Monday, August 1, 2011

USA Manufacturing Growth Plunges to 24-Month Low (Chart) *Sector still 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 July for the 24th consecutive month, and the overall economy grew for the 26th 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 50.9 percent, a decrease of 4.4 percentage points, indicating expansion in the manufacturing sector for the 24th consecutive month, although at a slower rate of growth than in June. Production and employment also showed continued growth in July, but at slower rates than in June. The New Orders Index registered 49.2 percent, indicating contraction for the first time since June of 2009, when it registered 48.9 percent. The rate of increase in prices slowed for the third consecutive month, dropping 9 percentage points in July to 59 percent. In the last three months combined, the Prices Index has declined by 26.5 percentage points, dropping from 85.5 percent in April to 59 percent in July. Despite relief in pricing, however, several comments suggest a slowdown in domestic demand in the short term, while export orders continue to remain strong."

Trend The short-term trend (3-month moving average) continues downwards for the 4th consecutive month. The intermediate-term trend (6-month moving average) continues downwards for the 3rd consecutive month. The long-term trend (12-month moving average) is now descending, after being level the prior 2 months.

Cycle History The ISM Manufacturing PMI reached a Post-Great Recession peak of 61.4 in February 2011. A Great Recession cyclical low of 33.3 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 the March 2010 cyclical high of 60.4 through the latest month reported. The PMI has been greater than 50, indicating USA manufacturing is expanding, since August 2009, for 24 consecutive months. The PMI a first Post-Great Recession peak in March 2010 at 60.4 and a higher peak in February 2011 at 61.4. However, a PMI greater than 50 indicates USA manufacturing is expanding even when the monthly PMI was decreasing in some months in 2010 and 2011, just at a slower rate.


Commentary The -4.4 decrease in the July 2011 PMI to 50.9 is near-dismal and indicates USA manufacturing has slowed considerably, to near stalling. The PMI has decreased 4 of the past 5 months, since the February 2011 peak and Post-Great Recession high. However, the USA manufacturing sector continued to expand for the 24th consecutive month (PMI greater than 50.0) and the overall economy continues to expand for the 26th consecutive month (PMI greater than 42.5). Key points of the current report (Direction, Rate of Change):
● Purchasing Managers' Index (PMI), USA Manufacturing Sector, growing, slower
● Overall USA Economy growing, slower
● Exports, Imports growing, faster
● Production, Employment growing, slower
● Supplier Deliveries slowing, slower
● New Orders, Inventories contracting, from growing
● Backlog of Orders contracting, faster
● Customer Inventories too low, faster
● 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 included: Miscellaneous Manufacturing; Printing & Related Support Activities; Computer & Electronic Products; Paper Products; Textile Mills; Petroleum & Coal Products; Nonmetallic Mineral Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Machinery; and Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Apparel, Leather & Allied Products; Primary Metals; Wood Products; and Food, Beverage & Tobacco Products.

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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