 percent, a level last achieved in May 2004, said Ore who explained that much of the new orders were driven by exports causing inventories to need replenishing on a continuous basis.
The PMI Index is a composite of five categories that reflect the responses of more than 400 purchasing managers throughout the country. The managers are chosen to achieve a diverse sample of U.S. regions and industries. The five sub-indexes are weighted and include: Production level (.25), New orders from customers (.30), Supplier deliveries (.15), Inventories (.10), and Employment level (.20).
Overall, the trend is one of optimism. Not only because of the 19 months of PMI growth, but also because many major manufacturers are increasing their budgets this year.
If capital spending is any indication of a healthy manufacturing sector, we should take comfort in the recent move by Caterpillar to raise its capital spending budget from $1.7 billion in 2010 to $3 billion for this year, said Amy Murphy, director of Corporate and Community Services for Joliet Junior College (JJC). Caterpillar is the largest manufacturer of earthmoving equipment in the world. What is encouraging is that more than half of their budget will be spent in the US for a variety of projects including two new factories in Texas and Arkansas.
In a Financial Times article written by Ed Crooks and Hal Weitzman and published online on February 7, Ed Rapp, Caterpillars chief financial officer, explains the reason for the budget increase. If you look at our 2011 outlook, its still with the U.S., Europe and Japan well off historical peaks, he said. So, in this cycle, we have tried to get ahead of some of that, to put the investment in place now. That, way when we get a more robust recovery in the developed world, well be ready.
That kind of optimism coming from a major manufacturer is an indication that things may be getting better. I do believe the US economy is more resilient now. Barring any unforeseen circumstances, were on the comeback trail, said David Cote, chief executive of Honeywell, a manufacturer of aircraft and vehicle components and industrial equipment.
One of the reasons for optimism may be the new emphasis on exporting. Last year, President Obama announced the National Export Initiative. His goal was to double US exports over the next five years. This year, the Obama administration is launching New Markets, New Jobs, which is an outreach effort to help small and medium sized businesses find new markets abroad.
A New York Times article posted on February 11, reported that American export of goods rose 21 percent in 2010 to $1.28 trillion. According to The New York Times, it was the sharpest rise in American exports since 1988, and it enabled the United States to pass Germany and again become the worlds second-largest exporter, behind China.
A picture is beginning to form for US manufacturers, said Murphy. The economy is beginning to heal and there is a global market for American made goods. For that reason, business owners and executives will need to keep there supply management skills up to date and start learning how to sell in other countries. Thats why we offer courses in supply management and exporting. For todays business executive, these are necessary skills to have.
To learn more about export, supply, distribution, and purchasing programs at Joliet Junior College including preparation for C.P.M. and APICS certifications, call Mike Sillar at (815) 280-1423, or e-mail msillar@jjc.edu.
Financial Times:
Additional PMI information:
U.S. Government information on exporting: