Manufacturing sector sees growth for fifth straight month
by August 2, 2016 3:41 pm 123 views
Manufacturing is enjoying a fifth consecutive month of expansion, according to American supply executives in the latest Manufacturing ISM Report on Business. Additionally, the overall economy grew for the 86th consecutive month.
The July Purchasing Managers’ Index (PMI) registered 52.6%, a decrease of 0.6% from the June reading of 53.2%.
In simple terms, a PMI reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.
“Manufacturing registered growth in July for the fifth consecutive month, as 12 of our 18 industries reported an increase in new orders in July (same as in June), and nine of our 18 industries reported an increase in production in July (down from 12 in June),” said Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
Of the 18 manufacturing industries, 11 are reporting growth in July in the following order: Textile Mills; Printing & Related Support Activities; Miscellaneous Manufacturing; Wood Products; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; and Computer & Electronic Products.
The seven industries reporting a downturn for July – listed in order – are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; and Paper Products.
Economically speaking, a PMI above 43.2%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the July PMI indicates growth for the 86th consecutive month in the overall economy. Holcomb said, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (51.1%) corresponds to a 2.5% increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for July (52.6%) is annualized, it corresponds to a 3% increase in real GDP annually.”
For more details on the July PMI, click here.