ISM Manufacturing Report Signals Strengthening of Supply Chains

The most recent edition of the Institute for Supply Management's (ISM) Manufacturing Report on Business report, pointes to another growth month. This represents one in an ongoing series of 102 consecutive months, or 8.5 years.

The report's key metric, known as the PMI, was 58.2 in November, which was off a mere 0.5% from October's 58.2. Even with this decline, though, analysts would regard this as positive.

The November PMI is 0.8% of the 2017 average of 57.4 and is 1.1% higher than the 12-month average of 57.1, both good benchmarks.

A quick recap of some of the report's other key metrics:

• new orders i.e. the engine that drives manufacturing increased 0.6% to 64.0, growing for the 15th straight month;
• production rose 2.9% to 63.9, growing for the 15th straight month;
• employment dipped 0.1% to 59.7, but still grew for the 14th straight month
• supplier deliveries slowed for the 19th month at 56.5, down 4.9% (a reading above 50 for this metric indicates contraction) but it is also a byproduct of strong new order activity, too;
• inventories dropped 1% to 47, contracting for the second month in a row; and
• prices were down 3% to 65.5, increasing for the 21st consecutive month

The overall trend of these orders suggest that manufacturers i.e. ISM member respondents seem to feel that demand trending in the right direction, as evidenced by comments submitted in the report.

A chemical products respondent said that continuing increased orders are expected for the next 6-12 months. A machinery respondent said that strong sales are intact for the third, and fourth quarters, with backlog increasing and capacity at suppliers tightening.

There were other submitted comments similar to these, each with underlying themes that demand is ramping up.

Why? For one thing, not long ago it could be argued that manufacturing was the one bright star amid an economy short of across the board momentum and traction. Now, though, the story has shifted in a positive way, too, considering how GDP appears to be showing signs of a decent growth track, coupled with excellent import numbers in recent months, and decent retail sales, too.

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