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Mixed signals

Purchasing Manager's Index continues climb in January

Economic activity in the manufacturing sector grew in January for the eighth consecutive month, while the overall economy grew for the 27th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Businessᆴ.

ISM's Purchasing Managers Index registered 63.6 percent in January, an increase of 0.2 percentage point when compared to the seasonally-adjusted 63.4 percent in December. ISM's New Orders Index declined 2 percentage points from 73.1 percent in December to 71.1 percent in January. ISM's Production Index rose 1.9 percentage points from 69.2 percent in December to 71.1 percent in January. The ISM Employment Index is at 52.9 percent for January, a decrease of 0.6 percentage point when compared to the 53.5 percent reported in December.

The PMI indicates that the manufacturing economy grew in January for the eighth consecutive month. The PMI for January registered 63.6 percent, an increase of 0.2 percentage point compared to the December reading of 63.4 percent. 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 42.8 percent, over a period of time, generally indicates an expansion of the overall economy. The January PMI indicates that both the overall economy and the manufacturing sector are growing. The past relationship between the PMI and the overall economy indicates that the PMI for January (63.6 percent) corresponds to a 7.6 percent annualized increase in real gross domestic product (GDP).

Comments from purchasing and supply managers are generally encouraging with mentions of "record sales and orders on a per-day basis" and "Companies are beginning to refill their inventory pipelines." However, others are still reporting that they see no sign of the recovery, best exemplified by the comment "Recovery? What recovery?" It is obvious that certain sectors are lagging the rest of manufacturing as we start the new year.

The data presented here is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. The Manufacturing ISM Report On Businessᆴ is published monthly by the Institute for Supply Managementル.
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