PMI Index jumps to nine-month high

Manufacturing growth shows an across-the-board increase in January

Bob Vavra, Content Manager, CFE Media

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A sharp jump in January's PMI Index got the manufacturing sector off on the right foot for 2013.

The monthly manufacturing index was at 53.1% in January, higher than analysts predicted and 2.9 percentage points higher than the December 2012 figure. It marked the 11th month out of the last 12 that the index was above the 50% mark that indicates growth in manufacturing, and it was the highest level since the index hit 54.1% in April 2012.

"Manufacturing is starting out the year on a positive note, with all five of the PMI's component indexes - new orders, production, employment, supplier deliveries and inventories - registering above 50% in January," said Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. "The past relationship between the PMI and the overall economy indicates that the PMI for January corresponds to a 3.4% increase in real gross domestic product on an annualized basis."

The survey quotes several manufacturers as saying the manufacturing sector continues to be solid, if still a little uncertain.

"Fiscal cliff, uncertainty in general and EU economic weakness are factors causing our customers to be very tentative with commitments for product purchases in 2013," said one machinery manufacturer.

"Housing sales are trending upward in light of overall market uncertainty, translating to improving optimism in appliance market," said an appliance manufacturer."

"The general theme developing in our industry is that we can move suitable volumes. However, profit margin is elusive," added a wood products manufacturer.

The ISM's New Orders Index was at 53.3%, reversing a month of contraction in December and representing a 3.6 percentage point increase over the previous month. The production and employment indexes also were up for January, with the employment index higher for the 40th consecutive month.

The index also tracks growth in the overall economy, with a figure above 42.2% indicating growth. The PMI was above that level for the 44th consecutive month.

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