July 2016 Manufacturing ISM Report on Business PMI at 52.6%
August 1, 2016 | ISMEstimated reading time: 4 minutes
Economic activity in the manufacturing sector expanded in July for the fifth consecutive month, while the overall economy grew for the 86th 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 July PMI registered 52.6%, a decrease of 0.6 percentage point from the June reading of 53.2%. The New Orders Index registered 56.9%, a decrease of 0.1 percentage point from the June reading of 57%. The Production Index registered 55.4%, 0.7 percentage point higher than the June reading of 54.7%. The Employment Index registered 49.4%, a decrease of 1 percentage point from the June reading of 50.4%. Inventories of raw materials registered 49.5%, an increase of 1 percentage point from the June reading of 48.5%. The Prices Index registered 55%, a decrease of 5.5 percentage points from the June reading of 60.5%, indicating higher raw materials prices for the fifth consecutive month. 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)."
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 contraction in July — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; and Paper Product
JULY 2016 MANUFACTURING INDEX SUMMARIES
PMI
Manufacturing expanded in July as the PMI® registered 52.6%, a decrease of 0.6 percentage point from the June reading of 53.2%, indicating growth in manufacturing for the fifth 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 July PMI® indicates growth for the 86th consecutive month in the overall economy, while indicating growth in the manufacturing sector for the fifth consecutive month. Holcomb stated, "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."
New Orders
ISM®'s New Orders Index registered 56.9% in July, which is a decrease of 0.1 percentage point when compared to the 57% reported for June, indicating growth in new orders for the seventh 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 12 industries reporting growth in new orders in July — listed in order — are: Textile Mills; Miscellaneous Manufacturing; Printing & Related Support Activities; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Fabricated Metal Products; Computer & Electronic Products; Petroleum & Coal Products; Primary Metals; and Paper Products. The five industries reporting a decrease in new orders during July are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Machinery; Plastics & Rubber Products; and Transportation Equipment.
Production
ISM®'s Production Index registered 55.4% in July, which is an increase of 0.7 percentage point when compared to the 54.7% reported for June, indicating growth in production in July for the seventh 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 July — listed in order — are: Printing & Related Support Activities; Miscellaneous Manufacturing; Furniture & Related Products; Food, Beverage & Tobacco Products; Chemical Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Fabricated Metal Products; and Paper Products. The six industries reporting a decrease in production during July — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; Plastics & Rubber Products; and Primary Metals.
Employment
ISM®'s Employment Index registered 49.4% in July, a decrease of 1 percentage point when compared to the June reading of 50.4%, indicating contraction in employment in July following one month of growth. An Employment Index above 50.6%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
Of the 18 manufacturing industries, in July, the eight industries reporting employment growth — listed in order — are: Textile Mills; Printing & Related Support Activities; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; and Fabricated Metal Products. The seven industries reporting a decrease in employment in July — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; Petroleum & Coal Products; Transportation Equipment; and Computer & Electronic Products.
Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in July as the Supplier Deliveries Index registered 51.8%, which is 3.6 percentage points lower than the 55.4% reported for June. A reading below 50% indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.
The 10 industries reporting slower supplier deliveries in July — listed in order — are: Textile Mills; Fabricated Metal Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Chemical Products; Machinery; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment. The only industry reporting faster supplier deliveries in July is Primary Metals. Seven industries reported no change in supplier deliveries in July compared to June.
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