10/4/2019 | 4 MINUTE READ

Statistics & Party Favors

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At the start of last month, the Institute for Supply Chain Management released its Purchasing Managers’ Index (PMI) for August, which was at 49.1 percent.

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At the start of last month, the Institute for Supply Chain Management (ISM; instituteforsupplychainmanagement.org) released its Purchasing Managers’ Index (PMI) for August, which was at 49.1 percent. While that was down 2.1 percent from the July figure (51.2), what is startling is this observation from Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management Manufacturing Business Survey Committee: “The PMI contracted for the first time since August 2016 [when it registered 49.6 percent] and ended a 35-month expansion period in which the composite index averaged 56.5 percent.”

One might be inclined to wonder where have all the good times gone, but one shouldn’t get too maudlin about the putting away of the party hats, streamers and balloons because the ISM notes that when the PMI is consistently above 42.9 percent it is a sign of the expansion of the overall economy, so even though that 35-month streak came to an end, there is a 124-month streak of growth in the U.S. economy at large.

That said, at least some of the party accoutrements need to be shelved because according to the ISM “The seven industries reporting contraction in August — in the following order — are: Apparel, Leather & Allied Products; Fabricated Metal Products; Transportation Equipment; Primary Metals; Plastics & Rubber Products; Paper Products; and Electrical Equipment, Appliances & Components”; “The 11 industries reporting a decline in new orders in August — in the following order — are: Apparel, Leather & Allied Products; Paper Products; Wood Products; Transportation Equipment; Textile Mills; Fabricated Metal Products; Petroleum & Coal Products; Plastics & Rubber Products; Primary Metals; Miscellaneous Manufacturing; and Computer & Electronic Products”; “The nine industries reporting a decrease in production in August — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Petroleum & Coal Products; Transportation Equipment; Primary Metals; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; and Machinery”; “The nine industries reporting a decrease in employment in August, in the following order, are: Wood Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Primary Metals; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; and Machinery” (italics added to emphasize the point).

Yes, things are beginning to trend in the wrong direction for auto.

But here’s the thing: When you see data like that you must recognize this is aggregate information. Meaning there are entire groups of companies reporting. But you don’t work for entire groups of companies. You work for one company. And it very well may be the case that if you and your colleagues are doing the right things, if you are providing the market with the right products or services, then you are going to be bucking the trend of the others.

Case in point: Subaru of America. When it reported its August sales, it noted that it was the “best-ever sales month in company history.” Best. Ever. Sales. What’ s more, it was the 93rd consecutive month of yearly, month-over-month sales growth for the company.  Subaru has chalked up 66 consecutive months of more than 10,000 Outbacks sold and 73 consecutive months of more than 10,000 Foresters sold. And according to its Jeff Walters, senior vice president of Sales, “We’ll also be starting September with historically low inventory levels.” Which clearly means that they don’t have a whole lot of products sitting on vehicle lots waiting for rebates or other incentives to be applied.

Things are going to be getting tougher in the industry. Make no mistake about that. There are several factors at play. For one thing, there are the investments being made by OEMs and suppliers for developing autonomous technologies and varying levels of electrification all the way to full-on electric vehicles. Consider investments in electric vehicles. According to AlixPartners (alixpartners.com), the global OEMs and suppliers have announced $225-billion in electric vehicle investments between 2019 and 2023. You may have noticed that there isn’t an overwhelming number of consumers buying electric vehicles, which means that it is going to take a considerable amount of time for all those companies to recoup some of that investment. And AlixPartners also calculates that the spending on autonomous vehicles will grow to a cumulative $85 billion through 2025. Again: it will take a while to get a return on that investment. Somehow it is hard to imagine that electric robotaxis are going to be all that big a market. Let’s face it: were the ride-hailing market all it seems to be the Crown Vic would still be in production.

Still, there are the companies that are going to buck the trends, that are going to be successful in the market. They are going to be the ones that, whether it is at the component, system or vehicle level, provide products to the market that are going to be well accepted. Exceedingly so. Just look back at those Subaru numbers.

For those who will be able to bust out with the party hats, streamers and balloons, know that also in the ISM Report on Business that there are two commodities in short supply. One is electrical components. The other is helium. So maybe you’ll have to blow up your own balloons.