Economic activity in the manufacturing sector expands for the seventh consecutive month

Source: ISM

Mar 11, 2010

Economic activity in the manufacturing sector expanded in February for the seventh consecutive month, and the overall economy grew for the tenth consecutive month, according the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee. "The manufacturing sector grew for the seventh consecutive month during February. While new orders and production were not as strong as they were in January, they still show significant month-over-month growth. Additionally, the Employment Index is very encouraging, as it is up 2.8 percentage points for the month to 56.1%. This is the third consecutive month of growth in the Employment Index. With these levels of activity, manufacturers are seemingly willing to hire where they have orders to support higher employment."




PMI 56.5 58.4 -1.9 Growing Slower 7
New Orders 59.5 65.9 -6.4 Growing Slower 8
Production 58.4 66.2 -7.8 Growing Slower 9
Employment 56.1 53.3 +2.8 Growing Faster 3
Supplier Deliveries 61.1 60.1 +1.0 Slowing Faster 9
Inventories 47.3 46.5 +0.8 Contracting Slower 46
Customers' Inventories 37.0 32.0 +5.0 Too Low Slower 11
Prices 67.0 70.0 -3.0 Increasing Slower 8
Backlog of Orders 61.0 56.0 +5.0 Growing Faster 2
Exports 56.5 58.5 -2.0 Growing Slower 8
Imports 56.0 56.5 -0.5 Growing Slower 6
OVERALL ECONOMY Growing Slower 10
Manufacturing Sector Growing Slower 7

*Number of months moving in current direction.

Manufacturing continued to grow in February, but the rate of growth decelerated as the PMI registered 56.5%, a decrease of 1.9 percentage points when compared to January's seasonally adjusted reading of 58.4%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI in excess of 42%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 10th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the seventh consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January and February (57.5%) corresponds to a 5.2% increase in real gross domestic product (GDP). In addition, if the PMI for February is annualized, it corresponds to a 4.9% increase in real GDP annually."

ISM's Production Index registered 58.4% in February, which is a decrease of 7.8 percentage points from the January reading of 66.2% (seasonally adjusted). An index above 51%, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the ninth consecutive month the Production Index has registered above 50%.

ISM's Employment Index registered 56.1% in February, which is 2.8 percentage points higher than the seasonally adjusted 53.3% reported in January. This is the third month of growth in manufacturing employment, and the highest reading since January 2005 (58.7%). An Employment Index above 49.8%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

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