ISM: Manufacturing index rises in November

Growth pace accelerates to highest level since June

12/09/2011


Economic activity in the manufacturing sector expanded in November for the 28th consecutive month, and the overall economy grew for the 30th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “The PMI registered 52.7% an increase of 1.9 percentage points from October's reading of 50.8% indicating expansion in the manufacturing sector for the 28th consecutive month,” Holcomb said. “The New Orders Index increased 4.3 percentage points from October to 56.7% reflecting the second month of growth after three months of contraction.

“While the Prices Index, at 45% increased 4 percentage points from the October reading of 41% prices of raw materials continued to decrease (registering below 50%) for the second consecutive month. Respondents cite continuing concerns about the general economic environment, government regulations and European financial conditions, but are cautiously more optimistic about the next few months based on lower raw materials pricing and favorable levels of new orders.”

What respondents are saying...

  • “Business still holding its own. Some growth in margin now that some of the raw materials prices have abated. Oil is pushing $100 so that has not been favorable.”
  • “Orders for the remaining two months have increased after an extended 'summer dip' in sales overall. We expect to finish the year approximately 10% above 2010.”
  • “Seeing a slight slowdown in orders; could be related to the holidays.”
  • “Material lead times are getting longer. Seems like no one is hiring. Trying to do twice the output with the same amount of people.”
  • “Japanese auto production has returned to 100% and domestic manufacturing continues to increase.”
  • “Oil exploration seems to be really picking up. Government is permitting again, so business is the busiest we've ever seen.”
  • “The EPS ruling about higher fees for coal-generated electricity can have a huge, negative impact on our business if implemented in January 2012. We are at the peak of our seasonal demand push.”
  • “Thailand flood impacting our business. Honda and Toyota cut production forecasts, and we are chasing some components made in Thailand.”

Manufacturing continued its growth in November as the PMI registered 52.7% an increase of 1.9 percentage points when compared to October's reading of 50.8%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI in excess of 42.5% over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 30th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 28th consecutive month.

“The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (55.4%) corresponds to a 4.5% increase in real gross domestic product,” said Holcomb. “In addition, if the PMI for November (52.7%) is annualized, it corresponds to a 3.6% increase in real GDP annually.”

The last 12 months

Read the rest of the report here.

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