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USA PMI at 10 Month Low
USA Manufacturing Contracts in September -1.9%
Official Statement The Institute for Supply Management reported on October 1, 2010, "Economic activity in the manufacturing sector expanded in September for the 14th consecutive month, and the overall economy grew for the 17th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®. The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging. The growth of new orders continued to slow, as the index is down significantly from its cyclical high of 65.9 percent (January 2010). Production is currently growing at a faster rate than new orders, but it typically lags and would be expected to weaken further in the fourth quarter. Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter. Both the Inventories and Backlog of Orders Indexes are sending strong negative signals of weakening performance in the sector."
Cycle History The current ISM Manufacturing PMI is up +21.9 and +40.3% from the Great Recession cyclical bottom of 32.5 in December 2008. The PMI is down -6.0 and -9.9% from the recent cyclical peak of 60.4 in April 2010. Therefore, the current PMI is closer to the cyclical peak than the trough. The PMI is a percentage - not a total. More about the PMI below the chart.
Trend The current PMI continues below the April 2010 peak and has decreased 4 out of the 5 subsequent months. The current PMI is below the 12-month moving average of 56.7 and above the 24-month and 36-month moving averages of 49.1 and 49.1, respectively. The short-term trend has been downwards.
Chart (ISM Monthly Manufacturing PMI) Below is a chart of the latest 36 months (3 years) of the Purchasing Managers' Index (PMI) from October 2007 through the latest month reported, September 2010. The PMI has been greater than 50, indicating USA manufacturing is expanding, since August 2009 - 14 consecutive months. As can be seen, the PMI bottomed in December 2008 at 32.5, ascended significantly through August 2009 to 52.8. The PMI eventually continued upwards to a peak of 60.4 in April 2010. There have been 4 monthly declines out of the latest 5 months. However, the PMI still indicate USA manufacturing was expanding, just a a slowing rate.
Commentary The September PMI of 54.4 and a -1.9% decrease from August is disappointing. The USA economic slowdown persists. A continuation of these declines will lower the USA GDP further and increase unemployment. The Institute of Supply Management stated, "While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging."
Cycle History The current ISM Manufacturing PMI is up +21.9 and +40.3% from the Great Recession cyclical bottom of 32.5 in December 2008. The PMI is down -6.0 and -9.9% from the recent cyclical peak of 60.4 in April 2010. Therefore, the current PMI is closer to the cyclical peak than the trough. The PMI is a percentage - not a total. More about the PMI below the chart.
Trend The current PMI continues below the April 2010 peak and has decreased 4 out of the 5 subsequent months. The current PMI is below the 12-month moving average of 56.7 and above the 24-month and 36-month moving averages of 49.1 and 49.1, respectively. The short-term trend has been downwards.
Chart (ISM Monthly Manufacturing PMI) Below is a chart of the latest 36 months (3 years) of the Purchasing Managers' Index (PMI) from October 2007 through the latest month reported, September 2010. The PMI has been greater than 50, indicating USA manufacturing is expanding, since August 2009 - 14 consecutive months. As can be seen, the PMI bottomed in December 2008 at 32.5, ascended significantly through August 2009 to 52.8. The PMI eventually continued upwards to a peak of 60.4 in April 2010. There have been 4 monthly declines out of the latest 5 months. However, the PMI still indicate USA manufacturing was expanding, just a a slowing rate.
Commentary The September PMI of 54.4 and a -1.9% decrease from August is disappointing. The USA economic slowdown persists. A continuation of these declines will lower the USA GDP further and increase unemployment. The Institute of Supply Management stated, "While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging."
About the PMI
The ISM describes the PMI, the USA manufacturing metric as: A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. The PMI is a composite of five indexes: New Orders, Production, Employment, Supplier Deliveries, and Inventories. 18 manufacturing industries are reported and represented in the PMI: Primary Metals; Apparel, Leather & Allied Products; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Computer & Electronic Products; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; Printing & Related Support Activities. The five industries reporting contraction in August are: Furniture & Related Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Plastics & Rubber Products; and Machinery.
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