June 2017 Manufacturing ISM Report on Business: PMI at 57.8%

Estimated reading time: 5 minutes

Economic activity in the manufacturing sector expanded in June, and the overall economy grew for the 97th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee: "The June PMI registered 57.8%, an increase of 2.9 percentage points from the May reading of 54.9%. The New Orders Index registered 63.5%, an increase of 4 percentage points from the May reading of 59.5%. The Production Index registered 62.4%, a 5.3 percentage point increase compared to the May reading of 57.1%. The Employment Index registered 57.2%, an increase of 3.7 percentage points from the May reading of 53.5%. The Supplier Deliveries index registered 57%, a 3.9 percentage point increase from the May reading of 53.1%. The Inventories Index registered 49%, a decrease of 2.5 percentage points from the May reading of 51.5%. The Prices Index registered 55%in June, a decrease of 5.5 percentage points from the May reading of 60.5%, indicating higher raw materials’ prices for the 16th consecutive month, but at a slower rate of increase in June compared with May. Comments from the panel generally reflect expanding business conditions; with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace."

Of the 18 manufacturing industries, 15 reported growth in June in the following order: Furniture & Related Products; Nonmetallic Mineral Products; Paper Products; Machinery; Electrical Equipment, Appliances & Components; Chemical Products; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Printing & Related Support Activities; Fabricated Metal Products; Wood Products; Miscellaneous Manufacturing; and Petroleum & Coal Products. Three industries reported contraction in June compared to May: Apparel, Leather & Allied Products; Textile Mills; and Primary Metals.

June 2017 Manufacturing Index Summaries

PMI

Manufacturing expanded in June as the PMI registered 57.8%, an increase of 2.9 percentage points from the May reading of 54.9% and its highest level since August 2014, when it registered 57.9%. This indicates growth in manufacturing for the 10th consecutive month. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI above 43.3%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the June PMI® indicates growth for the 97th consecutive month in the overall economy and the 10th straight month of growth in the manufacturing sector. Fiore stated, "The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through June (56.4%) corresponds to a 4.1%increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for June (57.8 percent) is annualized, it corresponds to a 4.6% increase in real GDP annually."

New Orders

ISM's New Orders Index registered 63.5% in June, which is an increase of 4 percentage points when compared to the 59.5% reported for May, indicating growth in new orders for the 10th consecutive month. New orders returned to the above-60 level last seen in March 2017 and continues to signal strong order intake for calendar year 2017. A New Orders Index above 52.3%, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

Fifteen of 18 industries reported growth in new orders in June, listed in the following order: Wood Products; Furniture & Related Products; Machinery; Plastics & Rubber Products; Paper Products; Transportation Equipment; Fabricated Metal Products; Chemical Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Petroleum & Coal Products; and Computer & Electronic Products. Three industries reported a decrease in new orders in June compared to May: Textile Mills; Apparel, Leather & Allied Products; and Primary Metals.

Production

ISM's Production Index registered 62.4% in June, which is an increase of 5.3 percentage points when compared to the 57.1% reported for May, indicating growth in production for the 10th consecutive month and reaching its highest level since February 2017 when it registered 62.9%. An index above 51.4%, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The 14 industries reporting growth in production during the month of June — listed in order — are: Paper Products; Furniture & Related Products; Machinery; Nonmetallic Mineral Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; Printing & Related Support Activities; Transportation Equipment; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; and Primary Metals. Two industries reported a decrease in production in June compared to May: Apparel, Leather & Allied Products; and Textile Mills.

Employment

ISM's Employment Index registered 57.2% in June, an increase of 3.7 percentage points when compared to the May reading of 53.5% and its highest level since March 2017, when it registered 58.9%. This indicates growth in employment in June for the ninth consecutive month. Employment levels have been expanding since October 2016. An Employment Index above 50.5%, 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 14 reporting employment growth in June — listed in order — are: Textile Mills; Furniture & Related Products; Paper Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Plastics & Rubber Products; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; Chemical Products; Nonmetallic Mineral Products; Machinery; and Primary Metals. The two industries reporting a decrease in employment in June are: Apparel, Leather & Allied Products; and Petroleum & Coal Products.

About Institute for Supply Management

Institute for Supply Management (ISM) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business, its highly regarded certification programs and the newly launched ISM Mastery Model. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM Report On Business is posted on ISM's website on the first business day of every month after 10:00 a.m. ET.