Metal forming companies expect leveling in business conditions, incoming orders during fourth quarter

According to the October 2009 Precision Metalforming Association (PMA) Business Conditions Report, metal forming companies expect a leveling in business conditions and incoming orders during the final quarter of 2009. Conducted monthly, the report is an economic indicator for manufacturing, sampling 149 metal forming companies in the United States and Canada.

The October report shows that metal formers are less optimistic about general economic activity during the next three months. Just 30 percent of participants anticipate an improvement in overall economic activity (down from 47 percent in September), 54 percent expect that activity will remain unchanged (compared to 42 percent last month) and 16 percent report that activity will decline (compared to 11 percent in September).

The percentage of metal forming companies forecasting a decrease in incoming orders during the next three months rose from 14 percent in September to 22 percent in October. Increased orders were forecast by 38 percent (down from 51 percent in September), and 40 percent expect no change (up from 35 percent the previous month).

However, current average daily shipping levels remained steady in October. Fifty-four percent of participants report that shipping levels are above levels of three months ago (compared to 53 percent in September), 31 percent report no change (up from 30 percent in September) and 15 percent report that shipping levels are below levels of three months ago (down from 17 percent reported last month).

The number of metal forming companies with a portion of their work force on short time or layoff decreased to 60 percent in October, down from 68 percent in September. While this is the lowest level since December 2008 when 54 percent of companies had workers on short time or layoff, it may also reflect that some companies have permanently downsized their work force, eliminating plans to recall workers previously considered temporarily laid off.

"While metal forming companies have generally experienced a significant rebound in orders and shipments over the past few months, there is real concern about whether the rebound has staying power," says William E. Gaskin, PMA president. "Many believe that the current uptick is primarily inventory restocking and that without a more robust recovery of consumer spending and capital investment, their increased orders will disappear later this year and during the first quarter of 2010. However, 78 percent of PMA members expect new orders through year-end to be the same as, or higher than, for the past three months. The outlook is much more robust than it was one year ago, when the majority was seeing new orders drop precipitously," Gaskin says.