Economic Watch: Manufacturing Up for 13th Month in a Row
July 01, 2014
Economic activity in the manufacturing sector expanded in June for the 13th consecutive month, and the overall economy grew for the 61st consecutive month, according to the Institute for Supply Management.
The nation's supply executives are surveyed for the Manufacturing ISM Report On Business.
The June PMI (commonly known as the Purchasing Managers Index) registered 55.3%, a decrease of 0.1 percentage point from May's reading of 55.4%, says Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, indicating expansion in manufacturing for the 13th consecutive month.
The New Orders Index registered 58.9%, an increase of 2 percentage points from the 56.9% reading in May, indicating growth in new orders for the 13th consecutive month.
The Production Index registered 60%, 1 percentage point below the May reading of 61%.
Holcomb noted that employment grew for the 12th consecutive month, registering 52.8%, the same level of growth as reported in May. Inventories of raw materials remained at 53%, the same reading as reported in both May and April. The price of raw materials grew at a slower rate in June, registering 58%, down 2 percentage points from May.
A PMI in excess of 43.2%, over a period of time, generally indicates an expansion of the overall economy, ISM says. Therefore, the June PMI indicates growth for the 61st consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 13th consecutive month.
"The past relationship between the PMI and the overall economy indicates that the average PMI for January through June (54%) corresponds to a 3.6% increase in real gross domestic product (GDP) on an annualized basis," Holcomb says. "In addition, if the PMI for June (55.3%) is annualized, it corresponds to a 4% increase in real GDP annually."
Of the 18 manufacturing industries, 15 are reporting growth in June, led by Furniture & Related Products; Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.
The data is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations.
The ISM offered some sample comments from respondents to the survey:
- "Business volume is increasing at a good pace and consumers appear to be spending more." (Food, Beverage & Tobacco Products)
- "The strength of the automotive industry continues to drive the high demand for steel." (Fabricated Metal Products)
- "Business still very solid and strong -- Class 8 Truck and RV." (Transportation Equipment)