Wednesday, March 2, 2011

USA Manufacturing PMI Highest Since May 2004! (Chart) *Economy expanded for 21st month*


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

USA Manufacturing PMI Highest Since May 2004!

Official Statement by the Institute for Supply Management (Tempe, Arizona) - Economic activity in the manufacturing sector expanded in February for the 19th consecutive month, and the overall economy grew for the 21st 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. "February's report from the manufacturing sector indicates continuing strong performance as the PMI registered 61.4 percent, a level last achieved in May 2004. New orders and production, driven by strength in exports in particular, continue to drive the composite index (PMI). New orders are growing significantly faster than inventories, and the Customers' Inventories Index indicates supply chain inventories will require continuing replenishment. The Employment Index is above 60 percent for only the third time in the last decade. While there are many positive indicators, there is also concern as industries related to housing continue to struggle and the Prices Index indicates significant inflation of raw material costs across many commodities."

Cycle History The current ISM Manufacturing PMI of 61.4 is up +28.9 and +89% 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 peaks of 60.8 in January 2011 and 60.4 in March 2010. Therefore, the current PMI is now well above the December 2008 cyclical trough. The PMI is a percentage - not a total. More about the PMI below the chart.

Trend The short-term trend has up and now another Post-Great Recession peak was reached with the current  February PMI. The current PMI has exceeded the previous January 2011 peak of 60.8. The current PMI is above the ascending 12 month moving average of 57.9 and has continued above for 5 consecutive months. The current PMI continues above the steeply ascending 24-month and ascending 36-month moving averages of 53.9 and 50.3, 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 27 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, February 2011. The PMI has been greater than 50, indicating USA manufacturing is expanding, since August 2009, for 19 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 7 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 February 2011 PMI of 61.4 is a second consecutive extraordinary month, the highest since May 2004 (61.4), and an 81-month high. The USA manufacturing sector continues to expand for the 19th consecutive month (PMI greater than 50.0) and the overall economy continues to expand for the 21st 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 "New orders and production, driven by strength in exports in particular, continue to drive the composite index (PMI)." 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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