February 2013 ISM PMI Increases to 54.2

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In the words of PMPA’s economics advisor, Dr. Ken Mayland, “The factory sector wants to grow. Orders were better (57.8, up 4.5 points), production was better (57.6, up 4.0 points), and the order backlog was better (55.5, up 7.5 points). The U.S. economy may be the best performing of the major economies of the world.”

The Institute for Supply Management (ISM) reported that its summary Purchasing Managers’ Index (PMI) increased 1.1 points, for a February reading of 54.2. According to the ISM, a reading above 50 would typically be associated with an expansion of the manufacturing sector. Furthermore, based on the ISM’s estimates, if the current reading of 54.2 were sustained, it would tend to be consistent with 3.7% real GDP growth (annualized).

Our inferences:

Manufacturing remains a growing sector of the U.S. and world economies
The ISM employment index was weakest of any of the ISM indicators tracked, at 52.6%, down 1.4% from 54.0%.
With Affordable Health Care Act clearly on the minds of employers, adding employees has to be the least preferred outcome until we can see costs more clearly.
The Prices sub-index rose 5 points to 61.5. Can price increases and inflation be all that far away?

One respondent in the Miscellaneous Manufacturing sector is quoted by ISM, “Starting to pick up after a slower than normal year-end.”

That is certainly in agreement with PMPA’s Business Trends Report for January 2013 which showed a record rise of 41% over December 2012 sales levels, which were quite low.

ISM February 2013

Calculated Risk Blog

Precision Industry Sales In July Beat Seasonal Doldrums

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business trends July 2012 — Up five points over last July.

PMPA’s Business Trends Index for July 2012 is 111, down substantially from last month’s adjusted value of 119, but still well above last year’s July value of 106 and July 2010’s value of 99. While our index does reflect a drop in shipments that we expect seasonally in July, the 111 value is highest value for July in this decade. July 2012’s reading is up 4 % over last July, and year to date we are up 5% over same period last year. It is easy to see the absolute value of the month to month drop and be concerned, but our index shows that our industry continues to improve over past years’ performance when considering where we are seasonally.

Industrial Production (IP) increased 0.6 percent in July after having risen 0.1 percent in both May and June. In July, the U.S. summary “Purchasing Managers’ Index” (PMI) from the Institute for Supply Management (ISM) inched up 0.1 points for July, to a level of 49.8.

In plain English, “Industrial activity at the nation’s factories remained stalled in July” according to Dr. Ken Mayland, PMPA’s retained economist.

Our index indicates that our shops continue to adjust to the broader economy as we sustain higher performance than prior years.

Over half of shops responding were scheduling overtime in July.

Full report here.

USA Leads Global Recovery-Evidence

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Leadership is about action, not potential. Global Purchasing Managers Index (PMI) data shows that it is the USA, not China, that is leading the world out of the slowdown.

20120202_GlobPMI — Maybe the term SHOULD be U-BRIC

Here are 5 reasons that PMI data is relevant evidence for your analysis

PMI is a reliable fact-based indicator as opposed to opinion or confidence-based indicators.
PMI is produced monthly, faster than comparable official data series.
PMI covers almost all private sector economic activity in many countries (including the all-important service sectors).
PMI are not revised after publication.
PMI are produced using the same methodology in all countries where they are produced- assuring comparability.

While we associate the PMI data with the Institute for Supply Management, the fact is that Markit Economics is the firm doing the actual surveys and reporting.

How do you read the above PMI Data?

Graph

MARKIT

Manufacturing Growth Suggested by ISM Survey

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The Institute of Supply Management said its index of the manufacturing sector, also known as the Purchasing Managers Index, rose to 48.9 percent from 44.8 percent in June.
That figure was better than Wall Street’s expected level of 46.5 percent and closer to the 50 percent level that separates expansion and contraction. 48.9% is knocking on 50%’s door…
The ISM said that although the factory sector contracted for an 18th consecutive month, the decline was modest and suggested the slump is ending.
“It would be difficult to convince many manufacturers that we are on the brink of recovery, but the data suggests that we will see growth in the third quarter if the trends continue,” according to ISM survey chief Norbert Ore.
Additionally, the survey showed growth in both the new orders and production sub-indexes. The survey also indicates that the headline index was pulled down by weakness in inventories and lingering declines in employment.
We don’t think that it would be difficult to convince our members that “Now is the time,” for the orders to appear. We just hope that we can all have access to credit to cover our payrolls while we wait for payment on the new business that is imminent.
According to the NSBA’s July Report , access to capital continues to be a major issue, with 80 percent of small-business owners negatively impacted by the credit crunch—up from 67 percent one year ago. Sixty-eight percent reported worsening terms on their credit cards and 38 percent were subject to a decrease on their lines of credit or credit cards.
It takes energy, machinists, materials and supplies to keep our machines running. And all of those require working capital.
Recovery may be imminent, but its duration will be measured by our ability to fund our work.
What has your shop done that is out of the box to stay ‘in the game?’