October 23, 20122 REPORT ON BUSINESSS TRENDS September 20122 Industry Performance Reverts to Pace off GDP in Broad Economy Index of Sales September 2011 - September 2012 140 130 125 127 125 120 114 117 120 117 119 113 113 118 110 99 90 80 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 PMPA s Businesss Trends Index of Shipments fell to in September, a non-seasonal move that shows our industry shipments gain for the year slipping to just 102% year to date. September shipments are just 88% of same month last year. That 2% growth in shipments year to date is consistent with likely GDP growth for the broad economy- up 2% % in 1Q 2012, and 1.3% 2Q 2012. http://www.bea.gov/newsreleases/national/ /gdp/gdpnewsrelease.htm. While we still have confidence in our industry s ability to record a very positive increase in shipments by year end, we are aware of the regular and special causes that seem to be suppressing orders andd shipments at this time. The regular causes that we see operant are the stagnation of demandd in the broad economy. We believe that this is exacerbated by the special causes of the present uncertainty of the 1) ) November election and 2) Spending cuts mandated by the looming Fiscal Cliff. The slump in sales was widespread in September; of 92 companies reporting this month, only nineteen (19) weree in positive territory, and just ten (10) of those in the double digits. Seventy three (73) firms reported declines, and sixty-three (63) of those reported double digit sales declines compared to prior month. Versus other indicators: The Fed s reports that Industrial Production rose just 0.4 percent in September after having fallen 1.4 percent in August. Third Quarter 2012 Industrial production declined 0.4 percentt according to the Fed. Manufacturing outpu moved down 0.9 percent in the third quarter. The Fed reports total industry capacity utilization increased 0.3 percent to 78.3 percent, 2 full percentage points below its long-runn (1972-2011)) average http: ://www.federalreserve.gov/releases/g17/current/. The three month moving average (3 MMA) for sales has fallen below the 12 MMA for the second month in a row. This indicates that our industry s shipments are no longer growing. (over)
Sales Outlook: The sales outlook of our respondents has dropped below eighty percent (80%) for the second month in a row. Only 62 percent (62%) of respondents indicated that sales would remain the same or increasee over the next three months. Within that group, those expecting levels to increase dropped further to just 19%. The outlook for sales is no longer positive, as those expecting sales declines outnumber those expecting increases by a 2:1 margin (38 negative vs. 199 positive). Lead Times, Employment, and Profitability: Seventy nine percent (79%) of respondents expected lead times to remain the same or increase compared to 85% last month. Lead times decreasing is a sign off capacity opening up. Expectations for increased employment in our industry fell, dropping from 91% of responding companies expecting an increase in hiring in August to 79% reporting the same in September 2012. Most respondents are expecting profitability to remain the same or decrease, with 29 reporting decrease vs. 18 reporting increase; 53 expect profits to remain unchanged. The Average Length of First Shift (Hours) fell another 0.4 hour in September to 42.0 hours; it had been 42.4 for August. Twenty-three percent ( 23%) of shops reporting scheduled 45 hours or more.. This is the second consecutive month that number registered less than 30%. Only 39% of responding shops scheduled firstt shift overtime in September 2012. Opinions for the next three months compared to today: (See Graphs) Net Sales: Those expecting sales to remain level or DECREASE aree a majority at 81% of respondents. Lead Times: Eighty-nine percent (89%) expect lead times to remain the same or DECREASE. Employment: Eighty-four percent (84%) of this month s respondents are expecting employment to remain the same or improve. Profitability: Eighty-two percent (82%) of respondents expect profitability to remain the same or DECREASE over the next three months. Current Environment: September s numbers are discouraging to our forecast of industry sales for our precision machiningg industry increasing 7-8% by year end. Savvy managers will be investingg incrementally in training and workforce flexibility rather than capital equipment given these numbers and the regular andd special causes we discussed in this report. NOTE: Ninety-two (92) participants this month. (19 up (10 of those up double digits), 73 down, (63 down double digits)). Miles Free Director, Industry Research and Technology PMPA MKF: cmp
PRECISION MACHINED PRODUCTS ASSOCIATION BUSINESS TRENDS Results from: September, 2012 1. INDEX OF SALES OF PRECISION MACHINED PRODUCTS 2000 = INDUSTRIES AVERAGES JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVG Base 2000 103 103 118 101 106 105 88 106 96 97 79 2008 116 110 114 118 110 112 106 103 106 108 85 71 105 2009 83 76 78 68 64 70 69 74 82 85 78 72 75 2010 86 87 105 98 97 107 99 109 107 105 103 91 99 2011 110 108 127 113 116 122 106 126 114 117 113 99 114 2012 125 120 127 117 125 119 113 118 % YR AGO 113 111 104 108 97 106 94 88 Y-T-D 113 112 108 107 107 105 105 104 102 2. AVERAGE LENGTH OF FIRST SHIFT PER WEEK YEAR-TO-DATE AVERAGES Average length first shift (hours) 43.7 43.2 42.4 42.0 Aug Sep % Companies Reporting: Less Than 40 Hours 2% 1% 3% 1% 40 Hours 41% 43% 49% 60% 41-44 Hours 19% 23% 18% 17% 45 Hours 13% 11% 15% 11% 46-49 Hours 10% 10% 5% 6% 50 and Over 15% 13% 9% 6% Note: Periodically, we update prior period data which was not previously available at the time of input. When these changes are made, you will probably see some discrepancy between prior month figures shown on the current report and the prior month report as originally issued. THIS REPORT DOES REFLECT CHANGES -2-
PRECISION MACHINED PRODUCTS ASSOCIATION BUSINESS TRENDS Results from: September, 2012 The figures reported below reflect the view of respondents based on conditions as of the end of: September, 2012 3. A. NET SALES OF MACHINED PRODUCTS - Compared with today, the trend of Net Sales volume for the next 3 months is expected to be: Up 39 48 47 35 31 38 27 25 23 17 33 47 46 45 34 29 27 23 28 20 19 Same 52 43 47 50 58 47 58 54 51 56 53 40 46 43 53 57 53 59 54 56 43 Down 9 9 5 15 12 15 15 21 26 27 14 13 9 12 13 14 20 18 18 24 38 B. LEAD TIMES - Compared with today, the trend of Lead Times for the next 3 months is expected to be: Up 26 26 27 24 21 22 17 9 11 6 10 15 17 17 20 24 17 9 9 9 11 Same 68 69 67 68 72 73 75 81 79 80 81 78 74 78 76 71 69 78 82 74 68 Down 6 5 5 7 7 5 8 9 11 14 10 6 9 4 4 5 14 13 10 17 21 C. EMPLOYMENT - Compared with today, the trend of Employment for the next 3 months is expected to be: Up 28 39 36 29 28 22 21 14 12 7 12 17 23 26 24 28 22 17 18 9 12 Same 70 60 61 67 69 75 77 80 78 82 84 82 73 69 75 65 72 75 68 82 72 Down 2 1 3 4 2 3 2 6 11 11 4 1 3 5 1 8 6 8 14 9 16 D. PROFITABILITY - Compared with today, the trend of Profitability for the next 3 months is expected to be: Up 23 30 33 24 19 24 24 20 18 13 21 26 28 30 21 20 23 20 19 14 18 Same 73 64 60 65 78 67 63 74 69 72 69 62 63 56 68 67 66 65 66 69 53 Down 4 6 6 11 3 8 13 6 13 15 10 12 10 14 11 13 12 15 15 17 29 EXPLANATION OF GRAPHS: The line in each chart represents a graph for that chart's data to allow for easy comparison and tracking of trends. The full range from top to bottom on that line represents 0% (bottom) to % (top) of the respondents. In other words, the higher the line, the greater the ratio of respondents who answered the top option as opposed to the bottom option. -3-
BUSINESS TRENDS Index of Sales and Average Weekly Hours Charts 140 Index of Sales September 2011 - September 2012 130 125 127 125 120 114 117 113 120 117 119 113 118 110 99 90 80 Average Weekly Hours September 2011 - September 2012 45.0 44.0 43.0 42.0 43.6 43.5 43.1 42.4 43.1 43.7 43.9 43.8 43.4 43.3 42.8 42.4 42.0 41.0 40.0 39.0 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12
130 SALES Precision Machined Products Industry Calculated at 3 & 12 Month Moving Averages 120 110 INDEX (2000 = ) 90 80 Machined Products - 3 Month Moving Average Machined Products - 12 Month Moving Average 70 60 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 2009 2010 2011 2012