Stock shock: Dow Jones tumbles, then rebounds after May PMI Index is corrected
Software error blamed for report of decline; monthly indexes all increased as index hits 55.4%.
UPDATED at 3:45 p.m. CST Monday, June 2: The importance of the PMI Index each month was reflected Monday, June 2 when an erroneous report of a drop in the PMI sent stocks tumbling.
After initially reported that the May PMI Index fell by 1.5 percentage points, the Institute for Supply Management recalculated the numbers and found the index actually rose 0.5 percentage points to 55.4.
“We apologize for this error. We have recalculated and confirmed that the actual index indicates that the economy is accelerating,” said Bradley J. Holcomb, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee. “Our research team is analyzing our internal processes to ensure that this doesn’t happen again.”
ISM blamed the error on the use of a seasonal adjustment factor from the previous month.
The report of the drop in PMI was unexpected by industry analysts, and the Dow Jones Industrial Average plunged on the news. The index fell 0.2% on the news, but once the error was corrected, the DJIA rebounded and finished the day on Monday by gaining 15 points to reach another new record high.
Even without the updated data, the PMI hit two important milestones in May. The index reported one full year of growth, and the index hit five full years of overall economic growth.
“Comments from the panel reflect generally steady growth, but note some areas of concern regarding raw materials pricing and supply tightness and shortages," Holcomb said.
Among the comments from ISM survey participants:
- “Increasing demand for product is creating supply and sourcing challenges.” (Food, Beverage & Tobacco Products)
- “Aviation is recovering and outlook is optimistic.” (Transportation Equipment)
- “The improving gas prices are positively impacting our short term drilling plans.” (Petroleum & Coal Products)
- “Political issues in Russia are not yet impacting our supply of raw materials from Russian suppliers.” (Computer & Electronic Products)
- “Volumes picking up in some sectors, but profitability still elusive. Suppliers indicate similar difficulties in getting price increases.” (Chemical Products)
- “Business has remained steady. However, this month has a more subdued disposition by comparison. Price escalation has leveled off with even a few decreases on selected items.” (Wood Products)
- "Defense industry contracts are shrinking, customer is exercising minimum options, or less than minimum." (Miscellaneous Manufacturing)
The threshold for overall economic growth is a PMI Index above 43.2%, so May marked five full years of positive data.
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