August 2014 Manufacturing ISM Report On Business – PMI At 59%

September 2, 2014

New Orders, Employment and Production Growing; Inventories Growing; Supplier Deliveries Slowing

Economic activity in the manufacturing sector expanded in August for the 15th consecutive month, and the overall economy grew for the 63rd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report on Business.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.  “The August PMI registered 59 percent, an increase of 1.9 percentage points from July’s reading of 57.1 percent, indicating continued expansion in manufacturing.  This month’s PMI reflects the highest reading since March 2011 when the index registered 59.1 percent.  The New Orders Index registered 66.7 percent, an increase of 3.3 percentage points from the 63.4 percent reading in July, indicating growth in new orders for the 15th consecutive month.  The Production Index registered 64.5 percent, 3.3 percentage points above the July reading of 61.2 percent.  The Employment Index grew for the 14th consecutive month, registering 58.1 percent, a slight decrease of 0.1 percentage point below the July reading of 58.2 percent.  Inventories of raw materials registered 52 percent, an increase of 3.5 percentage points from the July reading of 48.5 percent, indicating growth in inventories following one month of contraction.  The August PMI is led by the highest recorded New Orders Index since April 2004 when it registered 67.1 percent.  At the same time, comments from the panel reflect a positive outlook mixed with caution over global geopolitical unrest.”

Manufacturing expanded in August as the PMI registered 59 percent, an increase of 1.9 percentage points when compared to July’s reading of 57.1 percent.  August’s PMI reading of 59 percent is the highest reading since March 2011 when the PMI registered 59.1 percent.  A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 43.2 percent, over a period of time, generally indicates an expansion of the overall economy.  Therefore, the August PMI indicates growth for the 63rd consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 15th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (55 percent) corresponds to a 3.9 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for August (59 percent) is annualized, it corresponds to a 5.2 percent increase in real GDP annually.”

Of the 18 manufacturing industries, 17 are reporting growth in August.

Source: Institute for Supply Management