ISM Report: Economy Positioned For Continuous Growth In 2015

According to the latest Manufacturing ISM Report on Business, economic activity in the manufacturing sector expanded in July for the 31st consecutive month, and the overall economy grew for the 74th consecutive month. A reading above 50 indicates general expansion, and the July PMI registered at 52.7 percent.

Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee states, "I’m pleased that we’re off to such a good start for 2015 and, at 52.7 percent, I think that we’re in good shape in terms of the potential for continuous growth for the rest of the year."

Of the 18 manufacturing industries, 11 are reporting growth in July. The most positive number on the page is "new orders" at 56.5, which is a new high for the year. "We’re in great shape as far as I can see," said Holcomb.

MANUFACTURING AT A GLANCE JULY 2015
Index	Series Index July	Series Index June	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI®	52.7	53.5	-0.8	Growing	Slower	31
New Orders	56.5	56.0	+0.5	Growing	Faster	32
Production	56.0	54.0	+2.0	Growing	Faster	35
Employment	52.7	55.5	-2.8	Growing	Slower	3
Supplier Deliveries	48.9	48.8	+0.1	Faster	Slower	2
Inventories	49.5	53.0	-3.5	Contracting	From Growing	1
Customers’ Inventories	44.0	48.5	-4.5	Too Low	Faster	8
Prices	44.0	49.5	-5.5	Decreasing	Faster	9
Backlog of Orders	42.5	47.0	-4.5	Contracting	Faster	2
Exports	48.0	49.5	-1.5	Contracting	Faster	2
Imports	52.0	53.5	-1.5	Growing	Slower	30
OVERALL ECONOMY   Manufacturing Sector				Growing	Slower	74
				Growing	Slower	31

Orders, Production and Inventory

The New Orders Index registered at 56.5 percent in July, up from June’s 56.0 percent by 0.5 percentage points. This indicates growth in new orders for the 32nd consecutive month. Holcomb said that the number for “New Orders” was, by far, the best number in the report.

The Production Index registered at 56.0 percent in July, which is an increase of 2.0 percentage points from June’s 54.0 percent. The number is still well above 51.1 percent, which indicates growth over time.

The Backlog of Orders Index registered 42.5 percent in July, which was a decrease of 4.5 percentage points from June’s reading of 47 percent. This indicates a contraction in order backlogs for the second consecutive month.

The Inventories Index also decreased in July. It registered 49.5 percent in July, which is 3.5 percentage points lower than the 53 percent registered in June.

"Inventories these days, through thick and thin and any kind of environment, float up and down a few points around the fifty mark," said Holcomb. "It all means that inventories are well-balanced and have the right amount of materials to satisfy these new orders and the backlog of orders as well. It’s in a nice range at this time." 

Exports, Imports and Prices

ISM’s Exports Index, which refers to the exporting of finished products, registered at 48 percent in July.

The Imports Index, which refers to the importing of raw materials to feed manufacturing, registered at 52 percent in July, which is 1.5 percentage points lower than the 53.5 percent reported in June.  

The ISM Prices Index registered at 52.0 percent in July. This is 1.5 percentage points lower than the 53.5 percent reported in June.

“Lower oil prices mean that it costs less to run our factories and translates to lower input and commodity prices, which is ultimately good for manufacturers,” said Holcomb.

Employment

The Employment Index saw a decrease of 2.8 percentage points from June when it registered at 52.7 percent.

The decrease in the Employment Index is a leading indicator within the manufacturing sector, but Holcomb says that he doesn’t think that number holds any particular significance.

"At 52.7 we’re still growing employment fast and anytime that our number is above 50.6, then this generally corresponds with an uptake in the Bureau of Labor Statistics figures that will come out later this week."

The monthly Manufacturing ISM Report on Business is based on the survey results of approximately 350 professionals across 18 different industry sectors. The report is released on the first business day of each month and features the PMI Index as its key measure. For more information on the Institute of Supply Management, visit www.ism.ws.