PMI stumbles to 51.1% in August over global concerns

The August decline of the monthly Purchasing Manufacturers’ Index (PMI) from the Institute for Supply Management (ISM) reflected the general malaise in the global markets. Even though the underlying growth in the manufacturing sector continues, the drop of 1.6 percentage points proves there are plenty of frayed nerves.

The PMI fell to 51.1% in August, down from July’s 52.7% reading and the lowest level for the PMI since a 50.1% reading in May 2013. The index had slipped as low as 51.5% in March and April of 2015 before rallying over the summer. The news didn’t help a stock market already shaken by news of a slowdown in the Chinese economy. By 9:30 a.m. CST on Sept. 1, the Dow Jones Industrial Average (DJIA)
had fallen more than 400 points.

All major indices that make up the PMI were lower in August, including a 4.8 percentage point drop in the New Order Index to 51.7% and a fall of 2.4 percentage points in the Production Index to 53.6%.

While any figure above 50% in the PMI indicates growth in manufacturing ISM manufacturing business survey committee chairman Bradley Holcomb said the global markets were weighing on the survey committee. "Comments from the panel reflect a mix of modest to strong growth depending upon the specific industry, the positive impact of lower raw materials prices, but also a continuing concern over export growth," said Holcomb in a press release. Among the comments from committee members:

• "Falling crude oil prices are benefiting all resin based purchases as well as positively impacting fuel surcharges for inbound products." (Food, Beverage & Tobacco Products)
• "We are oversold." (Paper Products)
• "Business is still strong but has slowed slightly." (Transportation Equipment)
• "Modest growth slightly ahead of GDP. Optimistic for the remainder of the year as we have little international exposure." (Chemical Products)
• "(Foreign Exchange) continues to be a challenge, especially in Europe. Overall though, the mood is fairly upbeat regarding (the second half of 2015) as we ramp up for a new product launch." (Computer & Electronic Products)
• "Our business is good due to the increase in commercial construction." (Fabricated Metal Products)
• "Raw metals price decreases will impact our business favorably." (Miscellaneous Manufacturing)
• "Business is guarded but steady. Margins are tight. Markets are very competitive. China is lackluster." (Wood Products)
• "Automotive companies are investing heavily in upgrading their equipment." (Machinery)

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

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