Manufacturing Continues to Expand as PMI Hits 60.4%

Economic activity in the manufacturing sector expanded in April for the 21st consecutive month as the PMI hit 60.4 percent, according to the latest Manufacturing ISM Report On Business from the Institute for Supply Management, Tempe, Ariz. While down slightly from 61.2 percent in March, any reading above 50 percent indicates growth.

“The recent trend of rapid growth in the manufacturing sector continued in April as the PMI registered above 60 percent for the fourth consecutive month. The New Orders and Production Indexes continue to drive the PMI, as they have both exceeded 60 percent for five consecutive months,” said Norbert J. Ore, chairman of ISM’s Manufacturing Business Survey Committee.

Manufacturing employment appears to have developed significant momentum, as the Employment Index readings for the first four months of 2011 are the highest readings in the last 38 years, Ore said. Inventory growth also took place in April after two months of destocking; however, the inventory restocking would appear to be necessitated by the strong performance in new orders.

“While the manufacturing sector is definitely performing above most expectations so far in 2011, manufacturers are experiencing significant cost pressures from commodities and other inputs,” he added.

Of the 18 manufacturing industries, 17 reported growth in April, including primary metals and fabricated metal products.

A PMI in excess of 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI of 60.4 percent indicates growth for the 23rd consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 21st consecutive month. “The average PMI for January through April (61 percent) corresponds to a 6.5 percent increase in real gross domestic product. In addition, if the PMI for April is annualized, it corresponds to a 6.3 percent increase in real GDP annually,” Ore said.

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Sunday, August 28, 2016