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Economic activity in the manufacturing sector expanded in August, and the overall economy grew for the 99th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.
The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee: "The August PMI registered 58.8%, an increase of 2.5 percentage points from the July reading of 56.3%. The New Orders Index registered 60.3%, a decrease of 0.1 percentage point from the July reading of 60.4%. The Production Index registered 61%, a 0.4 percentage point increase compared to the July reading of 60.6%. The Employment Index registered 59.9%, an increase of 4.7 percentage points from the July reading of 55.2%. The Supplier Deliveries Index registered 57.1%, a 1.7 percentage point increase from the July reading of 55.4%. The Inventories Index registered 55.5%, an increase of 5.5 percentage points from the July reading of 50%. The Prices Index registered 62% in August, the same reading as July, indicating higher raw materials’ prices for the 18th consecutive month. Comments from the panel reflect expanding business conditions, with new orders, production, employment, backlog and exports all growing in August, as well as supplier deliveries slowing (improving) and inventories increasing during the period. The Customers’ Inventories Index experienced a sharp decline in August compared to July."
August 2017 Manufacturing Index Summaries
Manufacturing expanded in August as the PMI registered 58.8%, an increase of 2.5 percentage points from the July reading of 56.3%. This indicates growth in manufacturing for the 12th consecutive month and is the highest reading since April 2011, when the index registered 59.1%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.
A PMI above 43.3%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the August PMI indicates growth for the 99th consecutive month in the overall economy and the 12th straight month of growth in the manufacturing sector. Fiore says, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (56.7%) corresponds to a 4.2% increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for August (58.8%) is annualized, it corresponds to a 4.9% increase in real GDP annually."
ISM's New Orders Index registered 60.3% in August, which is a decrease of 0.1 percentage point when compared to the 60.4% reported for July, indicating growth in new orders for the 12th consecutive month. "Order input continues at a strong pace consistent with the last four months of order activity," says Fiore. A New Orders Index above 52.3%, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).
ISM's Production Index registered 61% in August, which is an increase of 0.4 percentage point when compared to the 60.6% reported for July, indicating growth in production for the 12th consecutive month. "Production remains at strong growth levels in most industries in spite of supplier delivery constraints," says Fiore. An index above 51.4%, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
ISM's Employment Index registered 59.9% in August, an increase of 4.7 percentage points when compared to the July reading of 55.2%. This indicates growth in employment in August for the 11th consecutive month. Employment levels have been expanding since October 2016 and reached the highest level of expansion since June 2011, when the index registered 61.3%. An Employment Index above 50.5%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
The delivery performance of suppliers to manufacturing organizations was slower in August, as the Supplier Deliveries Index registered 57.1%. This is 1.7 percentage points higher than the 55.4% reported for July. This is the 16th straight month of slowing supplier deliveries, and the index achieved its highest level since December 2014, when it registered 58.3%. A reading below 50% indicates faster deliveries, while a reading above 50% indicates slower deliveries.
About Institute for Supply Management
Institute for Supply Management (ISM) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business, its highly regarded certification programs and the newly launched ISM Mastery Model. This report has been issued by the association since 1931, except for a four-year interruption during World War II.
The full text version of the Manufacturing ISM Report On Business is posted on ISM's website.