Monday, January 3, 2011

USA Manufacturing PMI Up in December! (Chart) *7-month high, 17th month of expansion*


USA Manufacturing PMI (Purchasing Managers' Index) by the Institute for Supply Management

USA Manufacturing PMI Up +0.4% in December

Official Statement by the Institute for Supply Management (Tempe, Arizona) - Economic activity in the manufacturing sector expanded in December for the 17th consecutive month, and the overall economy grew for the 20th 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. "The manufacturing sector continued its growth trend as indicated by this month's report. We saw significant recovery for much of the U.S. manufacturing sector in 2010. The recovery centered on strength in autos, metals, food, machinery, computers and electronics, while those industries tied primarily to housing continue to struggle. Additionally, manufacturers that export have benefited from both global demand and the weaker dollar. December's strong readings in new orders and production, combined with positive comments from the panel, should create momentum as we go into the first quarter of 2011."

Cycle History The current ISM Manufacturing PMI is up +24.5 and +75.3% from the Great Recession cyclical bottom of 32.5 in December 2008. The PMI is down -3.4 and -5.6% from the recent cyclical peak, the post-Great Recession 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 short-term trend has been mixed and basically even. The current PMI continues below the April 2010 peak of 60.4 and has decreased 5 of the 8 subsequent months. The current PMI is below the 12 month moving average of 57.3 and has not exceeded for 6 consecutive months. The current PMI is above the 24-month and 36-month moving averages of 51.8 and 49.7, respectively. The 12-month moving average continues slightly ascending, while the 24-month average is ascending sharply and the 36-month moving average is ascending. (The 12-month, 24-month, and 36-month moving averages charts are not shown on this page).

ISM Monthly Manufacturing PMI (Chart) Below is a chart of the latest 36 months (3 years) of the Purchasing Managers' Index (PMI) from January 2008 through the latest month reported, December 2010. The PMI has been greater than 50, indicating USA manufacturing is expanding, since August 2009, for 17 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 then continued upwards to a peak of 60.4 in April 2010. There have been 5 monthly declines out of the latest 8 months. However, the PMI still indicates USA manufacturing is expanding, just at a slower rate.

Commentary The December PMI of 57.0 and +0.4% increase from November is welcome news after the slightly disappointing dip in November. The PMI is now back up to the October level (56.9), but still below the April 2010 post-Great Recession peak (60.4). However, the USA manufacturing sector continues to expand for the 17th consecutive month. The 5 declines in the past 8 months have kept the April 2010 cyclical peak of 60.4 out of reach. Most encouraging is concern about a double-dip recession is negated by recent PMI data.

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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*Data courtesy of the Institute for Supply Management*

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