There isn’t a stronger indicator of the overall direction of the economy than the manufacturing sector. Given its position as one of the leading sources of output and exports, any movements in those industries can easily have an impact on the rest of the American economy. Manufacturers know their role too well and are constantly looking for ways to bolster productivity and efficiency at the same time. Utilizing enterprise resource planning systems like Microsoft Dynamics NAV 2015 can help these businesses go through volatile periods easily. With this in mind, companies should consider this software in the wake of news that troubled waters lie ahead, even though they aren’t as severe as they were before.
Manufacturing reports give off job loss warning
Last week, both ADP and the U.S. Bureau of Labor Statistics released their monthly jobs report, and neither painted a particularly pretty picture on the job situation. For the first time in more than a year, both reports had job gains dropping below 200,000 for the month of March. According to USA Today, ADP’s report indicated only 189,000 jobs were added. Meanwhile, the BLS report noted a gain of only 126,000 while leaving the unemployment rate unchanged at 5.5 percent. While neither report suggests that the economy is beginning to decline, it does hint that there is some degree of slowdown.
Just before these reports came in, however, two manufacturing reports gave a heads-up that something of this nature would likely happen for the month of March. The Institute of Supply Management, which monitors the supply chain throughout the U.S., announced in its “Report on Business” that the Purchasing Managers Index was at 51.5 percent for the month. This was a distinct 1.4 percent drop from February. While the sector did in fact grow in the month of March, it happened at a much slower pace than before. There were drops in growth for new orders and inventories for raw materials, while employment itself remained unchanged. The only bright spot for growth was production, where there was a slight increase.
However, business consulting firm Markit released its PMI for March 2015, and it showed a much better result. At 55.7, the index marked a 0.6 point increase from February and has shown continued growth for more than five consecutive years. Large and midsized manufacturers reaped most of the gains in terms of output and employment. More importantly, new businesses are growing significantly as well.
Causes for concern
The conflicting reports seem to indicate that while slowdown seems likely, manufacturing faces a soft landing. One of the main concerns in all the reports is the fact that the dollar as a currency has strengthened considerably due to the euro’s quantitative easing program, making it difficult to profit off exports. More importantly, while low oil prices have benefited consumers everywhere, it has put a damper on continued local exploration. That in turn has weakened output from manufacturers connected to that industry such as pipe makers. Still, the situation is not as severe as one would make it, and it represents an opportunity for companies to make more capital investments such as ERP software to make up for the difference.
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