U.S. Federal Reserve data related to February factory output levels provides reinforcing evidence of a supply chain and production slowdown underway in the U.S., which has before provided a singular bright spot for activity levels. The open question is whether activity levels will bounce back later in the year.
In a February log commentary, Supply Chain Matters highlighted that global PMI indices pointed to a discernable slowdown in demand and supply network activity.
Overall, the J.P. Morgan Global Manufacturing PMI was reported as declining to a 32-month low point. Among Developed regions, the Markit Eurozone PMI slipped into contraction territory while the
The ISM Report on Business for February surprised many with a 2.4 percentage points from the January number. That number represented the lowest level in more than two years with declines in new orders, production and employment contributing to decreased momentum.
Last week, newly released U.S. Federal Reserve data provided reinforcing evidence of a supply chain and production slowdown. Output for U.S. factories reportedly decreased 0.4 percent in February, after falling 0.5 percent in January. The Federal Reserve’s index for manufacturing activity has now dropped to its lowest level since July. February’s drop appeared to include multiple industry sectors including apparel, autos, electronics and machinery. Various reports point to concerns over the current trade and tariff tensions with China and other countries, a slowdown in U.S. auto sales and a growing uneasiness over expected U.S. GDP growth rate this year. General Motors initiated its headcount cutbacks across three major U.S. manufacturing facilities earlier this month.
Not factored in the data up to February is any potential impacts in 2019 supply chain and factory activity relative the worldwide grounding of the Boeing 737 MAX aircraft. While Boeing has initially elected to continue with existing monthly production activity levels, a definitive cause of recent fatal accidents involving this aircraft, and how long Boeing will continue full-blown production remain unclear at this point.
Our counsel to global supply chain and sales and operations planning teams remains close attention to global activity trending and specific regional market indicators. The operative word remains diligence, detail, and a lot of scenario-based analysis.
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