PMI rises to 54.9% in April, hits five-month high

Manufacturing index growth fueled by better weather, but international issues raise concerns

05/01/2014


As the overall economy prepares to mark five straight years of growth, the manufacturing sector again is leading the charge.PLE0514_WEB_IMG_PMI_INDEX_CHART

The Institute for Supply Management’s PMI Index jumped in April to 54.9%, a 1.2 percentage point increase from March and the 11th straight month of growth in manufacturing. The April figure also is the highest PMI level since December 2013, indicating the slump in the first quarter of 2014 may have had more to do with weather issues throughout the eastern half of the country and less to do with fundamental weaknesses in manufacturing.

Bradley J. Holcomb, chairman of the ISM’s Manufacturing Business Survey Committee, noted that both the new orders index and the employment index both hit 11-month highs, with the employment index growing 3.6 percentage points to 54.7%

“Comments from the (committee) generally remain positive; however, some expressed concern about international economic and political issues potentially impacting demand,” said Holcomb. 

Underscoring that concern was one manufacturer’s comment about the continuing issues between Russia and Ukraine, and the response of Europe and the United States to impose economic sanctions. "Russia may stop importing medical devices manufactured completely outside of Russia,” the committee member said, adding such a decision “would have big negative impact: 5% to 10% (of) lost revenue.”

Other committee comments were generally upbeat:

  • “Business is strong and continues to grow in my industry.” (Textile Mills)
  • “Winter weather has slowed order intake but not inquiries. We think there is pent-up demand waiting for the weather to break.” (Fabricated Metal Products)
  • “U.S. remains stable, Asia is increasing in sales dramatically and Europe remains soft.” (Transportation Equipment)
  • “Overall business is up. Hiring is also up. Skilled trades in short supply.” (Transportation Equipment)
  • “Export demand picking up but seems to have no leverage to raise prices. Margins are very thin, and concerned about Chinese slowdown effect on our business.” (Chemical Products)
  • “China returned from their New Year holiday with brisk demand. Domestic markets are also doing well.” (Wood Products)
  • “Spring of 2014 is 3% to 4% better than spring of 2013 for our company.” (Machinery)

When the PMI Index is above 43.2%, it indicates an expansion of the overall economy. April marks the 59th straight month the index has been above 43.2%. “The past relationship between the PMI and the overall economy indicates that the average PMI for January through April (53.3%) corresponds to a 3.3% increase in real gross domestic product on an annualized basis,” Holcomb said.



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