Economic data points to uncertainty for manufacturers in current market

Total ETO


The world of manufacturing recently received some muddied reports.


A string of economic data, including the U.S. Federal Reserve’s Industrial Production and Capacity Utilization report, the Empire State Manufacturing Survey and the Federal Reserve Bank of Philadelphia’s 2016 Manufacturing Business Outlook Survey offered up conflicting data. Collectively, these influential reports revealed a lot about the current state of the manufacturing industry.


By keeping a finger on the pulse of the biggest trends shaping the manufacturing landscape, engineer-to-order companies that automate other manufacturing companies can more rapidly respond to shifting markets, pivot to leverage these industrial adjustments and, ultimately, outperform competitors.


Industrial production

The U.S. Federal Reserve’s recent Industrial Production and Capacity Utilization report revealed these measures suffered a decline of 0.6 percent the second straight month in a row. The drop is much steeper than the 0.1 percent dip many economists had initially forecasted.


While much of this drop resulted in the precipitous decline in mining production, the manufacturing sector’s output dropped 0.3 percent.


According to Bloomberg Business, several factors played a role  in weighing down production and utilization, including tepid overseas markets and a surging dollar. In addition, sluggish American household demands continue to pull down this sector, as declining consumer goods production dropped for the second straight month.


“The manufacturing sector is struggling with an uncertain global growth outlook, past declines in commodities prices and past appreciation of the dollar,” said Brittany Baumann, a New York-based economist at Credit Agricole CIB, according to Bloomberg. “Those effects were still lingering in March.”


“As manufacturing markets are uncertain, it’s important for Engineer To Order automation manufacturers to cut waste and boost efficiencies.”

As manufacturing markets are uncertain, it’s important for Engineer To Order automation manufacturers to cut waste and boost efficiencies. This requires having the ability to track purchasing, inventory and bills of materials in real time to ensure that all resources are being effectively allocated and not being wasted on unnecessary or superfluous materials. Using an enterprise resource planning software like Total ETO lets Engineer To Order companies accurately track and measure all of these components in real time, which optimizes output and capacity.


Empire State manufacturing

While the Fed’s report indicated the current rough patch affecting manufacturing continues to linger, other economic indicators are painting a much brighter picture for this sector.


The April 2016 Empire State Manufacturing Survey revealed conditions for manufacturers in New York expanded, with general business conditions surging to 9.6 percent. This represents a nine-point increase and marks the highest level this reading has reached in more than a year. Although inventories were slightly lower than last month, both new orders and shipments indices improved, with readings of 11.1 and 10.2, respectively. With prices paid skyrocketing 16 points to 19.2, the report indicates last month experienced a substantially higher price increase than previously expected. Further, both employment levels and the average workweek were largely steady, as both of these indexes were at 2.


Looking ahead, the six-month outlook expects respondents expect conditions to turn better. The future business conditions index ticked up four points to 29.4, while the new orders index stayed at 36.6 and the future shipments index increased to 37.2.


Even with sluggish industrial production and lowered capacity utilization, manufacturers still remain optimistic about business conditions. With a positive future outlook for this sector, Engineer To Order manufacturers should be in a position to reinvest in their companies to be ready for when conditions swing back upward. Implementing an ERP system like Total ETO gives engineer-to-order manufacturers that critical edge to remain successful in an increasingly complex industry.

Philly manufacturing outlook

With the Fed reporting depressed industrial production and capacity utilization, but the Empire Manufacturing Survey revealing stronger-than-expected business conditions, the latest data from the Federal Reserve Bank of Philadelphia takes another tack and shows business conditions in its survey dropped into the negative for April.


According to the bank, after improving into positive terrain in March, April saw this number decline from 12.4 to negative 1.6. In contrast to the Empire State Manufacturing Survey, new orders and shipments indexes both fell. Meanwhile the employment index dropped nearly 17 points for the fourth straight negative month.


However, on a more positive note, despite the trend of weakening current indicators, the survey’s future outlook diverged from the current conditions. The diffusion index for future general activity grew to 42.2 in April after a reading of 28.8 in March. This represents the highest reading of this index in 15 months and indicates the reported decline in growth is expected to dissipate.


Succeeding in uncertain times

With conflicting reports sending mixed messages about the current state of the the manufacturing industry, engineer to order job shops that build industrial equipment need to have the right tools for responding to these shifts as quickly and effectively as possible. With Total ETO, Engineer To Order manufacturers can easily streamline information between engineers and purchasers, ensuring these companies optimize their inventory space, create bill of materials quickly and share data effortlessly.


By implementing this inexpensive and intuitive ERP system, custom design job shops can stay ahead of the competition and position their business for success in the years to come. Request a demo of Total ETO today!