For the nineteenth consecutive month economic activity expanded in the overall economy as manufacturing continued its rapid growth in February for the twenty-first consecutive month according to the Manufacturing ISM Report on Business for February 2011. Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee stated, “February’s report from the manufacturing sector indicates continuing strong performance as the PMI registered 61.4 percent, a level last achieved in May 2004. New orders and production, driven by strength in exports in particular, continue to drive the composite index (PMI). New orders are growing significantly faster than inventories, and the Customers’ Inventories Index indicates supply chain inventories will require continuing replenishment. The Employment Index is above 60 percent for only the third time in the last decade. While there are many positive indicators, there is also concern as industries related to housing continue to struggle and the Prices Index indicates significant inflation of raw material costs across many commodities.”
Although 14 manufacturing industries reported growth in February, including Apparel, Leather & Allied Products; Petroleum & Coal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; Textile Mills; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Paper Products; Wood Products; and Miscellaneous Manufacturing, the continued weak dollar is being blamed for the high cost of components and raw materials, particularly those obtained overseas. Representatives from Transportation Equipment stated “It is going to force us to increase our selling prices to our customers.” A similar statement was made by representatives from Chemical Products: “We continue to see significant inflation across nearly every type of chemical raw material we purchase.” Nonmetallic Mineral Products, which is one of the 4 industries to experience contraction last month, along with Plastics & Rubber Products; Primary Metals; and Furniture & Related Products, stated, “Prices continue to rise, while business limps along at last year’s pace.” Plastics and Rubber reported, “Overall demand is off 10 percent.”
While the weak dollar has adversely affected the purchase of components and raw materials overseas it has had a positive impact on exports, which experienced a growth percentage point change of +0.5% with a PMI of 62.5%. Right alongside that of the overall economy, exports have experienced continued month-over-month growth at a faster rate of change for the past twenty months. Both Production and New Orders are up as well. Production experienced an increase of 2.8 percentage points from the January reading of 63.5%, registering a Production Index of 66.3% and continued growth for the 21st consecutive month. Demonstrating a 20 month growth trend at a faster rate of change, New Orders were up 0.2 percentage points from January. Thirteen industries reported growth in New Orders, including Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Wood Products; Printing & Related Support Activities; Machinery; Transportation Equipment; Chemical Products; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Miscellaneous Manufacturing, while Primary Metals; Nonmetallic Mineral Products; Furniture & Related Products; and Plastics & Rubber Products reported decreases.
Despite a +0.5 percentage point rise in Prices, and increases for the past 20 months at a faster rate of change, manufacturing and the overall economy continue to expand. And that is good news. Companies are challenged to find cost saving ways to attract new business to offset any decreases in orders from existing customers that may occur as a result of rising Prices. To manage marketing budgets set aside for new business development, industrial marketers must consider the changing landscape of search, social media, and lead/sales generation that occurs online and offline. Content presented on blogs, websites, text ads, emails, industrial directories, map sites, search engines, relevant 3rd party sites, Twitter, Facebook and other social media websites, as well as all direct mail letters and brochures, must be current and highly focused on the specific interests of your target audience groups. Market research may need to be done to understand those interests and to uncover the specific language used by your target audiences to search for what you offer. Through careful research, planning, and implementation budgets can be intelligently and carefully managed to nurture leads, sales, and overall business growth, particularly as you strategize to offset the impact of increased prices.
For help with your marketing research, planning, creation and implementation speak with an Industrial Web Solutions marketing expert. Call (800) 399-9859.