Industrial Distribution - November/December 2014

14 INDUSTRIAL DISTRIBUTION / November/December 2014 www.inddist.com MARKETPULSE

ISM: Manufacturing Set For A Strong Q4

Economic activity in the manufacturing sector expanded in September for the 16th consecutive month, and the overall economy grew for the 64th consecutive month, say the nation’s supply chain executives in the latest Manufacturing ISM Report On Business.

Manufacturing expanded in September as the PMI registered 56.6 percent, a decrease of 2. 4 percentage points when compared to August’s reading of 59 percent.

A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

“Even with new orders down 6. 7
percent, 60 is still a great number and
August’s 66.7 was the highest number in
years, so you can’t expect to maintain at
that level,” says Bradley J. Holcomb, CPSM,
CPSD, chair of the ISM Business Survey
Committee. “It’s a continuation of what
we’ve been seeing. Now we’ve got 3 quar-
ters in the drawer and, from a quarterly
perspective, Q3 has been the strongest yet
with an average PMI of 57.6 — whereas
Q2 is at 55.2 and Q1 was 52.7. So, we’re
very much moving in the right direction
and setting us up for a good fourth quar-
ter.”
A PMI in excess of 43. 2 percent, over
a period of time, generally indicates an
expansion of the overall economy. There-
fore, the September PMI indicates growth
for the 64th consecutive month in the
overall economy and indicates expansion
in the manufacturing sector for the 16th
consecutive month.

Orders, Production, and
Inventory

ISM’s New Orders Index registered 60 percent in September, a decrease of 6. 7 percentage points when compared to the

66.7 percent reported in August, indicat-
ing growth in new orders for the 16th
consecutive month. A New Orders Index
above 52.1 percent, over time, is generally
consistent with an increase in the Census
Bureau’s series on manufacturing orders
(in constant 2000 dollars).

ISM’s Production Index registered 64.6 percent in September, which is a slight increase of 0.1 percentage points when compared to the 64.5 percent reported in August, indicating growth in production for the seventh consecutive month. This is the highest reading since May 2010 when the Production Index also registered 64.6 percent. An index above 51.1 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

“New Orders Index at 60 is strong.

It’s supported by 12 of our 18 industries growing new orders and only 2 reporting a decrease,” adds Holcomb. “The goal of manufacturing is to keep production level with respect to its resources, level of em-

Index Series Series Percentage Direction Rate of Trend*
Index Index Point Change (Months)
Sept Aug Change

PMI 56.6 59.0 - 2. 4 Growing Slower 16 NewOrders 60.0 66.7 - 6. 7 Growing Slower 16 Production 64.6 64.5 +0.1 Growing Faster 7 Employment 54.6 58.1 - 3. 5 Growing Slower 15 Supplier 52.2 53.9 -1.7 Slowing Slower 16 Deliveries Inventories 51.5 52.0 -0.5 Growing Slower 2 Customers’ 44. 5 49.0 - 4. 5 TooLow Faster 34 Inventories Prices 59.5 58.0 +1.5 Increasing Faster 14 Backlog of Orders 47.0 52.5 - 5. 5 Contracting From Growing 1 Exports 53.5 55.0 -1.5 Growing Slower 22 Imports 53.0 56.0 - 3.0 Growing Slower 20