Manufacturing index retreats, but remains on solid ground

PMI falls to 54.8%, but manufacturing sector optimism continues.
By Bob Vavra, CFE Media May 1, 2017

Image courtesy: Bob Vavra, CFE Media

Even as the April purchasing manufactuers’ index (PMI) from the Institute for Supply Management (ISM) fell 2.4 percentage points from its March reading, the underlying manufacturing sector remained on solid footing. After hitting 57.2% in March, the PMI settled back to 54.8% in April. 

Even with the drop, the index is nearly 10% above the 50% break-even point for manufacturing growth, and marked the eighth straight month of solid increases. An increase in inventories helped slow the PMI’s growth, which retreated for the second straight month from its February high of 57.7%.

"Comments from the panel generally reflect stable to growing business conditions; with new orders, production, employment and inventories of raw materials all growing in April over March," said Bradley Holcomb, chairman of the Institute for Supply Management’s Manufacturing Business Survey committee. In all, 16 of the 18 categories survey by ISM grew in April, and committee members in various sectors voiced continued optimism. Among the comments:

  • "For (the) first time in a long time, revenue was up in Q1 year-over-year. Our customers’ businesses are starting to show sustained health." (Apparel, Leather & Allied Products)
  • "Seeing increased orders and new projects." (Chemical Products)
  • "Business is definitely improving. Profit margins are increasing." (Fabricated Metal Products)
  • "Ongoing market strength. While world/political headlines cause personal anxiety, business conditions remain solid." (Miscellaneous Manufacturing)
  • "Continuing to source more raw materials locally and reduce exposure outside U.S." (Machinery)
  • "Military and government spending is remaining strong. Commercial business has been flat to slightly down." (Transportation Equipment)
  • "Our business and outlook are (strong). We are seeing price increases from suppliers in many categories." (Plastics & Rubber Products)
  • "Business is solid. Pricing pressures on commodities." (Furniture & Related Products).

The average PMI for the first four months of 2017 is 56.4%, which translates into a 4.1% annual increase in gross domestic product (GDP), according to ISM calculations. The 54.8% index number for April indicates a 3.6% increase in GDP.

Bob Vavra, content manager, Plant Engineering, CFE Media, bvavra@cfemedia.com.

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