ISM Index wraps up 2013 with bullish growth

PMI at 57% for December; new orders, employment on the rise

01/02/2014


It was a happy old year for manufacturing.

The first big manufacturing report of 2014 greeted industry analysts as the Institute of Supply Management’s PMI Index for December 2013 hit 57%. That’s just three-tenths of a point below November’s high-water mark of 57.3% and the sixth straight month above 55%. After the PMI dipped below the growth rate of 50% in April the index has climbed steadily.

There was more good news from the Jan. 2 report, as the New Orders Index increased to 64.2%, its highest level since April 2010. The Employment Index also increased in December to 56.9%, which left Bradley Holcomb, chairman of the ISM’s Manufacturing Business Survey Committee, pleased with the strength in the sector at the end of the year.

“Comments from the panel generally reflect a solid final month of the year, capping off the second half of 2013, which was characterized by continuous growth and momentum in manufacturing,” said Holcomb.

Among the comments from survey respondents were:

  • "Amazingly enough, we are seeing meaningful increases in our sales in nearly all segments and regions." (Apparel, Leather & Allied Products)
  • "Largest backlog ever. Most orders waiting on customer approvals." (Fabricated Metal Products)
  • "Orders and price continue to be strong." (Paper Products)
  • "Continued government spending constraints keeping production volumes low." (Transportation Equipment)
  • "Good overall business conditions nationally and internationally." (Computer & Electronic Products)
  • "Markets are sound. We typically see a seasonal 4th quarter slowdown. However, this year … not so." (Wood Products)
  • "Very, very busy." (Furniture & Related Products)

The latest PMI report is in sharp contrast to a similar report from China, which showed manufacturing growth at its lowest level in 15 years. The China Federation of Logistics & Purchasing said Jan. 1 that its purchasing managers index for December declined to 51% from the previous month’s 51.4%. The overall Chinese economy grew 7.6% in 2013, its lowest growth rate since 1999 and an indication of continuing struggles for the world’s second largest manufacturing economy.

The U.S. manufacturing sector continues to fuel solid economic growth for the overall economy, according to the PMI data. The threshold for overall economic growth is 42.2%, so the 57.0% reading in December was the 55th straight month for growth in the overall economy, according to ISM. Holcomb noted that the 2013 PMI data corresponds to a 3.7% growth rate in GDP for the year, and the December figure alone translates to a 4.6 increase in GDP.

The Last 12 Months



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Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

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