PMI jumps to 12-month high as optimism abounds

Concerns over global unrest don’t show up in July, as index hits 57.1%

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

Shrugging off the global political issues and focusing on continuing firming of the domestic economy, the monthly PMI Index from the Institute for Supply Management posted its largest one-month increase since February.

The July PMI jumped to 57.1%, increasing 1.8 percentage points from June’s 55.3% figure. In February, the PMI went from 51.3% to 53.2%, kicking off what has been a steady growth after a January plunge blamed largely on the brutal North American winter. The PMI is now back above its 12-month high of 57.0% in November 2013.

"Comments from the panel are generally positive, while some indicate concern over global geopolitical situations," said Bradley J. Holcomb, chairman of the ISM’s Manufacturing Business Survey Committee, in a press release. He noted that new order, production and employment all grew by more than 1 percentage point in July as all aspects of manufacturing continued to accelerate. Of the 18 industries studied by ISM each month, 17 showed growth in July.

Comments from committee members quoted in the release reflected that optimism:

  • "Status quo…sales are okay (not great). Costs are generally flat." (Food, Beverage & Tobacco Products)
  • "We see slow growth in business as we see a slow growing economy." (Fabricated Metal Products)
  • "Business is still very good and we are very optimistic for the rest of the year." (Transportation Equipment)
  • "Bookings down, but shipments strong." (Electrical Equipment, Appliances & Components)
  • "Overall business conditions still good in our industry." (Computer & Electronic Products)
  • "Geopolitics still present a considerable risk as well as the European market." (Chemical Products)
  • "Contractors are very busy. Difficult time getting many to bid, especially electrical." (Paper Products)
  • "Salaries for engineering labor continue to increase above general inflation due to market competition and shortages in certain specialty skills." (Petroleum & Coal Products)
  • "Economy shows many signs of strength." (Machinery)
  • "Russia’s demand for medical devices from the U.S. has dropped by 40 percent." (Miscellaneous Manufacturing)

The PMI has maintained is 62-month streak of growth over 43.2%, the statistical threshold for overall economy growth. July marked the 13th straight month of growing above the PMI’s baseline of 50%.