Manufacturing Continues Strong Performance, Says ISM

Three of the report's core four metrics, including the PMI, were up in October.

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Manufacturing activity in October grew for the sixth time in the last seven months, according to the most recent edition of the Institute for Supply Management's (ISM) monthly Manufacturing Report on Business, which was released today.

The PMI, the index used by the ISM to measure growth, was 51.9 in October (a reading of 50 or higher indicates growth), a 0.4 percent gain over October, and it was 1.3 percent above the 12-month average of 50.6. The ISM said that the over all economy expanded in October for the 89th month in a row.

Three of the report's core four metrics, including the PMI, were up in October.

The lone decline among the core four was new orders, which are often cited as the engine that drives manufacturing, with a 3.0 percent decline to 52.1. New orders came off of a very strong September, which was up 6.0 percent over August (with new orders in August down 7.8 percent). Eight industries reported growth for new orders in October, with another eight reporting a decrease.

Production headed up 1.8 percent to 54.6, growing for the second month in a row, while employment rose 3.2 percent to 52.9, returning to growth mode after checking in at 49.7 in September.

ISM said that of the 18 manufacturing sectors contributing to the report, ten reported growth, including: Textile Mills; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Computer & Electronic Products; Furniture & Related Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; and Chemical Products. The eight industries reporting contraction in October — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Machinery.

Comments included in the report by ISM member respondents were largely positive, reflecting the increase in the October PMI. A chemical products respondent said that domestic business was steady, with the export business trending higher and a computer & electronic products respondent noted that there is a very favorable outlook for the market.

“We continue to view what happened in August (with the PMI at 49.4) as an anomaly or a pause in the action,” said Brad Holcomb, chair of the ISM Manufacturing Survey Business Committee, in an interview. “Things are pretty much back on track over the last few months, with the PMI beating Wall Street expectations of 51.7. It is an acceptable but modest growth rate and is led by good production with a 1.8 percent increase, paced by particularly good employment numbers.”

Holcomb added that the solid October employment number bodes well for the coming months, too, as it is a solid economic indicator of things to come, with companies willing to add headcount heading into the fourth quarter and the holiday season.

Another metric Holcomb cited was the difference between new orders at 55.1 minus inventories at 47.5 (down 2.0 percent) at 4.6. While a number of 5 or higher for this points more directly to growth, he said it is in a decent territory, showing decent balance.

Other data points that showed the trend of strong balance, included: new export orders up 0.5 percent at 52.5 and imports up 3.0 percent at 52.0, which he said points to good trade activity going across the oceans for things like finished products and raw materials.

“As I look at the China PMI at 51.2, its highest in two years, and the Eurozone at 53.7, which is a great start to the fourth quarter as well, it feels like the global economy is perking up just a little bit, perhaps in preparation for the upcoming holiday season,” Holcomb explained. “It may be in anticipation of the U.S. Presidential election being behind us very soon so we can forget about that guessing game for a while.”


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Jeff Berman, Group News Editor
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Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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