Sunday, June 5, 2011

USA Manufacturing PMI Plunges to 20-Month Low (Chart) *USA economy expands for 24th month*

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


Official Statement by the Institute for Supply Management (Tempe, Arizona) - Economic activity in the manufacturing sector expanded in May for the 22nd consecutive month, and the overall economy grew for the 24th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business. The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 53.5 percent and indicates expansion in the manufacturing sector for the 22nd consecutive month. This month's index, however, registered 6.9 percentage points below the April reading of 60.4 percent, and is the first reading below 60 percent for 2011, as well as the lowest PMI reported for the past 12 months. Slower growth in new orders and production are the primary contributors to this month's lower PMI reading. Manufacturing employment continues to show good momentum for the year, as the Employment Index registered 58.2 percent, which is 4.5 percentage points lower than the 62.7 percent reported in April. Manufacturers continue to experience significant cost pressures from commodities and other inputs."

Trend The short-term trend continues downwards and has dropped below the benchmark 60.0 after 4 consecutive months above. The intermediate-term trend (6 months) is upwards and the long-term trend (12 months) is leveling off.

Cycle History The ISM Manufacturing PMI reached a Post-Great Recession peak of 61.4 in February 2011. A Great Recession cyclical low of 32.5 was set in December 2008. The PMI is a percentage - not a total. More about the PMI below the chart.

ISM Monthly Manufacturing PMI (Chart) Below is a chart of the Purchasing Managers' Index (PMI) from cyclical low, the Great Recession low of 32.5 in December 2008 through the latest month reported. The PMI has been greater than 50, indicating USA manufacturing is expanding, since August 2009, for 22 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 then regained the 60.0 benchmark for 4 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 May 2011 PMI is a 20-month low (September 2010 at 52.4) and clearly indicates USA manufacturing expansion is slowing significantly. However, USA manufacturing sector continued to expand for the 22nd consecutive month (PMI greater than 50.0) and the overall economy continues to expand for the 24th consecutive month (PMI greater than 42.5). Key points of the current report:
● New Orders, Production, Employment, Inventories, Backlog of Orders, Exports, Imports growing slower
● Supplier Deliveries slowing slower
● Customer Inventories contracting from growing
● Prices increasing slower

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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