ISM data jumps back above growth threshold

PMI at 50.9% is 1.9 points higher than May, signaling improving conditions overall

07/02/2013


A boost in new orders and production data helped manufacturing avoid a June swoon, according to the latest data from the Institute for Supply Management.

The manufacturing benchmark jumped 1.9 percentage points in June to reverse its first loss of 2013 and finish above the 50% mark indicating growth in the sector. The 50.9% reading was not just higher than the 49.0% in May; it also was 0.3 percentage points higher than the April reading.

While manufacturing had shown expansion during the first quarter of 2013, it had been at an increasingly slower pace, and May’s reading indicating contraction in the sector was a worrisome sign for some. June’s data signaled at least a return to growth for manufacturing.

The ISM’s New Order Index jumped 3.1 points to 51.9%, while the production index rose 4.8 points to 53.4 %

Not all the news was great, according to Bradley Holcomb, chairman of the ISM Manufacturing Business Survey Committee. That especially was true on the jobs front. “The Employment Index registered 48.7%, a decrease of 1.4 percentage points compared to May's reading of 50.1%. Manufacturing employment contracted for the first time since September 2009, when the index registered 47.8%,” said Holcomb. “The Prices Index registered 52.5%, increasing 3 percentage points from May, indicating that overall raw materials prices increased from last month. Comments from the panel generally indicate slow growth and improving business conditions.”

That was reflected in quotes from various parts of the sector. Among the comments:

  • “Business remains good to improving.” (Miscellaneous Manufacturing)
  • “Industry volumes picking up with improved housing starts.” (Electrical Equipment, Appliances & Components)
  • “Indications are that customers have acceptable inventory levels, and as a result, are backing down on new orders and reassessing market conditions.” (Wood Products)
  • “Seeing signs of life through summer retail [sales] promotions — still an overall soft market.” (Food, Beverage & Tobacco Products)
  • “June sales appear to have rebounded from what was a lackluster May.” (Paper Products)
  • “Slow growth continues to choke the recovery. We are not out of the woods yet by any stretch of the imagination.” (Chemical Products)

The improved ISM data also moved the index past the four-year mark in overall growth. A PMI Index above 42.2% indicates overall growth in the economy, a figure it has reached for the 49th consecutive month. Holcomb said the index indicates overall GDP growth for the first half of 2013 at between 2.7% and 2.9%.

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