Further reason for optimism:

• The percentage of significant manufacturers on the Panjiva Watch List declined slightly to 29%.

Pessimists, take note:

• Seasonality — Last year, from June 2008 to July 2008, there was a 6% increase in the number of global manufacturers shipping to the U.S. market, indicating that there may be a strong seasonal component to this year’s increase.
• Vulnerability — Last year’s increase preceded the free fall in global trade that unfolded from July of 2008 through February of 2009; if we were vulnerable to shocks this time last year, we’re even more so this year.
• Low absolute level of activity — The number of companies shipping to the U.S. is about 10% down from where we were this time last year.
• High absolute level of risk — The percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months remained steady at 40%.

Methodological notes for the data junkies:

• Manufacturers that have suffered a 50% or greater decline in volume shipped to American customers in the most recent three month period, versus the same period a year ago, are on the Panjiva Watch List.
• “Significant manufacturers” are companies that have sent 10 or more shipments to American customers within the last year.  As of the end of July, there were 86,570 significant manufacturers.
• “Significant buyers” are companies that have received 10 or more shipments from overseas manufacturers within the last year.  As of the end of July, there were 73,570 significant buyers.

See our previous analyses of other bankruptcies in the auto industry.

“Multinational corporations and their manufacturing partners in emerging markets need to rethink how they manage their relationships with each other in light of the global downturn.”

http://hbr.harvardbusiness.org/2009/07/just-how-healthy-is-your-global-partner/ar/1

The Wall Street Journal: “‘America led the global economy into a downturn; now, a sustained increase in the number of global companies serving the U.S. market suggests that America may be leading us out of the downturn,’ said Panjiva CEO Josh Green. ‘That said, anyone hoping for a quick recovery to pre-crisis levels of global trade is likely to be disappointed.’”

http://blogs.wsj.com/economics/2009/06/18/trade-picture-clouded-by-rise-in-oil/

“Panjiva in BusinessWeek — Global Trade Data” />

BusinessWeek: “‘Increasingly, it feels that the worst is behind us,’ says Josh Green, chief executive officer of the trade-tracking firm. Waxing cautious, however, he adds ‘Still, we have a long way to get back to the pre-crisis level of global trade.’”

http://www.businessweek.com/managing/economic_recovery/blog/archives/2009/06/global_trade_ri.html

About.com: “Panjiva’s research team also found that there was a decline in manufacturers on their watch list, which was the first time since September 2008.”

http://logistics.about.com/b/2009/06/17/shipments-to-the-us-rise-again-in-may.htm

Supply Chain Management Review: “We are seeing some encouraging signs, but there is still a low level of overall activity in an absolute sense.”

http://www.scmr.com/article/CA6665999.html

Logistics Management: “Companies continue to be cautious in their approach to placing orders, according to Green, and they are much more cognizant of the risks that are in their supply chains.”

http://www.logisticsmgmt.com/article/CA6665988.html?industryid=48470

World Trade Magazine: “Panjiva cautions that there will likely be further supplier bankruptcies.”

http://www.worldtrademag.com/CDA/Articles/Breaking_News/BNP_GUID_9-5-2006_A_10000000000000610030

Modern Materials Handling: “Said Green… ‘As macroeconomic circumstances change, people are going to be looking at a variety of potential risks.’”

http://www.mmh.com/article/CA6665991.html

Carpe Diem: “[M]ore offshore manufacturers are shipping goods into the consumer-driven U.S. market, global-trade tracker Panjiva reports.”

http://mjperry.blogspot.com/2009/06/shipping-index-rises-for-third-straight.html

Some additional good news:

• The percentage of significant manufacturers on the Panjiva Watch List declined from 31% in April to 30% in May.  This also is a first — the first decline in the percentage of significant manufacturers appearing on the Watch List since we began tracking this metric in September of 08.
• Similarly, the percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months declined from 41% in April to 40% in May.

These numbers lend further credence to the possibility that global trade has already hit bottom and that we are witnessing the first steps of a recovery in global trade.  However, pessimists should take note of the following:

• In 2008, there was a Spring uptick in the number of manufacturers shipping to the U.S., suggesting that there’s a seasonal component to what we’re seeing.
• This most recent 2% uptick in the number of manufacturers shipping to the U.S. is modest, suggesting that recovery to pre-crisis levels of trade activity will likely take some time.
• While things are getting better in a relative sense, the absolute amount of risk in the system remains quite high.  I.e., we’re likely to continue to see supplier bankruptcies, and the system as a whole remains quite vulnerable to further shocks.

Methodological notes for the data junkies:

• Manufacturers that have suffered a 50% or greater decline in volume shipped to American customers in the most recent three month period, versus the same period a year ago, are on the Panjiva Watch List.
• “Significant manufacturers” are companies that have sent 10 or more shipments to American customers within the last year.  As of the end of May, there were 86,331 significant manufacturers.
• “Significant buyers” are companies that have received 10 or more shipments from overseas manufacturers within the last year.  As of the end of May, there were 72,031 significant buyers.

The New York Times: “‘The free fall in global trade seems to have halted,’ said Josh Green, the chief executive of Panjiva…”
http://www.nytimes.com/2009/05/29/business/economy/29norris.html?_r=1

The Wall Street Journal: “‘The number of companies shipping to U.S. customers is no longer in free fall — definitely a reason for optimism,’ Panjiva said.”
http://blogs.wsj.com/economics/2009/05/29/signs-of-stabilization-in-trade/

BusinessWeek: “‘Unfortunately, there is still substantial risk facing those engaged in global trade, and the global trading system remains vulnerable to further shocks,’ cautions CEO Green.”

http://www.businessweek.com/managing/economic_recovery/blog/archives/2009/06/global_trade_tu.html#more

MarketWatch: “Customers will have to decide whether they will share in the suppliers’ restructuring costs, or leave it entirely to the supplier “and run the risk of seeing [the] supplier go under.’”
http://www.marketwatch.com/story/gm-fallout-set-to-be-windfall-for-japan-automakers

CIO: “New global trade data from Panjiva, a vendor that tracks the health of the world’s suppliers, shows that ‘after four months of free fall in the number of manufacturers shipping to American customers, there have been small increases from February 2009 to March, and then from March to April.”
http://www.cio.com/article/493868/Supply_Chain_Reality_Much_Risk_Tied_Up_in_Shrinking_Pool_of_Suppliers_

The Business Insider: “[C]onfirming the rebound are privately collected numbers from the firm Panjiva, which monitors manufacturing and supplier information…”
http://www.businessinsider.com/the-rebound-in-china-is-real-2009-6

Supply & Demand Chain Executive: “‘While some may interpret this data as a welcome sign that the global manufacturing economy has hit bottom and is rebounding, analysis of historical trends and additional shipment data points to a need for continued caution as significant risk still exists.’ Panjiva said.”
http://www.sdcexec.com/web/online/Decision-Support-News/Green-Shoots-in-the-Supply-Chain-Manufacturers-Shipping-to-US-Increases-for-Second-Month-in-a-Row/37$11389

About.com: “[T]he risk for companies engaged in global trade remains high as the percentage of significant manufacturers on the Panjiva Watch List edged up from 30% in March to 31% in April.”
http://logistics.about.com/b/2009/06/01/reasons-to-be-cheerful.htm

Reuters: “CEO Josh Green… warns further that, ‘there is still a tremendous amount of risk in the system.’”
http://economics.alltop.com/

The graph below summarizes the data behind the quote.  As you can see, after four months of free fall in the number of manufacturers shipping to American customers, there were increases from February to March (~2%), and again from March to April (~8%).

Unfortunately, the news isn’t all good, as noted by the Wall Street Journal and BusinessWeek.  Consider the following:

• Though the March-April increase surpassed last year’s March-April increase, data released by Chinese authorities suggest that, on a seasonally adjusted basis, April was worse than March for the world’s largest exporting economy.
• Risk for those engaged in global trade remains high: the percentage of significant manufacturers on the Panjiva Watch List edged up from 30% in March to 31% in April.
• Similarly, the percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months edged up from 40% in March to 41% in April.

Clearly, global trade is still vulnerable to shocks.  But it’s nice, finally, to be able to report a bit of good news.

Some methodological notes for the data junkies:

• Manufacturers that have suffered a 50% or greater decline in volume shipped to American customers in the most recent three month period, versus the same period a year ago, are on the Panjiva Watch List
• “Significant manufacturers” are companies that have sent 10 or more shipments to American customers within the last year.  As of the end of April, there were 86,740 significant manufacturers.
• “Significant buyers” are companies that have received 10 or more shipments from overseas manufacturers within the last year.  As of the end of April, there were 72,447 significant buyers.

Indeed, things looked grim starting for Visteon in January of 2008:

Similarly, things looked grim for Metaldyne starting in February of 2008:

“The free fall in global trade seems to have halted,” said Josh Green, the chief executive of Panjiva…

 http://www.nytimes.com/2009/05/29/business/economy/29norris.html?_r=1&ref=business

The bad news is that there is still a tremendous amount of risk in the system.  At the end of March, as usual, we took a look at significant manufacturers, and we found that 30% of these companies qualified for the Panjiva Watch List, as a result of suffering a 50% or greater decline in volume shipped to U.S. customers during the most recent three month period, versus the same period a year ago.

Also, 40% of significant U.S. buyers have an active relationship with at least one Panjiva Watch List manufacturer.

The comparable numbers for February were similar: 29% of significant manufacturers were on the Panjiva Watch List, and 40% of significant U.S. buyers maintained an active relationship with at least one Panjiva Watch List manufacturer.

Bottom line…  There’s some chance we’ve hit bottom, but it’s quite clear that we’re not remotely out of the woods yet.