Economy Grows, Manufacturing Slow

Overall, the US economy grew for the third consecutive month, reported the Institute for Supply Management (ISM). However, it's Purchasing Managers Index (PMI) was still not on the growth side of the index threshold of 50. (An indicator below 50 indicates contraction in a segment, a number above 50 signifies growth.)

The decline in manufacturing was slower in July when compared to June, as the more leading components of the PMI—the New Orders and Production Indexes—rose significantly above 50%,” said Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “This set an expectation for future growth in the sector. The Employment and Inventories Indexes are still contracting, but the rate is slowing and they are moving in the right direction.”

Ore continued, “It is also worth noting that the New Export Orders Index shows growth after nine consecutive months of decline, suggesting that the global economy is recovering. Overall, it would be difficult to convince many manufacturers that we are on the brink of recovery, but the data suggests that we will see growth in the third quarter if the trends continue."

Six of the 18 manufacturing industries reported growth in July. In order, they were: Nonmetallic Mineral Products; Paper Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Transportation Equipment; and Chemical Products.



MANUFACTURING AT A GLANCE
JULY 2009



Index

Series
Index
July

Series
Index
June

Percentage
Point
Change



Direction

Rate
of
Change


Trend*
(Months)

PMI

48.9

44.8

+4.1

Contracting

Slower

18

New Orders

55.3

49.2

+6.1

Growing

From Contracting

1

Production

57.9

52.5

+5.4

Growing

Faster

2

Employment

45.6

40.7

+4.9

Contracting

Slower

12

Supplier Deliveries

52.0

50.6

+1.4

Slowing

Faster

2

Inventories

33.5

30.8

+2.7

Contracting

Slower

39

Customers' Inventories

42.5

43.5

-1.0

Too Low

Faster

4

Prices

55.0

50.0

+5.0

Increasing

From Unchanged

1

Backlog of Orders

50.0

47.5

+2.5

Unchanged

From Contracting

1

Exports

50.5

49.5

+1.0

Growing

From Contracting

1

Imports

50.0

46.0

+4.0

Unchanged

From Contracting

1

OVERALL ECONOMY

Growing

Faster

3

Manufacturing Sector

Contracting

Slower

18

Source: Institute of Supply Management

Though the PMI is not on the growth side of the chart, it has been trending in the right direction. Over the last 12 months, ISM has reported the PMI reached a low of 32.9 in December 2008, but it has been rising ever since. The latest four months show an index above 40, posting 40.1 in April 2009, 42.8 in May, 44.8 in June and 48.9 in July.

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