PMI at 51.9%; October Manufacturing ISM Report on Business

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Economic activity in the manufacturing sector expanded in October, and the overall economy grew for the 89th 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® (ISM®) Manufacturing Business Survey Committee. "The October PMI® registered 51.9%, an increase of 0.4 percentage point from the September reading of 51.5%. The New Orders Index registered 52.1%, a decrease of 3 percentage points from the September reading of 55.1%. The Production Index registered 54.6%, 1.8 percentage points higher than the September reading of 52.8%. The Employment Index registered 52.9%, an increase of 3.2 percentage points from the September reading of 49.7%. Inventories of raw materials registered 47.5%, a decrease of 2 percentage points from the September reading of 49.5%. The Prices Index registered 54.5% in October, an increase of 1.5 percentage points from the September reading of 53%, indicating higher raw materials prices for the eighth consecutive month. Comments from the panel are largely positive citing a favorable economy and steady sales, with some exceptions."

OCTOBER 2016 MANUFACTURING INDEX SUMMARIES 

PMI

Manufacturing expanded in October as the PMI® registered 51.9%, an increase of 0.4 percentage point from the September reading of 51.5%, indicating growth in manufacturing for the second consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting. 

A PMI® above 43.2%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the October PMI® indicates growth for the 89th consecutive month in the overall economy, and indicates growth in the manufacturing sector for the second consecutive month. Holcomb stated, "The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through October (51%) corresponds to a 2.5% increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for October (51.9%) is annualized, it corresponds to a 2.8% increase in real GDP annually."

New Orders

ISM®'s New Orders Index registered 52.1% in October, which is a decrease of 3 percentage points when compared to the 55.1% reported for September, indicating growth in new orders for the second consecutive month. A New Orders Index above 52.2%, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). 

The eight industries reporting growth in new orders in October — listed in order — are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Paper Products; Plastics & Rubber Products; Computer & Electronic Products; and Chemical Products. The eight industries reporting a decrease in new orders during October — listed in order — are: Wood Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Fabricated Metal Products; Primary Metals; and Machinery.

Production

ISM®'s Production Index registered 54.6% in October, which is an increase of 1.8 percentage points when compared to the 52.8% reported for September, indicating growth in production in October for the second consecutive month. An index above 51.3%, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. 

The nine industries reporting growth in production during the month of October — listed in order — are: Textile Mills; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Fabricated Metal Products; Chemical Products; and Computer & Electronic Products. The four industries reporting a decrease in production during October are: Primary Metals; Transportation Equipment; Machinery; and Plastics & Rubber Products.

Employment

ISM®'s Employment Index registered 52.9% in October, an increase of 3.2 percentage points when compared to the September reading of 49.7%, indicating growth in employment in October following three consecutive months of contraction. An Employment Index above 50.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. 

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

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in October as the Supplier Deliveries Index registered 52.2%, which is 1.9 percentage points higher than the 50.3% reported for September. A reading below 50% indicates faster deliveries, while a reading above 50% indicates slower deliveries.

The seven industries reporting slower supplier deliveries in October — listed in order — are: Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Machinery; Computer & Electronic Products; and Primary Metals. The four industries reporting faster supplier deliveries in October are: Paper Products; Plastics & Rubber Products; Fabricated Metal Products; and Miscellaneous Manufacturing. Seven industries reported no change in supplier deliveries in October compared to September.