ISM Manufacturing

ISM Manufacturing Data Unexpectedly Weaken in March

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The Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) declined unexpectedly from 54.2 in February to 51.3 in March. The composite index was predicted to show a modest increase in manufacturing activity, much as I wrote in this morning’s Monday Economic Report and consistent with similar data from Markit. Instead, it moved lower on a deceleration of new orders and production.

The sample comments provide some context for this. As one printing manufacturer wrote, “Things seem slightly better than last year, but still not great.” This sentiment is one that we have noted before. While there has been progress from the pullback in activity observed late last year, the economy has still not seen the strength that it had at the beginning of 2012. Governmental policies have not helped, with respondent comments specifically mentioning the across-the-board spending cuts, slowing medical reimbursements from Medicare, and continuing regulatory uncertainties.

Of course, there were also those who noted “brisk” business, including those answering the survey from the automotive, furniture, and wood products sectors.

Looking specifically at the subcomponents of the ISM report, the index for new orders dropped from 57.8 to 51.8, indicating a fairly significant easing for the month of March. At the same time, sales have risen for three straight months, helping to justify the “slightly better than last year” comment discussed above.

There was also good news on the trade front, with the new export orders index rising from 53.5 to 56.0. This suggests that improving economies worldwide – outside of Europe – have helped increase manufacturers’ sales overseas. We should learn more about this on Friday with the release of official trade data from the Census Bureau. Read More

ISM: Manufacturing Activity Edges Higher in February, Challenges Remain

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The Institute for Supply Management’s purchasing managers’ index (PMI) rose much stronger than expected in February, up from 53.1 in January to 54.2 in February. The consensus estimate had been for the PMI to decline to around 52.5. Today’s report is similar to the results observed last week when Markit announced its Flash PMI data for the United States.

In both cases, the principal driver was higher sales. The index for new orders rose from 53.3 to 57.8. This was the second month of expanding orders, which is a good sign that manufacturing activity has picked up so far in 2013. This includes export orders, with its index rising from 50.5 to 53.5. Shipments data were also strongly higher, up from 53.6 to 57.6.

Most of the subcomponents provide better news about the manufacturing sector, but one exception is the pace of hiring. The employment index dropped from 54.0 to 52.6, suggesting that the pace of growth has slowed. This is consistent with other data which have shown hiring growth continuing to lag behind.

One other caveat of note was the escalation in pricing pressures. The index for the prices paid for raw materials jumped from 56.5 to 61.5, its fastest pace since this time last year. Read More

ISM: Manufacturing Activity Picks Up Slightly in January

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The Institute for Supply Management’s purchasing managers’ index (PMI) reflected an increase in manufacturing activity in the past month, up from 50.2 in December to 53.1 in January. This is the highest level experienced since April and a sign that there have been some improvements in the sector in January even as some headwinds and uncertainties continue.

Most importantly, the index for new orders shifted from contraction (49.7) to slight growth (53.3), suggesting that sales have picked up somewhat. This helped to move many of the other subcomponents.

Indeed, several of the indicators were higher for the month. This included production, employment, and inventories. The employment measure stands in contrast to the rather tepid jobs growth for manufacturers reported by the Bureau of Labor Statistics this morning. The employment index rose from 51.9 to 54.0.

The international trade numbers were one of the weak spots. The pace of new exports and new imports both slowed, with each of them essentially flat. However, this is progress on the contracting levels of trade experienced a few months ago.

The sample comments provided are more mixed than the positive data might suggest. While there are a couple respondents citing improving conditions, there are also those which express continuing anxieties about the current marketplace. For instance, a machinery manufacturer said, “Fiscal cliff, uncertainty in general and E.U. economic weaknesses are factors causing our customers to be very tentative with commitments for product purchases in 2013.” Another individual in the fabricated metal business cited higher payroll tax as something that he or she is watching closely. Read More