April Showers or Flowers?

Is the April PMI showers or flowers?

The monthly tea leaves reading by the Institute for Supply Management leaves us puzzled at just what is going to happen next for manufacturing orders.

On the one hand, the data show manufacturing remains flat and inventories rising. On the other hand, backlogs and new export orders are up, customers inventories are down, and Computer and Electronic Products demand is growing.

So which way next?

Anecdotal evidence from large equipment suppliers and market research firms suggest business is “coming back,” particularly to Mexico. The vast majority of this business, sources indicate, are new programs. OEMs, it seems, are awaking to the smell of sky-high fuel costs and other logistical nightmares inherent in sourcing heavily from Asia and deciding “all China, all the time” is no solution to near-term profits. And certainly, small- to mid-tiered EMS suppliers (those under $500 million) are doing fine and showing few signs of any downturn.

When the US was busy moving production by the freighter to Southeastern Asia, the dollar was very strong. One of the quirks with a global (read: Asian) supply chain is currency fluctuations can reverberate — and can be painful when they do. The dollar’s decline should be good news for US manufacturers that are trying to even the price gap with Asia, but instead their gains are given right back due to diminished purchasing ability, brought about because they source so much raw material overseas.

Assuming the Fed’s monetary policy remains a strong dollar, however — and we have no reason to believe that has changed, despite the depressed greenback — this current wave won’t last. Still, it could be a few years before the dollar regains its footing against the Asian currencies. Manufacturers should take advantage of this window to put pressure on their suppliers to rebuild domestic supply lines while money is cheap and demand still intact.

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About Mike

Mike Buetow is president of the Printed Circuit Engineering Association (pcea.net). He previously was editor-in-chief of Circuits Assembly magazine, the leading publication for electronics manufacturing, and PCD&F, the leading publication for printed circuit design and fabrication. He spent 21 years as vice president and editorial director of UP Media Group, for which he oversaw all editorial and production aspects. He has more than 30 years' experience in the electronics industry, including six years at IPC, an electronics trade association, at which he was a technical projects manager and communications director. He has also held editorial positions at SMT Magazine, community newspapers and in book publishing. He is a graduate of the University of Illinois. Follow Mike on Twitter: @mikebuetow