Boring manufacturing data acts up a bit

We don’t hear much about a lot of economic indicators these days, other than perhaps the occasional report about the Fed, and how it really will push interest rates up—just a little at a time, eventually—in a balancing act that aims to prevent the economy from overheating, before excessive inflation rears its ugly head. And yet inflation seems at bay. A strong economy stateside is being tempered by less than stellar news from just about everywhere else. So economic growth plods along. Yawn. Of course, I think most businesses welcome this kind of boredom.

Last month, though, came a little ripple from the National Association of Credit Management (NACM). Chris Kuehl, economic analyst for the Fabricators & Manufacturer’s Association, is also the economist for NACM, where he assembles that organization’s Credit Manager’s Index.

As Kuehl put it in his Fabrinomics e-newsletter from FMA last week, “In the past the CMI has been a little prescient given that it tracks the activity of those that are doing the bulk of work with trade credit, and once again it appears that the credit managers were starting to see something that others would see a little later.”

Last month the CMI dipped significantly, and this month the government’s industrial production as well as capacity utilization numbers are down. Why, exactly? Kuehl points to three factors. First, like last year, a snowy winter may have hindered economic activity enough to push the metrics down. Second, the strong dollar (or rather, other currencies becoming weaker) is having an effect. The third factor goes back to the CMI. “It seems that trade credit is tightening up, and in fact most forms of credit are suddenly getting a little tighter.”

So are we set for another dip? As Kuehl put it, “The data this month is distressing although not yet cause for panic.”

When you look at data during the Great Recession, recent fluctuations in manufacturing data look downright boring. Anecdotally, I can tell you that fabricators haven’t experienced anything dramatic, beyond the ups and downs of what has become the “new normal” of a fiercely competitive market.

One thing I do know: Fabricators that survived the Great Recession are battle-hardened, ready to face whatever economic changes come over the horizon. Personally, I hope the news stays boring.