Business media is alive with today’s headlines concerning the August report of U.S. manufacturing activity. The ISM PMI Index for August was reported as 59, almost two points higher than the July reading and the highest level in three years. Even more optimistic, the all-important New Orders index increased to 66.7, the highest level since April 2004. The production index also rose to its strongest level since May 2010. Of the total 18 industries surveyed in the ISM PMI Index, 17 showed positive gains, which is extraordinary.
If you have been receiving our Supply Chain Matters Quarterly Newsletter, (automatically distributed to registered readers) we regularly report trending of major global PMI indices across the globe. In our trending, the U.S. PMI has consistently led most other regions for the past 4 quarters. Thus, U.S. manufacturing momentum is indeed a significant headline.
However, before our U.S. based readers get too carried away with euphoria, there are still important changes and supply chain re-building initiatives required. In a recent Supply Chain Matters commentary, we noted how Mexico will likely become a significant manufacturing and export hub for the global automobile industry, to include its own supplier component network. The recent efforts by Wal-Mart and others to added significant monetary commitments for sourcing more products in the United States have uncovered needs for re-building globally competitive component supplier networks in areas such as shoes, apparel, consumer electronics and other direct-labor intensive industries seeking to nearshore products within the U.S.. Logistics and transportation infrastructure is currently struggling to support such momentum, particularly rail, barge and trucking.
Yes, the current continued surge of U.S. manufacturing is noteworthy, but much work remains to insure continued sustained momentum in the coming months and years. Addressing the rebuilding of supply chain network ecosystems in key industries and rebuilding long overdue logistics and surface transportation networks remain important priorities.