Wednesday, February 2, 2011

USA Manufacturing PMI at 80-Month High! (Chart) *Economy expanded for 20th month*


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

USA Manufacturing PMI at 80-Month High!

Official Statement by the Institute for Supply Management (Tempe, Arizona) - Economic activity in the manufacturing sector expanded in January for the 18th 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 grew at a faster rate in January as the PMI registered 60.8 percent, which is its highest level since May 2004 when the index registered 61.4 percent. The continuing strong performance is highlighted as January is also the sixth consecutive month of month-over-month growth in the sector. New orders and production continue to be strong, and employment rose above 60 percent for the first time since May 2004. Global demand is driving commodity prices higher, particularly for energy, metals and chemicals."

Cycle History The current ISM Manufacturing PMI of 60.8 is up +28.3 and +87% from the Great Recession cyclical bottom of 32.5 in December 2008. The PMI is now at a cyclical peak, a post-Great Recession peak, exceeding the prior peak of 60.4 in March 2010. Therefore, the current PMI is now well above the cyclical trough of about 2 years ago. The PMI is a percentage - not a total. More about the PMI below the chart.

Trend The short-term trend has up and now a post-Great Recession peak was reached with the current  January PMI. The current PMI has exceeded the previous March 2010 peak of 60.4. The current PMI is above the slightly ascending 12 month moving average of 57.5 and has continued above for 4 consecutive months. The current PMI continues above the steeply ascending 24-month and ascending 36-month moving averages of 52.8 and 50.0, respectively. 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 26 months of the Purchasing Managers' Index (PMI) from cyclical low, the Great Recession low of 32.5 in December 2008 through the latest month reported, January 2011. The PMI has been greater than 50, indicating USA manufacturing is expanding, since August 2009, for 18 consecutive months. As can be seen, the PMI bottomed in December 2008 at 32.5, ascended significantly through August 2009 to 52.8, the first time above 50 since January 2008. The PMI continued upwards to a peak of 60.4 in March 2010. The PMI then decreased for 4 consecutive months (April 2010 through July 2010) and now has increased 6 consecutive months. However, a PMI greater than 50 indicates USA manufacturing is expanding even when the monthly PMI was decreasing in some months in 2010, just at a slower rate.

Commentary The PMI was revised for several months of 2010, so the above commentary and monthly data changed somewhat from previous monthly posts. The January 2011 PMI of 60.8 is extraordinary, the highest since May 2004 (61.4), and an 80-month high. The +2.3% increase from December is the largest monthly increase since March 2010. The USA manufacturing sector continues to expand for the 18th consecutive month (PMI greater than 50.0) and the overall economy continues to expand for the 20th consecutive month (PMI greater than 42.5). Most encouraging is concern about a double-dip recession is negated by ongoing PMI data.  Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee noted "The past relationship between the PMI and the overall economy indicates that the PMI for January (60.8 percent) corresponds to a 6.4 percent increase in real gross domestic product (GDP) on an annual basis." USA manufacturing is off to a great start in 2011.

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 42.5 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.

About the Institute for Supply Management The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education.

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*Data courtesy of the Institute for Supply Management*

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