In conjunction with Prediction One of our Supply Chain Matters 2013 Predictions for Global Supply Chains, we will provide periodic commentaries throughout the year related to any noteworthy shifts in global supply chain activity, as reflected in recognized indices.

Various global purchasing and production indicators reflecting on January 2013 indicate positive signs of optimism, particularly in China and the United States.  Probably the most positive indices and signs of optimism came from the Eurozone sector.

U.S. purchasing and factory activity reflected in the Institute of Supply Management (ISM) January 2013 index indicates strong activity. The ISM PMI in January rose to 53.1, up 2.9 percentage points from the December 2012 index, and also the second consecutive month of increased activity. New orders, production and employment each had positive gains.  A 3.6 percentage point gain in new orders is an especially noteworthy sign of increased momentum along with a 2.1 point gain in manufacturing employment.  Inventories increased significantly, over 8 basis points, after two consecutive months of contraction, which should also be an optimistic sign.  The purchasing price index increased slightly but according to ISM, 67 percent of supply executives reported paying similar stable prices.

China manufacturing activity reflected in the HSBC China Manufacturing PMI recorded a two year high in January. The reported 52.3 number reflected a .8 point increase from December, and reflected the third consecutive month of manufacturing sector growth. The January new orders index signaled the fastest growth rate in two years and also adds signs for continued momentum. HSBC survey respondents suggested strengthened demand from customers in Europe and the U.S. However, input costs were reported as rising for the fourth month in a row while supplier delivery times are also on the rise.

The Markit Eurozone Composite PMI recorded a 48.6 value in January, a 1.2 point increase from December.  While the Eurozone sector still has a long way to go in terms of normalized output activity, the chief economist of Markit notes” The Eurozone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilisation in the first quarter.” Also noted was that Germany saw new orders rise for the first time in 11 months, while France, Italy and Spain each had easing over their previous rates of decline.

Taiwan also improved as reflected in the HSBC Taiwan Manufacturing PMI reading of 51.5 in January, up nearly a point from December, and reflecting a ten month high. This PMI reading was reported as the fastest rate of expansion since March 2012.  New orders also trended higher and once again, there was mention of increased demand from customers in China, Europe and the United States.  However, input costs were reported as rising rose sharply in January.

The HSBC South Korea PMI was reported as 49.9, down slightly from December’s 50.1 reading. The survey recorded a marginal fall in new orders as domestic market demand contracted slightly, with modest growth in new export orders.

All taken, the PMI indices are reflecting signs of optimism for the first quarter which should please global procurement and supply chain management teams. Perhaps our prediction of rather difficult top-line revenue and profitability challenges in 2013 may not totally come to pass and for that, readers should be pleased.  Let’s all observe what transpires in the months to come.

Bob Ferrari