ISM: PMI Increases to 52.7 Percent as Manufacturing Expands

Economic activity in the manufacturing sector expanded in November for the 28th consecutive month, and the overall economy grew for the 30th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business from the Institute for Supply Management, Tempe, Ariz.

Manufacturing continued its growth in November as the PMI registered 52.7 percent, an increase of 1.9 percentage points when compared to October. A reading above 50 percent indicates growth.

A PMI in excess of 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 30th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 28th consecutive month.

“The past relationship between the PMI and the overall economy indicates that the average PMI for January through November of 55.4 percent corresponds to a 4.5 percent increase in real gross domestic product. In addition, if the PMI for November, 52.7 percent, is annualized, it corresponds to a 3.6 percent increase in real GDP annually,” says Bradley Holcomb, chairman of ISM’s Manufacturing Business Survey Committee.

Primary metals was one of eight industries that reported growth in November, though fabricated metal products and miscellaneous manufacturing both reported contraction.

Also in November, the New Orders Index increased 4.3 percentage points from October to 56.7 percent, reflecting the second month of growth after three months of contraction.

ISM’s Production Index registered 56.6 percent in November, which is an increase of 6.5 percentage points when compared to the October reading. This indicates growth for the third consecutive month after just one month of contraction.

ISM’s Employment Index registered 51.8 percent in November, which is 1.7 percentage points lower than the 53.5 percent reported in October. This is the 26th consecutive month the Employment Index has been above 50 percent. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics data on manufacturing employment.

The Inventories Index registered 48.3 percent in November, 1.6 percentage points higher than the 46.7 percent reported in October. An Inventories Index greater than 42.7 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis’ figures on overall manufacturing inventories, ISM reports.

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Monday, August 29, 2016