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Friday, November 17, 2017
Memory Industry News
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Manufacturing Index continue on growth path


Thursday, November 02, 2017

Economic activity in the manufacturing sector expanded in October, and the overall economy grew for the 101st consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

U.S. manufacturing expanded in October as the PMI registered 58.7 percent, a decrease of 2.1 percentage points from the September reading of 60.8 percent. This indicates growth in manufacturing for the 14th consecutive month and continues expansion consistent with pre-hurricane levels. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee states, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (57.3 percent) corresponds to a 4.4 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for October (58.7 percent) is annualized, it corresponds to a 4.9 percent increase in real GDP annually.”

A PMI above 43.3 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the October PMI indicates growth for the 101st consecutive month in the overall economy and the 14th straight month of growth in the manufacturing sector.

“The larger than expected drop likely reflects the uncertainty created by the hurricanes as manufacturers try to navigate the full impact of the storms and recovery efforts — both in terms of scale as well as timing,” say Bobby Bono and Mike Goulet of PwC in a statement. “Survey responses reflected tempered optimism, ranging from ‘our plants are sold out for 2017’ and ‘things are really picking up’ to concerns over the hurricanes and ‘raw material costs on the rise.’ Overall, the October ISM report reflects a strong U.S. manufacturing sector, but companies will want to monitor whether the PMI slowdown continues over the next few months.”

Orders, Production and Inventory

ISM’s New Orders Index registered 63.4 percent in October, which is a decrease of 1.2 percentage points when compared to the 64.6 percent reported for September, indicating growth in new orders for the 14th consecutive month.

“New Order expansion continues at a strong pace, consistent with pre-hurricane levels,” says Fiore. A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

ISM’s Production Index registered 61 percent in October, which is a decrease of 1.2 percentage points when compared to the 62.2 percent reported for September, indicating growth in production for the 14th consecutive month.

“Production expansion continues at a strong pace in spite of supply chain difficulties including the reduction of inventory levels seen during the period,” says Fiore. An index above 51.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The Inventories Index registered 48 percent in October, which is a decrease of 4.5 percentage points when compared to the 52.5 percent reported for September, indicating raw materials inventories contracted in October compared to September. An Inventories Index greater than 42.9 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

ISM’s Backlog of Orders Index registered 55 percent in October, a decrease of 3 percentage points from the 58 percent reported for September, indicating growth in order backlogs for the ninth consecutive month but at a slower rate. Of the 88 percent of respondents who reported their backlog of orders, 26 percent reported greater backlogs, 16 percent reported smaller backlogs, and 58 percent reported no change from September.

Exports, Imports and Prices

ISM’s New Export Orders Index registered 56.5 percent in October, a decrease of 0.5 percentage point when compared to the 57 percent reported for September, indicating growth in new export orders for the 20th consecutive month.

ISM’s Imports Index registered 54 percent in October, the same level of expansion when compared to the 54 percent reported for September, indicating that imports are growing in October for the ninth consecutive month.

The ISM Prices Index registered 68.5 percent in October, a decrease of 3 percentage points from the September level of 71.5 percent indicating an increase in raw materials prices for the 20th consecutive month. In October, 43 percent of respondents reported paying higher prices, 6 percent reported paying lower prices, and 51 percent of supply executives reported paying the same prices as in September.

“The Business Survey Committee noted price increases in many areas, including metals (steel, stainless, brass and aluminum); fuels and distillates; electronic components; many basic and intermediate chemicals; and plastic resins and parts made from these materials. The near-term impacts from Hurricane Harvey were evident during the period,” says Fiore.

A Prices Index above 52.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

Employment

ISM’s Employment Index registered 59.8 percent in October, a decrease of 0.5 percentage point when compared to the September reading of 60.3 percent. This indicates growth in employment in October for the 13th consecutive month.

“Employment levels remain strong, consistent and in keeping pace with production output,” says Fiore.  An Employment Index above 50.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

By: DocMemory
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