April manufacturing activity appears to be slowing up as the
Institute of Supply Management (ISM) reported a slight decline in US activity.
In fact, US manufacturing has been slowing for the past 7 months and is now
teetering on possible contraction if growth slows further.
New orders increased 0.9 points which represents the fourth
consecutive month of growth. However, new export orders declined for the first
time this year. Disappointing but not a big surprise particularly as export
orders increased a whopping 12 points from February to March. The apparel, printing
and furniture industries noted increases in new export orders while primary metals,
computer & electronic products; and miscellaneous manufacturing reported
declines in such orders.
Inventories contracted for a second straight month while
employment grew at a slower rate despite production increasing 1.3 points.
So what does all of this mean for logistics providers? More
than likely for many providers, it remains business as usual. Although export
order orders declined, it still remains fairly strong due to positive gains
during first quarter. In fact the apparel industry appears to be an industry
logistics providers may want to focus on because it has reported increases in
export orders for each month this year so far. This should also bode well for
ocean freight demand as most apparel tends to move by this mode of transport.
And finally, inventory levels are contracting. An inventory
build-up was apparent as many shippers built up stock ahead of a US east coast
port strike that did not materialize. As such, it appears many manufacturers maybe
working from this stockpile. Also, it was noted in the recent ISM report that
customers’ inventories are too low. Declining inventory will need replenishment
probably in the next couple of months in preparation for third quarter. As
such, transportation providers should benefit from this demand. In particular,
this could boost rail intermodal demand much like it did after the 2011
Christmas holiday season.
The slowing of US manufacturing appears to be a reflection
of a slow, but growing US economy. Most economists forecast a small increase in
economic growth for 2013, and as a result, transportation associations expect
cargo transportation demand to follow along with economists’ predictions for
the US economy – slow growth.
North America PMI Activity
