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
OVERALL ECONOMY Growing Slower 64
Manufacturing Sector Growing Slower 16
MANUFACTURING AT A GLANCE: September 2014
Bradley J.
Holcomb, Chair of
ISM Mfg ROB