Chain Reactions

Slap-Happy New Year

The headline in the Wall Street Journal's first weekend edition of the year is as bleak as it is succinct: "Manufacturing Tumbles Globally." You can read the whole thing by clicking here, but I'll save you some time and excerpt the first paragraph, which pretty much says it all:

"Manufacturing activity around the world fell sharply in December , suggesting that the U.S. recession will extend well into 2009, if not longer, and that unemployment will rise globally."

The WSJ article refers to the latest ISM index of manufacturing activity (which you can read in its entirety here). Here's what Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee, had to say about the latest numbers:

"Manufacturing activity continued to decline at a rapid rate during the month of December . The decline covers the full breadth of manufacturing industries, as none of the industries in the sector report growth at this time. New orders have contracted for 13 consecutive months, and are at the lowest level on record going back to January 1948. Order backlogs have fallen to the lowest level since ISM began tracking the Backlog of Orders Index in January 1993. Manufacturers are reducing inventories and shutting down capacity to offset the slower rate of activity."

Not a single one of the manufacturing sectors surveyed by ISM reported growth in December. Sixteen industries reported contraction in December: Nonmetallic Mineral Products; Wood Products; Fabricated Metal Products; Printing & Related Support Activities; Textile Mills; Plastics & Rubber Products; Paper Products; Transportation Equipment; Machinery; Primary Metals; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Furniture & Related Products. Two industries at least held their own, with no change in activity compared to last month: Apparel, Leather & Allied Products; and Petroleum & Coal Products.

While the ISM index looks at U.S. manufacturing, the WSJ article casts a wider net and reports that just about everywhere in the world is feeling the crunch of a manufacturing malaise.

The good news, which neither the WSJ article nor the ISM index reflects, is that people aren't all of a sudden going to stop consuming goods just because of a lousy economy. They'll slow down their rate of consumption, of course, but if history has taught us anything, it's taught us that everything goes in cycles. The not-so-good news, though, is there's no immediate indication that the current slump we're in has bottomed out, or indeed whether it will bottom out any time soon.

If ever there was a time to get serious about lean manufacturing practices (and I'm NOT talking about layoffs, which is a worst practice if there ever was one), that time is now.

TAGS: Supply Chain
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