Economic activity in the manufacturing sector expanded in November, and the overall economy grew for the 90th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.
Manufacturing expanded in November as the PMI registered 53.2 percent, an increase of 1.3 percentage points from the October reading of 51.9 percent, indicating growth in manufacturing for the third consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee states, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (51.2 percent) corresponds to a 2.5 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for November (53.2 percent) is annualized, it corresponds to a 3.2 percent increase in real GDP annually.”
A PMI above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the November PMI indicates growth for the 90th consecutive month in the overall economy, and indicates growth in the manufacturing sector for the third consecutive month.
“Comments from the panel cite increasing demand, some tightness in the labor market and plans to reduce inventory by the end of the year,” says Holcomb.
Orders, Production and Inventory
ISM’s New Orders Index registered 53 percent in November, which is an increase of 0.9 percentage point when compared to the 52.1 percent reported for October, indicating growth in new orders for the third consecutive month. A New Orders Index above 52.2 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 56 percent in November, which is an increase of 1.4 percentage points when compared to the 54.6 percent reported for October, indicating growth in production for the third consecutive month. An index above 51.3 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
The Inventories Index registered 49 percent in November, which is an increase of 1.5 percentage points when compared to the 47.5 percent reported for October, indicating raw materials inventories are contracting in November for the 17th consecutive month. An Inventories Index greater than 42.8 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 49 percent in November, an increase of 3.5 percentage points when compared to the October reading of 45.5 percent, indicating contraction in order backlogs for the fifth consecutive month. Of the 87 percent of respondents who reported their backlog of orders, 21 percent reported greater backlogs, 23 percent reported smaller backlogs, and 56 percent reported no change from October.
Exports, Imports and Prices
ISM’s New Export Orders Index registered 52 percent in November, a decrease of 0.5 percentage point when compared to the 52.5 percent reported for October, indicating growth in new export orders for the ninth consecutive month.
ISM’s Imports Index registered 50.5 percent in November, which is 1.5 percentage points below the October reading of 52 percent. This month’s reading indicates growth in imports for the second consecutive month.
The ISM Prices Index registered 54.5 percent in November, the same reading as reported in October, indicating an increase in raw materials prices for the ninth consecutive month. In November, 21 percent of respondents reported paying higher prices, 12 percent reported paying lower prices, and 67 percent of supply executives reported paying the same prices as in October. 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 52.3 percent in November, a decrease of 0.6 percentage point when compared to the October reading of 52.9 percent, indicating growth in employment in November for the second consecutive month. An Employment Index above 50.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
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 for Supply Management, visit www.ism.ws.