Aug. 7, 2014
Disconnect Between PMI and Reality?
Each month, the PMI from the Institute for Supply Management is one of the economy's most-watched bellwethers. When July’s number came out (see related item), it was surely met with excitement from domestic manufacturers.
As spring has fed into summer, the PMI reading has risen with the thermometer. The index, based on a monthly survey of corporate purchasing managers, has been at or above 55 percent for the last four months, topping out at more than 57 percent in July. Past history says such activity levels correspond to annual GDP growth of more than 4.0 percent.
This is wonderful news, except that it’s hard to see comparable evidence of it in the metals sector. MSCI numbers show that while service center shipments of steel and aluminum are above last year’s first-half figures, the gains are relatively moderate. Moreover, the first half of 2013 was uncharacteristically weak compared to the second half.
The story is even less encouraging in the red metals world, where total shipments of copper products lagged 2013 through the first half, reports the Copper and Brass Servicenter Association.
Service center executives surveyed for Metal Center News' annual Mid-Year Report, while positive about prospects for the second half, reported no major spike in order levels thus far this year, certainly nothing commensurate with GDP growth over 4.0 percent.
So, is the metals sector underperforming the rest of the economy or is the PMI a lagging indicator of prosperity still to come? Perhaps both.