Will red-hot PMI help open manufacturing wallets?

2018 PMI starts out strong.

By Bob Vavra, CFE Media February 5, 2018

The monthly PMI Index produced by the Institute for Supply Management has been the barometer of U.S. manufacturing for years. When it slipped into the 30% range in 2008 and 2009, it paralleled the collapse of the manufacturing market—and the loss of jobs. Except for a brief slump at the end of 2015 and the beginning of 2016 that aligned with the collapse of oil prices, the PMI has been the bellwether of the industrial recovery in the U.S. for the past six years, and 2018 is off to another fast start. The January PMI checked in at 59.1%, almost 20% above the index’s growth level of 50%. It marked a year of double-digit growth, according to the index, but it hasn’t necessarily turned into a big run-up for new manufacturing purchases—yet.

At least one member of the committee that sets the PMI each month expects the steady growth in manufacturing to loosen a few purse strings. "Sales nationally and internationally are strong in Q1,” said a chemical products executive in the PMI’s monthly report. “We are increasing our CapEx spend by 30% to 40% over [the] previous year." That would provide more support for the entire sector and continue the long winning streak for the index—and the economy.