PMI ends 2016 on a note of optimism

Manufacturing index jumps to highest level since March 2015 as production, new orders are sharply higher.

By Bob Vavra, CFE Media January 3, 2017

Rapid growth in new orders, employment and production fueled a sharp increase in the December purchasing manufacturers’ index (PMI), according to the Institute for Supply Management (ISM) on Jan. 3.

The PMI reached its highest level since March 2015 with an December reading of 54.7%, a jump of 1.5 percentage points from November’s 53.2%. The PMI has been above the 50% growth level for nine of the last 10 months, with only a brief dip in August to break the solid growth streak the index has shown. It was the fourth straight month of growth for the index, and manufacturing start 2017 with momentum and optimism.

"The PMI, New Orders, Production and Employment indexes all registered new highs for the year 2016, and the forward-looking comments from the panel are largely positive," said Bradley S. Holcomb, chairman of the ISM Manufacturing Business Survey Committee, in a press release announcing the December figures.

The New Orders Index rose 7.2 percentage points to 60.2%, the production index jumped 4.3 percentage points to 60.3% and the employment index rose 0.8 percentage points to 53.1%.

Raw material prices also were on the rise again. "The Prices Index registered 65.5% in December, an increase of 11 percentage points from the November reading of 54.5%, indicating higher raw materials prices for the 10th consecutive month," Holcomb said.

The definitive word to describe the mood of manufacturing sectors is "strong". Among the comments from committee members:

  • "Ramping up for year-end by reducing inventory." (Chemical Products)
  • "Very strong month in terms of booking and billing which will contribute to a good overall year revenue-wise." (Computer & Electronic Products)
  • "Our business remains strong and we are seeing continued growth." (Plastics & Rubber Products)
  • "We have been fairly steady the last few months and it appears business is strong into the 1st quarter of next year." (Primary Metals)
  • "Moving into (a) more inflationary environment, with lots of pressure to increase prices on a number of fronts." (Food, Beverage & Tobacco Products)
  • "Business continues to be brisk with an uptick of RFQs. Customers are earmarking funds for capital equipment upgrades." (Machinery)
  • "Hiring still tight on available local labor. Business, by segments, still uneven. Some consumer markets very (seasonally) strong, but industrial markets lagging." (Transportation Equipment)
  • "Continued strong demand for product and strong forecast for next year." (Nonmetallic Mineral Products)
  • "December 2016 is way ahead of December 2015." (Fabricated Metal Products)

Bob Vavra is content manager, Plant Engineering, CFE Media,