Economic activity in the manufacturing sector expanded in October for the second consecutive month following three months of slight contraction, and the overall economy grew for the 41st consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.
The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee. "The PMI registered 51.7 percent, an increase of 0.2 percentage point from September's reading of 51.5 percent, indicating growth in manufacturing at a slightly faster rate. The New Orders Index registered 54.2 percent, an increase of 1.9 percentage points from September, indicating growth in new orders for the second consecutive month. The Production Index registered 52.4 percent, an increase of 2.9 percentage points, indicating growth in production following two months of contraction. The Employment Index registered 52.1 percent, a decrease of 2.6 percentage points, and the Prices Index registered 55 percent, reflecting a decrease of 3 percentage points. Comments from the panel this month reflect continued concern over a fragile global economy and soft orders across several manufacturing sectors."
Performance by Industry Of the 18 manufacturing industries, eight are reporting growth in October in the following order: Petroleum & Coal Products; Furniture & Related Products; Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Chemical Products. The eight industries reporting contraction in October -- listed in order -- are: Primary Metals; Wood Products; Machinery; Fabricated Metal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Nonmetallic Mineral Products.
What Economists are Saying:
-- "Market is still very soft." (Paper Products)
-- "Business is picking up." (Furniture & Related Products)
-- "[Our] 4th quarters usually begin to show a slowdown in demand, and this year is no different; prices are also dropping." (Wood Products)
-- "Demand down slightly due to customers pre-buying ahead of announced material price increases." (Plastics & Rubber Products)
-- "The slowing of capital expenditure in Europe and China has lowered our backlog for Q4." (Computer & Electronic Products)
-- "We see a general softening in the steel and automotive markets in the fourth quarter." (Fabricated Metal Products)
-- "Cuts in healthcare reimbursement rates continue to negatively affect top-line revenue." (Miscellaneous Manufacturing)
-- "Business conditions stable to slightly improving." (Transportation Equipment)
-- "Sales and order intake have slowed." (Primary Metals)
-- "Europe is still very much a concern. Global recovery is still fragile." (Chemical Products)
Manufacturing expanded in October as the PMI registered 51.7 percent, an increase of 0.2 percentage point when compared to September's reading of 51.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI in excess of 42.6 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the October PMI indicates growth for the 41st consecutive month in the overall economy, and indicates growth in the manufacturing sector for the second consecutive month following three consecutive months of slight contraction. Holcomb stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (52 percent) corresponds to a 3.2 percent increase in real gross domestic product (GDP). In addition, if the PMI for October (51.7 percent) is annualized, it corresponds to a 3.1 percent increase in real GDP annually."
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