Metals & Manufacturing Outlook May 2019

ISM’S SEMI-ANNUAL ECONOMIC FORECAST PLUS

MANUFACTURING OUTLOOK PAGE 6

Brought to you by

NORTH AMERICAN OUTLOOK PAGE 10

CNC MACHINING GUIDE PART 3 PAGE 38

APRIL ISM PMI:

52.8%

Released April 1st -The Full Executive Summary Report On Business - Page 30

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Metals & Manufacturing Outlook / May 2019

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TABLE OF CONTENTS

Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE TIM GRADY NORBERT ORE ANDREA OLSON CHRIS KUEHL MARK SHEEHAN Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

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PUBLISHER’S STATEMENT

ENERGY OUTLOOK

A word from our publisher

06 MANUFACTURING OUTLOOK A global look at manufacturing

08 THE CREDIT MANAGER’S OUTLOOK

Energy and the environment

34 GLOBAL PMI OUTLOOK

by Norbert Ore

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by Dr. Chris Kuehl

EURO OUTLOOK

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A look at Europe

NORTH AMERICAN OUTLOOK Manufacturing in the US, Canada and Mexico

12 METALS OUTLOOK The cost, making and treating of metals

14 AEROSPACE OUTLOOK The aerospace industry

15 AUTOMOTIVE OUTLOOK Auto industry news

17 SEMI-ANNUAL ECONOMIC FORECAST

37 ASIA OUTLOOK China sees little change

38 CNC MACHINING The complete engineering guide part 3

45 SOUTH AMERICA OUTLOOK Brazil in the spotlight

46 MAY ISM REPORT The Manufacturing Executive Summary Report on Business presented by the Institute for Supply Management

from the Institute for Supply Management

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THE RIGHT QUESTIONS TO ASK CUSTOMERS

ISSUES OUTLOOK

by Andrea Olson

Issues around the globe

PUBLISHERS STATEMENT

PUBLISHER’S STATEMENT If you are reading or hearing that industry in America is struggling, whether it is a sector in Manufacturing or Non-Manufacturing, you are getting bad information. The reality is that both of these components of America’s GDP are humming along nicely in the longest economic upcycle since The Great Depression of 1933.

As of now, unemployment is at 3.6%, the lowest unemployment rate since December of 1969. America’s GDP exceeded $20 Trillion in 2018 and continues to grow in 2019 at around 2.5%, with some calendar quarters stronger than others. Skilled labor is in short supply, which slows the progress of manufacturing and non-manufacturing, while employment in manufacturing, at 12,838,000, has reached the highest level since 2008 – remember 2008? Yuck!

Prices are relatively stable with little inflation to worry about. Wages and salaries increased across all industry sectors by 3% over last year translating into 4.4% in increased spending over 2018 so far. Demand is up and supply is trying to catch up. In short, it’s a boom time, a good time to be in business.

The outlook for 2019 is continued expansion which may trickle into 2020. Keep in mind that even 2.0% growth of a $20.50 trillion economy is an increase of $400 billion. It isn’t easy for the largest economy in the world to growth at that pace; in fact, it isn’t easy for any large entity to grow at 3 or 4%, but there have been recent quarters where the U.S. economy has grown at that pace.

This is incredibly good news. These are not the times that try men’s souls. They are the good ol’ days we will look back on with fond memories of booming business times. And, when things are this good, it is a time to improve the neglected nooks and crannies in production, purchasing, shipping, receiving, inventory, and anywhere else where efficiency and lean operating can be achieved. Ignore such opportunities at your own peril, for no expansion goes on forever.

In the vein of nooks and crannies, we are including a new section in the June issue of Metals & Manufacturing Outlook called Safety Outlook with a discussion of scaffolding safety provided to us by our podcast partner, the American Society of Safety Professionals. We profoundly believe that preventing worker injury or death is just as important as any aspect of manufacturing and non-manufacturing. There is nothing more precious and irreplaceable than a human life, or the quality of a life when so much of it is invested in the businesses where we work.

If you have an article to contribute to one of our Outlook sections, please send it to us. Your views are important, and we appreciate them. And, as always, we trust that you will enjoy this issue of Metals & Manufacturing Outlook which is distributed to more than 40,000 business and industry professionals each month. We hope you find it of such value that you forward a link to it to some of your colleagues so they can glean value for their roles from our pages.

Lewis A Weiss, Publisher Contact laweiss@mfgtalkradio.com or text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast.

Metals & Manufacturing Outlook / May 2019

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MANUFACTURING OUTLOOK

MAY 2019

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING IS STRUGGLING FOR GROWTH. U.S. PMI SOFTER AGAIN. EUROPE STILL SHAKY. TRADE DEALS, TARIFFS AND BREXIT ARE STILL IN A STATE OF FLUX. TRUMP VOWING TO PUNISH CHINA - AGAIN?

by ROYCE LOWE The Global Manufacturing PMI settled at 50.3 in April, again propped up by results from the U.S., whose PMI softened too. European and Japanese manufacturing are a little less healthy, and now Canada is in contraction.

The BLS jobs report for April shows the addition of 263,000 non-farm payroll jobs. The unemployment rate fell to 3.6 percent, its lowest rate since December 1969. Notable gains were in Professional and business services: 76,000 jobs, and construction: 33,000 jobs. For the third consecutive month, manufacturing showed little change with the addition of 4,000 jobs. In the 12

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months prior to February, manufacturing added an average of 22,000 jobs per month. There are presently 12,838,000 production floor jobs in the manufacturing sector.

The Bureau of Economic Analysis recently released its ‘advance’ estimate for the annual rate of Real GDP growth in the first quarter of 2019, putting it at 3.2 percent. The figure for the fourth quarter of 2018 was 2.2 percent.

U.S. durable goods orders placed with U.S. factories for business equipment rose by the most in eight months in March, with signs that

MANUFACTURING OUTLOOK corporate investment is coming back despite trade war uncertainty. Non-military capital goods excluding aircraft were up 1.3 percent. Bookings for all durable goods, or items meant to last at least three years, were up 2.7 percent, the most in seven months and more than projected.

IHS Markit’s remarks on the U.S. noted that operating conditions improved coincident with a solid rise in new orders, with new orders at a three-month high. There was a slight improvement in production. Employment was up at the slowest rate since June 2017, in part reflecting skill shortages, but there is also subdued confidence regarding future business.

Pre- and post-production inventories continued to rise in April. The Markit PMI moved from 52.4 percent in March, to 52.6 percent in April.

The seasonally adjusted annualized rate (SAAR) for light vehicle sales in April stood at 16.41 million units, down from 17.42 million in March and from 17.25 million in April 2018.

STEEL PRODUCTION CONTINUES TO RISE World crude steel production for the 64 reporting countries – which represent 99 percent of world crude steel production – was at 155,009 MT for the month of March, and up 4.9 percent year-overyear. China’s production was up 10 percent yearover-year. U.S. crude steel production for March 2019 was 7.752 MT, up 5.7 percent year-over-year.

Primary Global Aluminum Production in March 2019 was reported at 5.414 million tons, with production in China at 3.073 million tons, representing 57 percent of world total. Production was 449,000 tons in the Gulf Cooperation Council made up of UAE, Qatar, Saudi Arabia, Oman, Kuwait and Bahrain; 377,000 tons in the rest of Asia; 297,000 tons in Western Europe; 325,000 tons in North America, and 349,000 tons in Eastern and Central Europe.

U.S. light vehicle sales were down 2.3 percent in April.

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Consumer Prices, and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the % change on the previous quarter, annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted.

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CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK

by DR. CHRISTOPHER KUEHL MANAGING DIRECTOR OF ARMADA CORPORATE INTELLIGENCE THIS REPORT REPRINTED COURTESY OF THE NATIONAL ASSOCIATION OF CREDIT MANAGERS (NACM.ORG) WHERE MORE IN-DEPTH INFORMATION CAN BE FOUND.

Combined Sectors In March, the consumer sector was the one that let the economy down, but this month that same consumer is playing a more heroic role.

The data in April’s Credit Managers’ Index (CMI) showed a slowdown in the manufacturing sector after a robust month in March. “April’s service sector is demonstrating all the growth, while the manufacturing sector slumped,” said NACM Economist Chris Kuehl, Ph.D. “This matches pretty well with other data that has been coming in from the data analysts. The latest retail numbers were unexpectedly strong with growth at 1.6% when expectations were for growth of maybe 1%. Last month, there was a fall in the data despite the fact that consumer confidence numbers have been essentially solid—if not particularly impressive.”

The combined score for April’s CMI is 54, an improvement over the 53.6 notched the month prior. Over the last several months, there has not been a great deal of variability in the combined score. The high point was reached in May of 2018, when it hit 56.6. It was also at or above 56 three times in the last 12 months. The low point was this January when it hit 53.4, followed by last year’s readings of 53.7 in April and 53.6 in March. The range has been fairly narrow. The combined index for favorable factors jumped back into the 60s with a reading of 60.1—about where it had been in February. The combined score for the unfavorable factors moved out of the contraction zone (a score

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Metals & Manufacturing Outlook / May 2019

below 50) by the narrowest of margins with a reading of 50 after last month’s 49.9.

As is usually the case, there was quite a bit of interesting data in the subsectors. The sales data jumped back into the 60s with a reading of 61 after stumbling a little to 58.2 the month before.

New credit applications also improved with a move from 57.8 to 59.7, but this category had been in the 60s for most of the last few years, although it started to fall into the 50s in December. The dollar collections data also improved, but not quite enough to break into the 60s. It is at 59.1 after reading 56.6 in March. The amount of credit extended stayed in the 60s, but fell a little from 63.5 to 60.6.

There was more variability in the unfavorable factors. Rejections of credit applications improved a little and stayed comfortably in expansion territory. The reading last month was 51.2 and this month the data was at 52. Accounts placed for collection remained in the 40s, but improved from last month. It was at 46.4, the lowest point seen in several years. Now it is at 48.5, basically in the range that has been dominant most of the past 12 months. In contrast, the disputes category slipped further into the contraction zone with a reading of 48.5 after a reading of 49.5 in March.

Dollar amount beyond terms fell out of the expansion zone with a reading of 47.6 after hitting 50 the month prior. Dollar amount of customer

CREDIT MANAGERS’ OUTLOOK deductions improved a little with a reading of 49.7 compared to 48.8 the month prior. Filings for bankruptcies stayed very close to what it had been moving from 53.7 in March to 53.9 in April.

Kuehl noted that by and large the readings improved this month, but the real news has been the changing position of manufacturing and service sectors. “At this stage it is not clear what is causing the shifts in these sectors and it is certainly too early to identify any kind of a trend.”

Manufacturing Sector

Kuehl said the manufacturing data from last month was strong. Much of the gain in the CMI in March was due to improvements in the performance of the manufacturing community.

“It is not that conditions have dramatically changed, but some of the enthusiasm has faded.

This has been reflected in some of the other manufacturing data released of late—the Fed’s industrial index fell and there was some decline in the latest Purchasing Managers’ Index (mostly in the New Orders Data).”

The combined score for the manufacturing sector dropped from 54.6 to 53.7, taking this data to the low side of where it has been the last year. The numbers fell to 53.1 in January, but most of the readings for the last year have been in the 55 to 57 range—at least in the last few months. The

combined score for the favorable factors fell out of the 60s for the first time since January with a reading of 58.9 after a March’s 60.3 and a February reading of 60.

The combined score for the unfavorable factors stayed in the expansion zone with a reading of 50.2 following 50.7 the month before. The data in the subsectors showed some declines in select areas, but steady performance in others.

The sales data stayed very close to what it had been—58.6 compared to 58.4 the month before.

New credit applications slipped out of the 60s going from 61.2 to 59.8. The dollar collections data improved—always good news. It went from 57.8 to 58.6, but there was a big decline in the amount of credit extended as it moved from 63.9 to 58.5.

“Compared to the months before, there were no readings for the manufacturing favorables in the 60s, which has not happened in well over a year,” Kuehl said.

Rejections of credit applications stayed almost exactly where it had been the month before— dipping slightly to 53.1 after being at 53.2.

Accounts placed for collection improved quite a bit from 46.8 to 49.3, but it remains in the contraction zone. There was a significant decline in the disputes category. It is now in contraction territory with a reading of 47.7 after one of 50.2 in March.

Dollar amount beyond terms also fell out of the expansion zone with a reading of 48.5. This is in sharp contrast with the 51 noted in March. Dollar amount of customer deductions improved slightly (48.4 to 49.5). Better than last month, but still in contraction territory. Filings for bankruptcies slipped a little but stayed in the 50s with a reading of 53.3 following the March reading of 54.6.

“There is not a lot of consensus about what has been pushing manufacturing up and down of late, but the dominant view is that uncertainty in the trade sector has played a big role,” Kuehl said. “There have been on again and off again tariff threats, while manufacturers have been struggling to keep track of the changes that have swept through various trade talks. One minute there is no hope for a pact with China and the next minute it seems imminent. Then five minutes later there is an impasse that can’t be overcome. This has also been an issue with Europe and with the reconfigured NAFTA (USMCA).”

Metals & Manufacturing Outlook / May 2019

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NORTH AMERICAN OUTLOOK

MAY 2019

NORTH AMERICAN OUTLOOK

by ROYCE LOWE

The Institute For Supply Management PMI figure eased back from 55.3 in March to 52.8 in April, representing the 32nd consecutive month of growth in manufacturing.

The overall economy grew for the 120th consecutive month.

New orders, production, and employment are growing more slowly; supplier deliveries are slowing faster; inventories are growing faster, and customer inventories are too low. Order backlogs are growing faster, and both new export orders and imports are contracting.

Of the 18 manufacturing industries, 13 reported growth in April in the following order: Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Printing & Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Machinery; Furniture & Related Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; and Fabricated Metal Products. The five industries

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reporting contraction in April are: Apparel, Leather & Allied Products; Primary Metals; Wood Products; Petroleum & Coal Products; and Transportation Equipment.

Comments from the manufacturing industry continue, in general, in an optimistic vein, but there are concerns regarding both tariffs and a slowdown of supplier deliveries due to problems at the Mexico/U.S.border. There are also concerns with quality issues resulting from skill shortages and learning curves.

CANADA’s manufacturing PMI fell into contraction territory in April, with production declining at the greatest extent since December 2015, and export sales continuing to fall as they have done in four

NORTH AMERICAN OUTLOOK of the past five months. There were modest reductions in production, new orders, and employment. Quebec was the best performing region, followed by Ontario. Export sales were the bright spot in Alberta and BC. The PMI was down in April at 49.7 from March’s 50.5.

Canadian light vehicle year-over-year sales fell for the 14th consecutive month, by 4.6 percent in April, from 192,167 units to 183,287 units. Bad weather and flooding were said to be responsible for at least some of the decline in sales. Light trucks represented 72.7 percent of total sales.

Canada produced 1.150 MT of crude steel in March, up 3.4 percent year-over-year.

MEXICO scraped over the line into growth as the PMI struggled to 50.1 in April from 49.8 in March thanks to an increase in new orders growth and input stocks. Production and employment declined further. Export sales declined for the first time since February 2018. Mexico produced 1.780 MT of crude steel in March, down 3.8 percent year-over-year.

ISO9100:2015 and AS9100D

Metals & Manufacturing Outlook / May 2019

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METALS OUTLOOK

MAY 2019

METALS OUTLOOK THE COST, MAKING, TREATING AND APPLICATIONS OF METALS

by ROYCE LOWE The World Steel Association recently released its short-range outlook for global steel demand for 2019. The organization forecasts global steel demand will reach 1,735 MT in 2019, up 1.3 percent over 2018. A further 1.0 percent increase, to 1,752 MT, is forecast for 2020. Demand in 2018 was up 2.1 percent over 2017.

The forecast does look for significant gains in developing Asia - except China - with a forecast increase of 6.5 and 6.4 percent in 2019 and 2020 respectively. This will be led by India, where a growth of 7 percent is forecast for 2019. Such increases will be largely due to infrastructure projects.

We are presently witnessing a slowing in China, and in fact, a slowdown in the global economy as a whole. There is uncertainty regarding trade policies, viz U.S. - China trade agreements; NAFTA; Brexit and U.S. - EU tariff threats. All this will lead to possible changes in business confidence and investment.

The automotive industry, a very significant customer for steel, saw a sharp downturn in growth during 2018 in many countries, particularly in the EU. Turkey (down 9 percent) and the UK (down 5.5 percent) are two prime examples.

Growth in automotive demand was down to 2.2 percent in 2018, from 2017’s 4.9 percent, and is forecast at 1 percent in 2019.

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Metals & Manufacturing Outlook / May 2019

METALS OUTLOOK The global construction industry is looking for a 3 percent increase in 2019, but an easing is forecast for China, Turkey, and South Korea. Germany, China, and Japan are expected to witness a slowdown in demand from the machinery sector going into 2020.

Year-to-date capacity utilization in the U.S. steel industry is running around 81.5 percent, compared to 75.5 percent for the corresponding period in 2018. During this timeframe, demand from the automotive industry has slowed, putting downward pressure on prices. It may be a long time before we return to those prices for hot and cold - rolled sheet prices seen around a year ago. The section 232 tariffs were the reason for the price increases, but prices are now down significantly, with H.R. coil around $32.50 per cwt and C.R. coil around $41.00 per cwt.

is reportedly much less polluting than that of the Chinese product. There is no company in Canada, the Middle East, Japan, or the U.S., that could supply the required quantity. Rusal will pay the 10 percent tariff.

The finished product will be aimed at the U.S. auto industry, whose consumption of aluminum is expected to continue to grow.

Recent price spreads for non-ferrous metals are: copper from $ 2.96 per lb. in mid-April to $ 2.85 late April; aluminum from $ 0.85 in early April to $ 0.80 in late April; nickel dropped from $ 5.95 in early April to $ 5.50 in late April, and zinc fell from $1.35 in early April to $1.31 in late April.

U.S. Steel announced a $1.2 billion expansion U.S. Steel announced a $1.2 billion expansion at its Edgar Thomson Works involving the future use of thin slab casting and continuous hot rolling, with production scheduled for 2022. An additional new plant is also in the works.

Meanwhile, Braidy Industries in steel’s number one metallic competitor, aluminum, is to build the first U.S Greenfield aluminum mill in over 30 years, in Kentucky, and the mill will be, in part, financed and mostly supplied with semi-finished product by Russia’s United Co Rural. This is the company that was controlled by Oleg Deripaska, one of the Russian hierarchy’s ‘naughty boys’ until the U.S. sanctioned him out of it. He gave up control but is still the major shareholder. Sanctions have since been dropped.

Rusal will invest up to $200 million in the project, estimated at $1.7 billion, for start up in 2021. It will supply 200,000 tons of slabs per year from Siberia, a quantity that could only be matched by China, but production of the Russian aluminum

Metals & Manufacturing Outlook / May 2019

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AEROSPACE OUTLOOK

MAY 2019

AEROSPACE OUTLOOK

by ROYCE LOWE

Boeing Co. has changed its plans in light of the second fatal crash of a 737 Max on March 10 this year. It plans a temporary slowdown of its 737 final assembly line to cut production of the Max to 42 units per month by June, and foresees production for the year cut from 654 to 604. This represents the first factory slowdown since the disruption of 9/11. This is bad news for Boeing, its major suppliers and the airlines. Boeing recently came out and admitted it knew things about critical software before the first accidents, and that it didn’t pass on to the FAA or to airlines.

Airbus SE saw its earnings jump in the first quarter as the planemaker produced more A320 narrowbody jets, the 737 Max’s biggest rival. Some 737 Max operators have indicated they’ll consider switching to Airbus’s latest A320neo, but the company is not expecting many new orders since its narrow-body production capacity is sold out for the next few years.

Airbus is evaluating its ability to up A320 production capacity, reiterating a target of 880890 jetliner deliveries across the model range in 2019.

Problems with Pratt and Whitney engines are apparently resolved, and deliveries of the plane are the company’s priority. This should cancel out any negativity due to the termination of the A380 superjumbo program, which contributed to a

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Metals & Manufacturing Outlook / May 2019

58-plane reduction in the order backlog.

Mitsubishi Heavy Industries is testing a new airliner, coincident with rivals selling off their manufacturing operations for jets with less than 160 seats. The plane is long-delayed and was originally scheduled for test flights in 2012, but encountered production problems.

The Mitsubishi Regional Jet is the first airliner built in Japan since the sixties, and may be timely as more cities in Asia and Europe are looking to link up with each other and the global air travel network. Certification flights began in March in Moses Lake, Washington.

Boeing is set to buy 80 percent of Embraer SA’s commercial operations in a joint venture, and Bombardier last year sold control of its C series airliner to Airbus SE. MHI is a longtime supplier of aircraft components to Boeing, and after spending more than $2 billion over more than a decade, is looking to get its jet certified and to start deliveries to its launch partner, ANA Holdings Inc. It expects to have the plane ready for customers next year. There is an ongoing need for regional jets and the MRJ is fully capable of competing in the market. There will be some competition from the Commercial Aircraft Corp. of China - Comac -which has a new regional jet in service.

AUTOMOTIVE OUTLOOK

MAY 2019

AUTOMOTIVE OUTLOOK

by ROYCE LOWE

Wang Chuanfu started his working career as an industrial chemist who got a bee-in-his-bonnet about things electric. In the mid-nineties he founded the BYD company in Shenzhen as a manufacturer of batteries for brick-sized cell phones and digital cameras.

What Wang really wanted to do was manufacture electric vehicles, particularly cars, SUVs and buses, which he did. He got smallish contracts from Amsterdam, Frankfurt, and Los Angeles, even Albuquerque - but the buses he sent to New Mexico were so fraught with mechanical problems that the customer sent them back. He kept on, a small contract here, a small contract there, and by adding a little to a little he eventually got a lot. The company got to manufacturing its own batteries to put in its cars, buses, forklifts, utility vans, street sweepers and garbage trucks. And it kept on growing.

Today, BYD is the world’s number one producer of plug-ins, but it doesn’t make nearly the headlines that Tesla does. Perhaps something to do with the different personalities of the two founders.

BYD makes an SUV, the Tang, that sells for (the equivalent of) $35,700 to the Chinese middle class.

Its cheapest model, the el, sells for $8,950 with subsidies.

BYD counts 250,000 employees today and sells as many as 30,000 pure EVs or plug-in hybrids in China per month. In 2018, it opened a 10 million square foot battery plant in Qinghai province, and recently broke ground on another of similar size.

Warren Buffet’s Berkshire Hathaway Inc. bought a 10 percent stake in BYD a decade ago.

In China there are government subsidies for buyers of EVs and there are municipal regulations that make owning a car with an internal combustion engine in many cities inconvenient, expensive or both. Before buying a new gasoline car in Shanghai, there is an auction for a limited number of license plates that go for around $14,000 each. An EV plate is free.

China now accounts for over half the world’s purchases of electric cars. There were more EVs sold in Shanghai in 2018 than in Germany, France or the UK. Virtually all of Shenzhen’s 20,000 taxis are electric BYDs, compared to less than 20 of any make in New York. More than 500,000 buses carry

Metals & Manufacturing Outlook / May 2019

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AUTOMOTIVE OUTLOOK

passengers on China’s roads, compared to less than 1,000 in the U.S. Projected EV sales look something like: Sales, millions 2020 2025 2030 2035 2040 1.5 5.5 12 15 18 China 5.5 18 31 42 Rest of world 1.5 BYD knows it has its work cut out. Competition is coming in fast from the U.S. and Europe, with VW looking to produce 300,000 units per year in Shanghai in a couple of years. Chinese government subsidies, which have cost, to date, $15 billion, will be phased out. Then there is the question of functional versus stylish, and how long will the Chinese be content with ordinary cars with VW and Tesla in their backyard. So BYD has

In the meantime BYD will carry on its good work along with its competition. It hopes, in time, to sell 20 to 30 percent of its product abroad. It has a difficult row to hoe.

2020 CORVETTE

GM, with car sales falling, will add a second shift to its Bowling Green Corvette plant, and 400 new jobs, to build the 2020 version of its iconic sports car.

Toyota will produce gasoline and hybrid versions of the Lexus NX crossover starting 2022, at its Cambridge, Ontario plant. This will be the first time the model will have been produced outside Japan.

hired a designer, from Bavaria of all places. Even with a playing field a little less level, the company is optimistic, particularly as a manufacturer in the country where the EV revolution is surely to arrive fastest.

In 2021, Ford will reap $1 billion more in earnings before interest and taxes than it did two years ago from its Michigan Assembly Plant, which just switched from making Focus compact cars and C-Max hybrids to producing Ranger pickups - and Bronco SUVs are to come.

Between 2019 and 2023, Ford will put 91 percent of its capital expenditures into developing and making trucks and SUVs, a figure that was 64 percent from 2016 to 2020.

The U.S. has a president who seems dead set against any help for EV manufacturers, in spite of all major automotive companies vowing to invest billions into the sector. China’s leader, Xi Jinping, is gung ho about it.

China knows it has an extremely serious problem with pollution, representing one third of global emissions. It is also vulnerable to shifts in oil availability and prices. Hence the big push into public charging stations which increased from 150,000 to 300,00 between 2016 and 2018 in China; from 50,000 to 70,000 during the same period in the U.S. 2019 RANGER

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Metals & Manufacturing Outlook / May 2019

ISM SEMI-ANNUAL REPORT

MAY 2019

ISM’S SEMI-ANNUAL ECONOMIC FORECAST Economic growth is expected to continue in the U.S. throughout 2019, say the nation’s purchasing and supply executives in their Spring 2019 Semiannual Economic Forecast. Expectations for the remainder of 2019 continue to be positive in both the manufacturing and non-manufacturing sectors.

Manufacturing Growth Continues in 2019

These projections are part of the forecast issued by the Institute for Supply Management® (ISM®) Business Survey Committees. The forecast was presented today by Timothy R. Fiore, CPSM, C.P.M, chair of the ISM Manufacturing Business Survey Committee; and by Anthony S. Nieves, CPSM, C.P.M., A.P.P., CFPM, chair of the ISM NonManufacturing Business Survey Committee.

Non-Manufacturing Growth Continues in 2019

Revenue to Increase 4% Capital Expenditures to Increase 5.9% Capacity Utilization Currently at 84.2% Revenue to Increase 3.1% Capital Expenditures to Increase 2.1% Capacity Utilization Currently at 89%

Metals & Manufacturing Outlook / May 2019

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ISM SEMI-ANNUAL REPORT

MANUFACTURING SUMMARY Fifty-five percent of respondents from the panel of manufacturing supply management executives predict their revenues, on average, will be 4 percent greater in 2019 compared to 2018, 11 percent expect an 11.1 percent decline, and 34 percent foresee no change in revenue. This yields an overall average forecast of 4 percent revenue growth among manufacturers for 2019. This current prediction is 1.7 percentage points below the December 2018 forecast of 5.7-percent revenue growth for 2019 and is 1.8 percentage points below the actual revenue growth reported for all of 2018.

With operating rate at 84.2 percent, an expected capital expenditure increase of 5.9 percent, an increase of 1.5 percent for prices paid for raw materials, and employment expected to increase by 2 percent by the end of 2019, manufacturing is positioned to grow revenues while managing costs through the remainder of the year. “With 17 of the 18 manufacturing sector industries predicting revenue growth in 2019, U.S. manufacturing continues to move in a positive direction. However, finding and onboarding qualified labor and being able to pass on raw material price increases will ultimately define manufacturing revenues and profitability,” says Fiore.

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Metals & Manufacturing Outlook / May 2019

The 17 industries reporting expectations of growth in revenue for 2019 — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Nonmetallic Mineral Products; Textile Mills; Miscellaneous Manufacturing; Furniture & Related Products; Petroleum & Coal Products; Primary Metals; Food, Beverage & Tobacco Products; Wood Products; Chemical Products; Transportation Equipment; Machinery; Fabricated Metal Products; Plastics & Rubber Products; and Paper Products.

The manufacturing panel was also asked Special Questions related to the impact thus far in 2019 on the following: (1) In the past six months, has your firm had difficulty hiring workers to fill open positions? (2) In the past six months, has your firm raised wages to recruit new hires? (3) In the past six months, has your firm offered additional training for new hires? (4) In the past 6 months, has your firm increased, decreased or left unchanged its capital spending plans for the next 12 months, and why did you say so? (5) Do you believe that tariffs have raised the price of the goods that you produce and deliver to your customers? (6) If you believe that tariffs have raised the price of your goods to your customers, by how much? (7) Do you believe that tariffs have caused delays and disruptions in your supply chain.

ISM SEMI-ANNUAL REPORT

NON-MANUFACTURING SUMMARY

The non-manufacturing panel was also asked Special Questions related to the impact thus far in 2019 on the following: (1) In the past six months, has your firm had difficulty hiring workers to fill open positions? (2) In the past six months, has your firm raised wages to recruit new hires? (3) In the past six months, has your firm offered additional training for new hires? (4) In the past six months, has your firm increased, decreased or left unchanged its capital spending plans for the next 12 months? And why did you say so? (5) Do you believe that tariffs will raise the price of the goods that you produce and deliver to your customers?

(6) If you believe that tariffs will raise the price of your goods to your customers, by how much? (7) Do you believe that tariffs will cause delays and disruptions in your supply chain? Their responses are provided at the end of this report.

Forty-seven percent of non-manufacturing purchasing and supply executives expect their 2019 revenues to be greater by 9.2 percent as compared to 2018. Respondents currently expect a 3.1 percent net increase in overall revenue, which is less than the 3.7 percent increase that was forecasted in December 2018. “Nonmanufacturing will continue to grow for the balance of 2019. Non-manufacturing companies continue to operate with extreme efficiency, which is echoed by the high percentage of capacity utilization. Supply managers have indicated that prices are projected to increase 1.5 percent over the year reflecting minimal inflation.

Employment is projected to grow 1.3 percent.

Seventeen out of 18 industries are forecasting increased revenues, which is more than the 16 industries that forecasted increased revenues last year. The non-manufacturing sector will continue economic growth throughout the year,” says Nieves.

The 17 non-manufacturing industries expecting increases in revenue in 2019 — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Construction; Management of Companies & Support Services; Arts, Entertainment & Recreation; Information; Other Services; Mining; Professional, Scientific & Technical Services; Accommodation & Food Services; Finance & Insurance; Wholesale Trade; Health Care & Social Assistance; Transportation & Warehousing; Public Administration; Real Estate, Rental & Leasing; Utilities; and Educational Services.

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OPERATING RATE Manufacturing Purchasing and supply managers report that their companies are currently operating, on average, at 84.2 percent of normal capacity, 1 percentage point less than was reported in December 2018. The eight industries reporting operating capacity levels at or above the average capacity of 84.2 percent — listed in order — are: Paper Products; Petroleum & Coal Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Wood Products; and Food, Beverage & Tobacco Products.

Non-Manufacturing Non-manufacturing purchasing and supply executives report that their organizations are currently operating at 89 percent of normal capacity. This is 0.6 percent more than what was reported in December 2018 and more than the 85.5 percent reported in May 2018. The 12 industries operating at capacity levels above the average rate of 89 percent — listed in order — are: Educational Services; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Public Administration; Mining; Professional, Scientific & Technical Services; Retail Trade; Construction; Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; and Other Services.

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Metals & Manufacturing Outlook / May 2019

ISM SEMI-ANNUAL REPORT

PRODUCTION CAPACITY Manufacturing Production capacity in manufacturing is expected to increase 4.5 percent in 2019. This increase is less than the 4.7-percent increase predicted in December 2018 and is greater than the 4-percent increase reported in December 2018 for all of 2018. This reflects the continuing strength in the sector, as 37 percent of respondents expect an average capacity increase of 13.8 percent, 6 percent expect decreases averaging 9.9 percent, and 57 percent expect no change. The 15 industries expecting production capacity increases for 2019 — listed in order — are: Computer & Electronic Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Chemical Products; Nonmetallic Mineral Products; Textile Mills; Primary Metals; Machinery; Transportation Equipment; Fabricated Metal Products; Plastics & Rubber Products; Paper Products; and Petroleum & Coal Products.

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ISM SEMI-ANNUAL REPORT

PRODUCTION CAPACITY

Non-Manufacturing The capacity to produce products or provide services in the non-manufacturing sector is expected to increase 2 percent during 2019. This compares to an increase of 2.4 percent reported for 2018, and a prediction in December 2018 for an increase of 2.9 percent for 2019. Twenty-two percent of nonmanufacturing respondents expect their capacity for 2019 to increase by an average of 10.7 percent, and 3 percent of the respondents foresee their capacity decreasing by an average of 13.8 percent.

Seventy-five percent expect no change in their capacity. The 14 industries expecting to add to their production capacity in 2019 — listed in order — are: Construction; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Professional, Scientific & Technical Services; Accommodation & Food Services; Mining; Retail Trade; Wholesale Trade; Utilities; Finance & Insurance; Health Care & Social Assistance; Public Administration; Information; and Other Services.

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ISM SEMI-ANNUAL REPORT

PREDICTED CAPITAL EXPENDITURES — 2019 VS. 2018 Manufacturing Survey respondents expect a 5.9-percent increase in capital expenditures in 2019. This is nearly even with the 6-percent increase predicted by the panel in the December 2018 forecast for 2019. Currently, 32 percent of respondents predict increased capital expenditures in 2018, with an average increase of 29.3 percent, and 12 percent said their capital spending would decrease an average of 27.7 percent. Fifty-five percent say they will spend the same in 2019 as they did in 2018. The 14 industries expecting increases in capital expenditures in 2019 compared to 2018 — listed in order — are: Furniture & Related Products; Textile Mills; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Transportation Equipment; Chemical Products; Miscellaneous Manufacturing; Computer & Electronic Products; Paper Products; Apparel, Leather & Allied Products; Fabricated Metal Products; and Machinery.

Non-Manufacturing Non-manufacturing purchasing and supply executives expect to increase their level of capital expenditures 2.1 percent in 2019 compared to 2018. The 26 percent of members expecting to spend more, predict an average increase of 20.8 percent. Fourteen percent of respondents anticipate an average decrease of 22.6 percent. Sixty percent of the respondents expect to spend the same on capital expenditures in 2019 as in 2018. The 10 industries expecting an increase in capital expenditures in 2019 from 2018 — listed in order — are: Construction; Agriculture, Forestry, Fishing & Hunting; Public Administration; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Accommodation & Food Services; Mining; Health Care & Social Assistance; Finance & Insurance; and Management of Companies & Support Services.

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ISM SEMI-ANNUAL REPORT

PRICES - CHANGES BETWEEN END OF 2018 AND MAY 2019 Manufacturing In the December 2018 forecast, respondents predicted an increase of 3.5 percent in prices paid during the first four months of 2019; they now report prices increased by 1.5 percent. The 45 percent who say their prices are higher now than at the end of 2018 report an average increase of 4.9 percent, while the 13 percent who report lower prices report an average decrease of 5 percent. The remaining 42 percent indicate no change for the period. Sixteen manufacturing industries reported an increase in prices paid for the first part of 2019 in the following order: Textile Mills; Apparel, Leather & Allied Products; Furniture & Related Products; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Printing & Related Support Activities; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Nonmetallic Mineral Products; Chemical Products; Plastics & Rubber Products; and Paper Products.

Non-Manufacturing Non-Manufacturing respondents report that their purchases in the first four months of this year cost an average of 1 percent more than at the end of 2018. This is 2.2 percentage points lower than the 3.2-percent increase predicted in December 2018 for the first four months of 2019. Thirty-eight percent of non-manufacturing respondents report that prices increased an average of 3.8 percent in the first part of 2019. Eight percent report price decreases averaging 6.3 percent. The remaining 54 percent indicate no change in prices paid in the first four months of 2019. The 15 industries reporting an increase in prices paid in the first part of 2019 — listed in order — are: Arts, Entertainment & Recreation; Utilities; Transportation & Warehousing; Construction; Public Administration; Accommodation & Food Services; Professional, Scientific & Technical Services; Wholesale Trade; Mining; Health Care & Social Assistance; Information; Educational Services; Real Estate, Rental & Leasing; Management of Companies & Support Services; and Other Services.

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Metals & Manufacturing Outlook / May 2019

ISM SEMI-ANNUAL REPORT

PRICES - PREDICTED CHANGES BETWEEN END OF 2018 AND END OF 2019 Manufacturing When asked to predict 2019 price changes, 44 percent of respondents expect prices to increase by 4.8 percent for the full year of 2019 compared to the end of 2018. Meanwhile, 17 percent anticipate decreases averaging 4 percent. Including the 39 percent who expect no change in prices, survey respondents expect a net average prices increase of 1.5 percent for all of 2019. Seventeen of 18 manufacturing industries are predicting price increases for all of 2019 in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Miscellaneous Manufacturing; Petroleum & Coal Products; Computer & Electronic Products; Transportation Equipment; Primary Metals; Wood Products; Nonmetallic Mineral Products; Machinery; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Chemical Products; Fabricated Metal Products; Paper Products; and Plastics & Rubber Products.

Non-Manufacturing For 2019, non-manufacturing respondents expect prices to increase, on average, 1.5 percent when compared to the prices at the end of 2018. Given that respondents have reported that prices have increased 1 percent through May 2019, prices are projected to increase 0.5 percentage point over the remainder of the year. Forty-seven percent of respondents anticipate price increases averaging 4.6 percent. Twelve percent of respondents expect price decreases of 5.7 percent, and 41 percent do not expect prices to change. The 14 industries expecting price increases in 2019 — listed in order — are: Arts, Entertainment & Recreation; Transportation & Warehousing; Other Services; Public Administration; Mining; Construction; Management of Companies & Support Services; Real Estate, Rental & Leasing; Wholesale Trade; Utilities; Information; Professional, Scientific & Technical Services; Accommodation & Food Services; and Educational Services.

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ISM SEMI-ANNUAL REPORT

EMPLOYMENT Manufacturing ISM’s Manufacturing Business Survey respondents forecast that manufacturing employment will increase by 2 percent by the end of 2019, compared to the end of 2018. Thirty-six percent of respondents expect employment to be 6.7 percent higher, on average, while 8 percent of respondents predict employment to be lower by 5.2 percent. The remaining 56 percent of respondents expect their employment levels to be unchanged for the remainder of 2019. The 14 industries reporting expectations of growth in employment during 2019 — listed in order — are: Computer & Electronic Products; Textile Mills; Fabricated Metal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Machinery; Petroleum & Coal Products; Printing & Related Support Activities; Transportation Equipment; Chemical Products; and Paper Products.

Non-Manufacturing ISM’s Non-Manufacturing Business Survey Committee respondents forecast that employment will increase 1.3 percent through the end of 2019. For the remaining months of 2019, 33 percent expect employment to increase, on average, 6.1 percent, 10 percent anticipate employment to decrease by 7.7 percent, and 57 percent expect their employment levels to be unchanged. The 13 industries anticipating increases in employment — listed in order — are: Construction; Arts, Entertainment & Recreation; Other Services; Professional, Scientific & Technical Services; Accommodation & Food Services; Wholesale Trade; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Health Care & Social Assistance; Public Administration; Transportation & Warehousing; and Real Estate, Rental & Leasing.

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ISM SEMI-ANNUAL REPORT

BUSINESS REVENUES COMPARISON — 2019 VS. 2018

Manufacturing Increased revenue is expected in 2019 as purchasing and supply management executives predict an overall net increase of 4 percent in sector business revenue for 2019 over 2018. This is 1.7 percentage points lower than the 5.7-percent increase forecast in December 2018 for all of 2019, and 1.8 percentage points lower than the 5.8-percent increase reported for 2018 over 2017. Fifty-five percent of respondents say that revenues for 2019 will increase 9.5 percent, on average, over 2018. Conversely, 11 percent say their revenues will decrease, on average, 11.1 percent, and the remaining 34 percent indicate no change. Of the 18 manufacturing industries, 17 are reporting expectations of growth in revenue during 2019 in the following order: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Nonmetallic Mineral Products; Textile Mills; Miscellaneous Manufacturing; Furniture & Related Products; Petroleum & Coal Products; Primary Metals; Food, Beverage & Tobacco Products; Wood Products; Chemical Products; Transportation Equipment; Machinery; Fabricated Metal Products; Plastics & Rubber Products; and Paper Products.

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BUSINESS REVENUES COMPARISON — 2019 VS. 2018

Non-Manufacturing Non-manufacturing respondents forecast that sector business revenue for 2019 will increase 3.1 percent compared to 2018. This is 0.6 percent less than the 3.7 percent that was predicted in December 2018 for 2019. The 47 percent of respondents forecasting better business in 2019 than in 2018 estimate an average revenue increase of 9.2 percent. The 11 percent who predict less business in 2019 forecast an average decrease of 11.4 percent. The remaining 42 percent see no change in revenues for 2019. The 17 industries expecting an increase in revenues in 2019 — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Construction; Management of Companies & Support Services; Arts, Entertainment & Recreation; Information; Other Services; Mining; Professional, Scientific & Technical Services; Accommodation & Food Services; Finance & Insurance; Wholesale Trade; Health Care & Social Assistance; Transportation & Warehousing; Public Administration; Real Estate, Rental & Leasing; Utilities; and; Educational Services.

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ISM SEMI-ANNUAL REPORT

SPECIAL QUESTIONS RELATED TO THE EARLY MONTHS OF 2019

We asked the panelists to tell us: (1) In the past six months, has your firm had difficulty hiring workers to fill open positions? (2) In the past six months, has your firm raised wages to recruit new hires? (3) In the past six months, has your firm offered additional training for new hires? (4) In the past six months, has your firm increased, decreased, or left unchanged its capital spending plans for the next 12 months? And why did you say so?

We also asked three questions related to tariffs. (1) Do you believe that tariffs have raised the price of the goods that you produce and deliver to your customers? (2) If you believe that tariffs have raised the price of your goods to your customers, by how much? (3) Do you believe that tariffs caused delays and disruptions in your supply chain?

Manufacturing Answers to the first Special Question, “In the past six months, has your firm had difficulty hiring workers to fill open positions?”: Yes, we have had difficulty hiring (76.0%) No, we have not had difficulty hiring (24.0%) Answers to the second Special Question, “In the past six months, has your firm raised wages to recruit new hires?”: Yes (53.7%) No (46.3%)

Answers to the third Special Question: “In the past six months, has your firm offered additional training for new hires?”: Yes (44.4%) No (55.6%) Answers to the fourth Special Question: “In the past six months, has your firm increased, decreased or left unchanged its capital spending plans for the next 12 months? And why did you say so?”: Increased capital spending plans (34.7%) Decreased capital spending plans (17.9%) No change to capital spending plans (47.4%) Metals & Manufacturing Outlook / May 2019

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ISM SEMI-ANNUAL REPORT Non-Manufacturing Answers to the first Special Question,: “In the past six months, has your firm had difficulty hiring workers to fill open positions?”: Yes, we have had difficulty hiring (70.2%) No, we have not had difficulty hiring (29.8%) Answers to the second Special Question, “In the past six months, has your firm raised wages to recruit new hires?”: As a follow-up to the fourth Special Question, respondents were asked why they answered as they did.

The reasons given by those who increased capital spending plans (34.7%): General business outlook (69.3%) Business tax reform (4.5%) Prospects for regulatory reform (3.0%) Other (23.2%) The reasons given by those who decreased capital spending plans (17.9%): General business outlook (66.1%) Prospects for regulatory reform (0%) Business tax reform (0%) Other (33.9%) Answers to the fifth Special Question: “Do you believe that tariffs have raised the price of the goods that you produce and deliver to your customers?”: Yes (59.1%) No (40.9%) In response to the sixth Special Question: “If you believe that tariffs have raised the price of your goods to your customers, by how much?”, the average increase was 6.8 percent, with a median of 5.0 percent.

Answers to the seventh Special Question: “Do you believe that tariffs have caused delays and disruptions in your supply chain?”: Yes (29.8%) No (70.2%)

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Yes (48.1%) No (51.9%) Answers to the third Special Question, “In the past six months, has your firm offered additional training for new hires?”: Yes (45.5%) No (54.5%) Answers to the fourth Special Question, “In the past six months, has your firm increased, decreased or left unchanged its capital spending plans for the next 12 months? And why did you say so?”: Increased capital spending plans (27.1%) Decreased capital spending plans (18.8%) No change to capital spending plans (54.1%) As a follow-up to the fourth Special Question, respondents were asked why they answered as they did: The reasons given by those who increased capital spending plans (27.1%): General business outlook (70.4%) Business tax reform (2%) Prospects for regulatory reform (3.3%) Other (24.3%) The reasons given by those who decreased capital spending plans (18.8%): General business outlook (64.2%) Prospects for regulatory reform (5.7%) Business tax reform (0%) Other (30.2%)

ISM SEMI-ANNUAL REPORT Answers to the fifth Special Question: “Do you believe that tariffs raised the price of the goods that you produce and deliver to your customers?”:

Non-Manufacturing Operating rate is currently 89 percent of normal capacity.

Yes (35.7%) No (64.3%)

Production capacity is expected to increase 2 percent in 2019.

In response to the sixth Special Question, “If you believe that tariffs raised the price of your goods to your customers, by how much?”, the percent given was 7.7% with a median of 5%.

Capital expenditures are expected to increase 2.1 percent in 2019.

Answers to the seventh Special Question, “Do you believe that tariffs caused delays and disruptions in your supply chain?”: Yes (26.6%) No (73.4%)

Prices paid increased 1 percent through the end of April 2019.

Prices were reported to have increased 1 percent in the first four months of the year and are expected to increase 0.5 percentage point for the rest of the year, for a total projected net annual increase of 1.5 percent.

Non-manufacturing employment is expected to increase 1.3 percent during the rest of 2019.

Non-manufacturing revenue is expected to increase 3.1 percent in 2019.

SUMMARY Manufacturing

The non-manufacturing sector is projected to continue growth in 2019.

Operating rate is currently at 84.2 percent of normal capacity.

Production capacity is expected to increase 4.5 percent in 2019.

Capital expenditures are expected to increase 5.9 percent in 2019.

Prices paid increased 1.5 percent through the end of April 2019.

Prices of raw materials are expected to increase a total of 1.4 percent for all of 2019, indicating an expected decrease of 0.1 percent in prices for the remainder of the year.

Manufacturing employment is expected to increase by 2 percent in 2019.

Manufacturing revenue is expected to increase 4 percent in 2019.

Overall, manufacturing is expected to grow in 2019.

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ISSUES OUTLOOK

MAY 2019

ISSUES OUTLOOK

by ROYCE LOWE

A new independent government report on Trump’s new North American trade deal foresees higher car prices for U.S. consumers and a decline in auto sales even as it has a modest positive impact on the broader economy. This opposes one of the White House’s key sales pitches for the agreement.

The International Trade Commission found that the new USMCA would have a modest beneficial impact on the U.S. economy, adding 0.35 percent or $68 billion to the GDP in the sixth year after taking effect. The report goes on to suggest another side of this coin, stating that while the tough new auto production rules would add 28,000 jobs in the auto sector, there would actually ensue a fall in vehicle assembly jobs as a result of higher production costs that would have a broader slowing effect on U.S. manufacturing.

Administration officials shot back at the report by pointing out that the USMCA would bring in $34 billion in new auto investment in its first five years and 73,000 new jobs. Trump’s Council of Economic Advisors said the USMCA would add $100 billion to the U.S. economy once it was fully implemented.

The ITC report, mandated by Congress, found that higher prices for cars in the U.S. would result from the USMCA’s strict new auto rules, along with 140,000 fewer vehicle sales and a modest decline in auto assembly jobs. The ITC did point out that the 1,500 jobs lost in vehicle production would be offset by a gain of almost 30,000 jobs in parts production due

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in part to increased manufacture of engines and transmissions in the U.S. Vehicle prices in the U.S. would increase by 0.4 percent for pickups and by 1.6 percent for small cars The ITC also suggested that the increased U.S. production costs for cars under USMCA may have a broader negative impact by drawing ‘resources away from other manufacturing sectors and the rest of the U.S. economy, driving up production costs for other sectors, resulting in reduced U.S. exports, real incomes, and employment in the overall economy.

A U.S. Trade Representative official said automakers had shared privileged commercial information with them to which the ITC had no access. The U.S.T.R. also pointed to new investment resulting from the USMCA, when in fact most of the $15 billion investment quoted had been decided upon long before the wording of the USMCA was finalized.

The Trump Administration pushed tougher rules of origin during the USMCA negotiations, requiring 75 percent of vehicles to be produced in North America and 40 percent to be made in plants with an average wage of $16 an hour or more. Auto Industry groups, eager to get the USMCA through congress, are tending to take the administration’s side.

The Auto Alliance group said the USMCA’s benefits would only be realized if tariffs on steel and aluminum were removed and no further duties imposed on autos and auto parts.

ENERGY OUTLOOK

MAY 2019

ENERGY OUTLOOK

by ROYCE LOWE

GE recently unveiled the world’s largest wind turbine. It was produced by Danish manufacturer LM Wind Power, an individual operating unit within the GE Renewable Energy Business that provides services and logistics for wind-power installations.

LM Wind Power supplies turbine blades for GE’s onshore and offshore business units, and has manufacturing plants in Denmark, Brazil, Canada, China, India, Poland, Spain, France, and the U.S. LM Wind Power has produced the world’s largest wind turbine blade at its manufacturing operation in Cherbourg, France. The part is 107 meters (350 feet) long, and is one of three to be produced as part of a GE Renewable Energy Haliade-X 12-MW offshore turbine, the first of which will be built this summer near Rotterdam in The Netherlands. The turbine will have a rotor diameter of 220 meters (720 feet). The blade is made of multiple thin layers of glass and carbon fibres with wood, fused together with resin.

GE Renewable Energy and its partner Future Wind, are building a prototype on land near the North Sea where engineers will have access during a five-year period. GE is investing $400 million in the Haliade-X development in efforts to reduce the cost of wind energy, thus improving its competitiveness.

The Haliade-X is said to be the world’s largest and most powerful offshore wind turbine. Its large rotor and longer blades make it more sensitive to wind-speed variations, enabling it to capture more Annual Energy Production (AEP) than any other offshore wind-turbine, even in low wind conditions. The turbine is rated at 12 MW and has a projected annual generation capacity of 67 GWh. GE Renewable Energy estimates that a 750-MW (12MW) Haliade-X wind farm could produce enough power for up to 1 million households.

Automaker PSA, and French battery maker Saft, a unit of France’s Total, will get together with Europe’s biggest automakers to form a consortium to produce batteries for Europe’s upcoming foray into the EV business. EU carmakers are presently buying cells from (mostly Asian) manufacturers.

The consortium is being backed by the French and German governments, and will have further support from Italy, Belgium, Poland, Austria and Finland.

Initial investment will be in the order of 5 to 7 billion euros.

A pilot factory will be opened shortly in France, with a view to opening two production sites in France and Germany.

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GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS Survey data from around the world continues to identify a trend of slowing growth, particularly in manufacturing. In April, the ISM Manufacturing PMI recorded its lowest reading since October 2016 raising concerns about near term growth.

Our analysis generally focuses on manufacturing because it has more leading properties, but as manufacturing slows globally, the strength of the Nonmanufacturing sector remains, particularly in the U.S. where the economic contribution of services is four times greater than that of Manufacturing.

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Globally and domestically, manufacturing is slowing, but we believe that the strength of New Orders and Business Activity in Non-manufacturing is more than enough to carry the U.S. through this soft patch.

Eurozone: The Eurozone PMI (47.9, +0.4) contracted for the third consecutive month in April posting a slight improvement over March. There is a definite divide between expansion and contraction in the EZ. Support for expansion came from Greece (56.6, +1.9), Ireland (52.5, -1.4), Netherlands (52.0, -0.5), and Spain (51.8, +0.9). Growth was slowed by Italy (49.1, +1.7), Austria (49.2, -0.8), and France (50.0, +0.3); Germany (44.4, +0.3) remains problematic as it registered its second fastest decline in 6.5 years.

United Kingdom: The UK/CIPS PMI (53.1, -2.0) expansion slowed while posting its 33rd month of growth. Given the turmoil with its major trading partners, UK manufacturers continue to maintain significant inventories.

GLOBAL PMI OUTLOOK

China: China’s Official Report, the CFLP PMI (50.1, -0.4), and the Caixin Manufacturing PMI (50.2, -0.6) remained in weak expansion for a second consecutive month.

India: India’s PMI (51.8, -0.8) expansion continued for its 21st consecutive month. April marked a weak start to Q2 as it fell below the 12-month average of 52.7.

South Korea: The PMI (50.2, +1.4) climbed above the 50-mark following five consecutive months of contraction. Low business confidence prevails.

North America: Canada’s PMI (49.7, -0.8) contracted ending 37 consecutive months of growth dating back to March 2016.

Meanwhile, Mexico’s PMI (50.1, +0.3) rose slightly as both Canada and Mexico continue to lag U.S. manufacturing.

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Metals & Manufacturing Outlook / May 2019

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EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by ROYCE LOWE

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) continued in contraction for the third consecutive month, with the April PMI recovering at least a little ground, to 47.9 from March’s 47.5. There was a further marked decrease in new orders. Germany is still in the doldrums, but Greece is having its moments of glory. There was expansion in consumer goods, but continuing weakness in intermediate and investment goods. There is, however, confidence of a return to production growth.

Crude steel production in Germany in March was at 3.675 MT, down 1.1 percent year-over-year; in Italy 2.277 MT, down 0.3 percent year-over-year; in France 1.383 MT, up 2.3 percent year-over-year and in Spain 1.371 MT, up 5.9 percent year-over-year.

The UK produced 0.735 MT of crude steel in March, up 3.4 percent year-over-year.

Car registrations in Western Europe were down 1 percent year-over-year in April, from 1.228 million to 1.216 million. The SAAR, however, was up 1.4 percent to 14.27 million. Spain and Italy were up, France up 0.4 percent, but Germany and the UK were down 1.1 and 4.1 percent respectively. It’s Brexit and global economic uncertainty: still 1 percent is not that bad.

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Russia’s crude steel production for March was at 5.790 MT, down 6.9 percent year-over-year; Ukraine’s was 1.968 MT, up 15.0 percent year-over-year.

IHS Markit’s PMI for the UK showed the recent improvement slowing as new export business declined and the pace of stockpiling eased. The PMI for April, at 53.1, was down from March’s 55.1. from 52.1 in February.

New export business fell at the fastest rate in the past four-and-a-half years, and employment dropped for the third time in the past four months in April. Business optimism improved as over 50 percent saw production increasing over the coming year, but a large percentage is still worrying over Brexit.

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by ROYCE LOWE

CHINA’s operating conditions improved for the second consecutive month, but at a softer pace than in March. New orders and production were up slightly, but there was an easing of export demand. Input costs and output charges were up marginally, and there was an easing of inflationary pressures. April’s PMI eased back to 50.2 from March’s 50.8.

CHINA produced 80.326 MT of crude steel in March, up 10.0 percent year-over-year; Japan 9.084 MT, unchanged year-over-year; India 9.412 MT, down 1.0 percent year-over-year, and South Korea 6.266 MT, up 2.8 percent year-over-year. Taiwan produced 2.030 MT in March, unchanged.

Total vehicle sales in China were off 5.18 percent in March at 2.52 million units, with sedans, multipurpose vehicles and SUVs all down. Only minivan sales rose, along with NEVs - New Electric Vehicles - which latter rose 85.4 percent year-overyear.

JAPAN came out of contraction in April for the first time in three months, with its PMI for April at 50.2 from March’s 49.2. New orders and production continued to fall but at a slower rate. Employment growth picked up and business confidence improved.

INDIA saw a further slowdown in its manufacturing sector growth, with the weakest improvement in business conditions since August 2018. A slower rise in new orders meant a correspondingly weaker rise in production, employment, input buying, and business sentiment. Export sales remained strong. Investment goods were weak, but there was sustained growth at both consumer and intermediate goods manufacturers. The PMI retreated from March’s 52.6 to 51.8 in April.

Metals & Manufacturing Outlook / May 2019

37

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 3

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 3 OF A 6 PART SERIES:

Materials For CNC Machining by 3D HUBS

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Metals & Manufacturing Outlook / May 2019

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 3

PART 3 MATERIALS FOR CNC MACHINING - CNC MACHINING CAN BE USED WITH A VERY WIDE RANGE OF ENGINEERING METALS & PLASTICS. IN THIS SECTION, YOU WILL LEARN MORE ABOUT THE KEY CHARACTERISTICS OF THE MOST POPULAR MATERIALS. WE WILL ALSO EXAMINE THE MOST COMMON FINISHES THAT ARE APPLIED TO CNC MACHINED PARTS. Materials for CNC machining CNC machining can be used with a very wide range of engineering metals & plastics.

In this section, you will learn more about the key characteristics of the most popular materials. We will also examine the most common finishes that are applied to CNC machined parts.

Selecting the right material is a crucial step in the design process. The optimal material option is highly dependent on your specific use case and requirements.

Since almost every material with sufficient hardness can be machined, CNC offers a very large range of material options to choose from. For engineering applications, metals and plastics are most relevant and will be the focus of this section.

Surface finishes can also alter the properties of CNC machined parts and we will examine them below.

To get started, take a look at this decision tree. It contains high-level material recommendations that cover the most common design requirements.

Metals & Manufacturing Outlook / May 2019

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CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 3

Metals

CNC machining is primarily used with metals and metal alloys. Metal can be used for both the manufacturing of custom one-off parts and prototypes and for low-to-medium batch production.

Aluminum 6061 is by far the most used material in CNC machining.

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Metals & Manufacturing Outlook / May 2019

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 3

Plastics

Plastics are lightweight materials with a wide range of physical properties. They are often used for their chemical resistance and electrical insulation properties. Plastics are commonly CNC machined for prototyping purposes prior to Injection Molding.

Metals & Manufacturing Outlook / May 2019

41

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 3

Surface finishes

Surface finishes are applied after machining and can change the appearance, surface roughness, hardness and chemical resistance of the produced parts. Below is a quick summary of the most common finishes for CNC.

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Metals & Manufacturing Outlook / May 2019

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 3

Surface finishes (Continued)

Metals & Manufacturing Outlook / May 2019

43

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 3

Surface finishes (Continued)

In Next Month’s Issue: Part 4: Cost Reduction Tips 44

Metals & Manufacturing Outlook / May 2019

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA

by ROYCE LOWE

BRAZIL saw a further easing in new order growth in April, with the PMI at a six-month low. Slight increases in new orders, production and employment were more than offset by a quicker slowdown in export sales. But business sentiment remains fairly strong. The PMI in April , at 51.5, was down from March’s, 52.8. Brazil’s crude steel production for the month of March was 2.795 MT, a decrease year-over-year of 8.6 percent.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – eased further from March’s 50.5 to 50.3 in April.

Weakness is mostly seen in intermediate and investment goods sectors, where both production and new orders contracted in April. New export business declined for the eighth successive month in China, the Euro Zone, Brazil, the UK, Taiwan, South Korea, Turkey, the Philippines, Canada, Mexico, Australia, Poland, and the Czech Republic.

Employment was up in the U.S., India, South Korea, Italy, France, Indonesia and Brazil, but fell in China, Germany and the UK. There was a modest improvement in business optimism.

Metals & Manufacturing Outlook / May 2019

45

SOUTH AMERICA OUTLOOK

THE INSTITUTE FOR SUPPLY MANAGEMENT’S MANUFACTURING REPORT ON ® BUSINESS BREAKING NEWS

ISM PMI at 52.8% for April ISM PMI for the past 5 years

2014

46

2015

Metals & Manufacturing Outlook / May 2019

2016

2017

2018

2019

ISM REPORT OUTLOOK

ISM® REPORT ON BUSINESS®

MANUFACTURING E

conomic activity in the manufacturing sector expanded in April, and the overall economy grew for the 120th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The April PMI® registered 52.8 percent. The New Orders Index registered 51.7 percent, a decrease of 5.7 percentage points from the March reading of 57.4 percent. The Production Index registered 52.3 percent, a 3.5-percentage point decrease compared to the March reading of 55.8 percent. The Employment Index registered 52.4 percent, a decrease of 5.1 percentage points from the March reading of 57.5 percent. The Supplier Deliveries Index registered 54.6 percent,

APRIL 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

a 0.4-percentage point increase from the March reading of 54.2 percent. The Inventories Index registered 52.9 percent, an increase of 1.1 percentage points from the March reading of 51.8 percent. The Prices Index registered 50 percent, a 4.3-percentage point decrease from the March reading of 54.3 percent.

Of the 18 manufacturing industries, 13 reported growth in April, in the following order: Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Printing & Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Machinery; Furniture & Related Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; and Fabricated Metal Products.

PMI @ 52.8% ®

‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

MANUFACTURING AT A GLANCE Apr Index 52.8 51.7 52.3 52.4 54.6 52.9 42.6 50.0 53.9 49.5 49.8

Mar Index 55.3 57.4 55.8 57.5 54.2 51.8 42.7 54.3 50.4 51.7 51.1

% Point Change -2.5 -5.7 -3.5 -5.1 +0.4 +1.1 -0.1 -4.3 +3.5 -2.2 -1.3

Growing Growing Growing Growing Slowing Growing Too Low Unchanged Growing Contracting Contracting

Rate of Change Slower Slower Slower Slower Faster Faster Faster From Increasing Faster From Growing From Growing

Trend* (months) 32 40 32 31 38 16 31 1 4 1 1

OVERALL ECONOMY

Growing

Slower

120

Manufacturing Sector

Growing

Slower

32

Index PMI® New Orders Production Employment Supplier Deliveries Inventories Customers’ Inventories Prices Backlog of Orders New Export Orders Imports

Direction

*Number of months moving in current direction. Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes.

PMI 2017

2018

2019

52.8%

50% = Manufacturing Economy Breakeven Line

PMI® Manufacturing expanded in April, as the PMI® registered 52.8 percent, a decrease of 2.5 percentage points from the March reading of 55.3 percent. This indicates growth in manufacturing for the 32nd consecutive month. The PMI® reversed a March expansion improvement, thanks to decreases in new orders, production expansion and employment. The PMI® had its lowest level of expansion since October 2016, when the index registered 51.7 percent.

42.9% = Overall Economy Breakeven Line

COMMODITIES REPORTED Commodities Up in Price: Copper Products (2); Corrugate*; Electronic Components (9); Oil (2); and Steel (8).

Commodities Down in Price: Aluminum; Caustic Soda; Corn; Corrugate*; Fabricated Metal Products; Memory; Polypropylene (2); Steel — Hot Rolled; and Steel Products (4).

Commodities in Short Supply: Aluminum Products (2); Capacitors; and Electronic Components (12).

12

Note: The number of consecutive months the commodity is listed is indicated after each item. *Reported as both up and down in price.

MAY 2019

Metals & Manufacturing Outlook / May 2019

47

ISM Report On Business ®

®

manufacturing

April 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

New Orders (Manufacturing) 2017

2018

2019

51.7% 52.5% = Census Bureau Mfg. Breakeven Line

New Orders ISM’s New Orders Index registered 51.7 percent. Fourteen of 18 industries reported growth in new orders in April, in the following order: Nonmetallic Mineral Products; Wood Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Printing & Related Support Activities; Textile Mills; Furniture & Related Products; Paper Products; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; Machinery; Plastics & Rubber Products; and Food, Beverage & Tobacco Products.

Production (Manufacturing) 2017

2018

2019

52.3%

51.7% = Federal Reserve Board Industrial Production Breakeven Line

Production ISM’s Production Index registered 52.3 percent. The 13 industries reporting growth in production during the month of April — listed in order — are: Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Printing & Related Support Activities; Textile Mills; Fabricated Metal Products; Furniture & Related Products; Chemical Products; Machinery; Paper Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; and Plastics & Rubber Products.

Employment (Manufacturing) 2017

2018

2019

52.4% 50.8% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2017

2018

2019

54.6%

Employment ISM’s Employment Index registered 52.4 percent. Nine of 18 manufacturing industries reported employment growth in April, in the following order: Furniture & Related Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Food, Beverage & Tobacco Products; Paper Products; Machinery; Chemical Products; Plastics & Rubber Products; and Fabricated Metal Products.

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed in April, as the Supplier Deliveries Index registered 54.6 percent. The 10 industries reporting slower supplier deliveries in April — listed in order — are: Textile Mills; Computer & Electronic Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Transportation Equipment; Chemical Products; and Fabricated Metal Products.

Inventories (Manufacturing) 2017

2018

2019

52.9%

44.3% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

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Metals & Manufacturing Outlook / May 2019

Inventories The Inventories Index registered 52.9 percent. The 10 industries reporting higher inventories in April — listed in order — are: Petroleum & Coal Products; Printing & Related Support Activities; Textile Mills; Plastics & Rubber Products; Paper Products; Chemical Products; Machinery; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products.

ISM Report On Business ®

®

manufacturing

April 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2017

2018

2019

Customers’ Inventories ISM’s Customers’ Inventories Index registered 42.6 percent. The four industries reporting customers’ inventories as too high during the month of April are: Apparel, Leather & Allied Products; Wood Products; Primary Metals; and Fabricated Metal Products.

42.6%

Prices (Manufacturing) 2017

2018

2019

Prices The ISM Prices Index registered 50 percent. Five of the 18 industries reported paying increased prices for raw materials in April: Petroleum & Coal Products; Chemical Products; Miscellaneous Manufacturing‡; Transportation Equipment; and Machinery.

50%

52.5% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2017

2018

2019

53.9%

Backlog of Orders ISM’s Backlog of Orders Index registered 53.9 percent. The 13 industries reporting growth in order backlogs in April — listed in order — are: Nonmetallic Mineral Products; Textile Mills; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Plastics & Rubber Products; Paper Products; Furniture & Related Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Fabricated Metal Products.

New Export Orders (Manufacturing) 2017

2018

2019

49.5%

New Export Orders ISM’s New Export Orders Index registered 49.5 percent. The six industries reporting growth in new export orders in April — listed in order — are: Miscellaneous Manufacturing‡; Paper Products; Fabricated Metal Products; Plastics & Rubber Products; Machinery; and Chemical Products.

Imports (Manufacturing) 2017

2018

2019

49.8%

‡Miscellaneous

Imports ISM’s Imports Index registered 49.8 percent. The seven industries reporting growth in imports during the month of April — listed in order — are: Wood Products; Textile Mills; Nonmetallic Mineral Products; Miscellaneous Manufacturing‡; Chemical Products; Machinery; and Transportation Equipment.

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

Metals & Manufacturing Outlook / May 2019

49

THE RIGHT QUESTIONS TO ASK CUSTOMERS

by ANDREA OLSON

There’s quite a few best practices out there to gain customer feedback to help improve your organization’s performance and growth. Some of the recommendations for questions to ask customers to gain insight (via places like Google) have included: Is our product/service no longer useful to you?

Did the price of our product/service cause you to leave?

Have you decided to test out a competitor?

What would you like to see changed?

What would you say about your experience?

While all interesting, they are fairly useless. There’s good reason for this - they are binary questions.

Each can be answered with a Yes or a No, or a singular comment. In addition, there’s little to no context of the WHY. And the “why” is the most important thing to know.

Take for example, the question of “is our product/service no longer useful to you”? Many organizations will take questions like this through a broad sweeping online survey, with a “yes/no” radio option and an “open ended” text box to gather more detailed input. The challenge is that to get to the root of the “why” requires a conversation - a skilled interviewer and facilitator that can help the customer effectively articulate their reasons for their perceptions and actions.

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Metals & Manufacturing Outlook / May 2019

It might be simple as the product or service is something they now do in house, or that they don’t use the item anymore due to operational changes.

Yet, a trained interviewer will have the ability to ask a series of questions that will lead to more detail, identifying not only potential issues and problems which led to the change, but also opportunities that might be available to create new offerings, change offerings or identify a whole new product or service line.

When we put the onus on the customer to think through their decision process on their own, without investing the time to have an intimate conversation about the “why” behind the decision, we leave an inordinate amount of opportunity on the table. This hands-on engagement with customers is critical - it allows your organization to understand the nuances and unique challenges your customers have, that your competitors are not exploring.

Once we start to understand that “customer feedback” can’t simply be an automated process that it requires face time with customers, often in their own environments, to gain true insights into the “why” behind their behaviors and decisions, only then will we capture the input necessary to change our organizational competitiveness.

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