October 1, 2013

September ISM Manufacturing: 56.2% (Best This Year), Up From 55.7%

Filed under: Economy — Tom @ 9:56 am

Prediction: Business Insider is going with 55.1%, down from 55.7%.

The report will be here at 10:00 a.m.

HERE IT IS (permanent link):

Economic activity in the manufacturing sector expanded in September for the fourth consecutive month, and the overall economy grew for the 52nd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.

“The PMI™ registered 56.2 percent, an increase of 0.5 percentage point from August’s reading of 55.7 percent. September’s PMI™ reading is the highest of the year, leading to an average PMI™ reading of 55.8 percent for the third quarter. The New Orders Index decreased in September by 2.7 percentage points to 60.5 percent, and the Production Index increased by 0.2 percentage point to 62.6 percent. The Employment Index registered 55.4 percent, an increase of 2.1 percentage points compared to August’s reading of 53.3 percent, which is the highest reading for the year. Comments from the panel are generally positive and optimistic about increasing demand and improving business conditions.”

Of the 18 manufacturing industries, 11 are reporting growth in September in the following order: Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Furniture & Related Products; Petroleum & Coal Products; Fabricated Metal Products; Paper Products; Printing & Related Support Activities; Transportation Equipment; Computer & Electronic Products; Machinery; and Plastics & Rubber Products. The six industries reporting contraction in September — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Textile Mills; Nonmetallic Mineral Products; Miscellaneous Manufacturing; and Chemical Products.

It seems odd that one-third of the 18 industries tracked would show contraction in a report that is so positive overall, but there it is.

Two of the three GDP drivers (production, orders) were over 60%, and backlog was almost breakeven (49.5%) after spending several months quite a bit lower than that.

The obvious question, and I’m not going to pretend to know the answer, is how can the ISM indices continue to be so strong while the economy’s overall performance is so mediocre. Anyone with a clue on that is welcome to put in their two cents.

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2 Comments

  1. I would argue (to paraphrase John Wooden) that economic activity doesn’t necessarily mean economic achievement.

    Also from what I’ve since learned about the ISM it seems a lot of it is based on very subjective means.

    Comment by zf — October 1, 2013 @ 9:16 pm

  2. #1, well it is a survey and not a quantification.

    It used to be considered a reliable indicator of where the economy really is. Sadly, it doesn’t seem that way any more.

    Comment by Tom — October 1, 2013 @ 10:30 pm

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