Metal formers expect downturn during next three months

Metal forming companies expect a downturn in business conditions during the next three months, according to the Oct. 1, 2006 Precision Metalforming Association (PMA) Business Conditions Report. Conducted monthly, the report is an economic indicator for manufacturing, sampling 151 metal forming companies in the U.S. and Canada.

When asked what they expect the trend in general economic activity to be over the next three months, only 17 percent of participants reported that economic activity will improve (down from 24 percent in September), 36 percent believe conditions will decrease (up from 27 percent last month) and 47 percent predict economic activity will remain the same (down from 49 percent in September). This data reflects the lowest level of optimism since November 2001.

Metal forming companies also expect incoming orders to decline during the next three months. Forty percent of respondents anticipate a decrease in orders (up from 29 percent in September), 24 percent expect an increase orders (down from 28 percent last month), and 36 percent forecast no change (compared to 43 percent in September).

Current average daily shipping levels dipped in October as well. Twenty-one percent of companies reported that shipping levels are above levels of three months ago (down from 29 percent the previous month), 46 percent reported no change (compared to 45 percent in September) and 33 percent reported that October shipping levels are below levels of three months ago (up from 26 percent last month).

The number of metal forming companies with a portion of their work force on short time or layoff jumped to 17 percent in October, compared to 13 percent in September. The October 2006 data represents the highest level since August of 2005 when metal forming companies also reported 17 percent of their work force on short time or layoff.

In response to the report, PMA President William E. Gaskin stated, "The October data confirm an expectation by the metal forming industry for a significant decline in the overall economic outlook for the fourth quarter of 2006 and for business conditions in our industry. Significantly, approximately one-half of PMA members supply the automotive industry, so cutbacks in production announced by GM, Ford, and Chrysler are reflected in their outlook. Slowdowns in housing starts and the related impact on shipments of durable goods are also a factor. The automotive situation, lower housing starts, plus a normal cyclical pattern of lower orders and shipments as year-end approaches due to the Thanksgiving, Christmas, and New Year's holidays, would appear to be the primary drivers for the data."