Manufacturing Dusting Off Expansion Plans?
The March Institute of Supply Management survey held the most meaningful good news we've seen in a while and unlike other green shoots there was far more than just the "hope" we've seen in the past.
The single best piece of news in the survey was a meaningful pickup in respondents' plans to expand their facilities with some 22% saying they plan to build or buy new manufacturing facilities in the next year, up from zero last month, and the highest reading since December 2007.
Foreign Mills Remain Less Active.
Steel buyers continue to see foreign mills as less interested in seeking U.S. business with 60% reporting "sub-normal" or no interest in March, up from 54% last month; import pricing continues to be less attractive than it's been, with 100% of respondents reporting foreign prices "same or above" as compared with 64% as recently as last fall.
Outlook Continues to Improve Hitting Multiyear Highs.
Some 36% of survey respondents believetheir backlogs will be increasing over the next three months, the highest level since December 2006. A whopping 50% of respondents expect the trend of incoming orders in their own businesses to be up in the next three months, the second highest level since February 2006. Similarly, some 25% of survey respondents indicated that receipts will pick up in the next three months, the highest level since February 2009.
Current activity is improving and it appears capital spending may revive. We like that buyers are increasingly optimistic but at the same time are holding inventories in a "goldilocks" position - just right. There is far more worry of the risk of holding too much inventory than the risk of missing price escalations in the market today, and this is healthy for all.
Michelle Galanter Applebaum spent more than 20 years as a managing director at Salomon Brothers in New York and was the No. 1-rated steel analyst from 1988-2003, according to Institutional Investor magazine. In 2003, Ms. Applebaum formed Steel Market Intelligence, a 5-person Chicago-based equity research boutique providing advisory services to institutional investors. In addition to publishing 10-15 reports/week, Ms. Applebaum sponsors numerous CEO-level meetings for her investor clients during the year. She is regularly quoted on Bloomberg, Dow Jones, The New York Times and makes frequent appearances on CNBC and other news programs. Ms. Applebaum lives near Chicago with her husband, visiting children and 2 dogs.