New orders, employment bolster November PMI

Index at 58.7%, marking 18 straight months of growth for manufacturing.

By Bob Vavra, Content Manager, CFE Media December 1, 2014

With new orders and employment continuing to show strong growth, the monthly PMI Index from the Institute of Supply Management (ISM) continued its high-wire act in November. While the index slipped three-tenths of a point in November, the 58.7% PMI Index reading still is more than 17% above the break-even level of 50% and marks the seventh straight month the index has finished above 55%.

The New Orders Index rose again in November to 66.0%, a two-tenths increase from October. The Employment Index showed growth for the 17th straight month, checking in at 54.9%. As both of these are happening, the Price Index fell to 44.5%, a drop of 9 percentage points from October. The report noted, "This is the first time that raw materials prices have registered a decrease since July 2013 when the Prices Index registered 49%."

"Comments from the panel are upbeat about strong demand and new orders, with some expressing concerns about West Coast port slowdowns and the threat of a potential dock strike," said ISM Manufacturing Business Survey Committee chairman Bradley Holcomb. Otherwise, the manufacturing surge over the past year shows little signs of abating as 2014 comes to a close.

Among the comments:

  • "The holiday season continues to exceed expectations. Customers are generally optimistic for future sales growth." (Food, Beverage & Tobacco Products)
  • "Continued strong demand. Deliveries through the West Coast are delayed due to a number of factors." (Fabricated Metal Products)
  • "We have seen continued growth in transportation equipment. Slowdowns and threats of strike of West Coast longshoreman weigh heavily on U.S. operations." (Transportation Equipment)
  • "Business continues to be stronger than last year." (Furniture & Related Products)
  • "Improvement in defense spending and manufacturing." (Computer & Electronic Products)
  • "We continue to hire people. People are also leaving to take other jobs indicating the job market is starting to improve for manufacturing." (Electrical Equipment, Appliances & Components)
  • "Market has remained strong going into year-end." (Wood Products)
  • "Order intake has been substantial, resulting in a very healthy backlog. The packaging automation requirements in the food and beverage market are robust." (Machinery)

The PMI Index has now stayed above the 50% growth level for 18 straight months, and the index hit the 5 ½-year growth market for overall economic growth. "The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (55.8%) corresponds to a 4.2% increase in real gross domestic product (GDP) on an annualized basis," Holcomb said in a statement. "In addition, if the PMI for November (58.7%) is annualized, it corresponds to a 5.1% increase in real GDP annually."