Slow Growth Continues with PMI of 55.3 Percent
The Institute for Supply Management’s Purchasing Managers Index registered 55.3 percent in June, up 1.8 percent from May, indicating that economic activity in the manufacturing sector expanded for the 23rd consecutive month, while the overall economy grew for the 25th consecutive month, according to the latest Manufacturing ISM Report On Business from the Tempe, Ariz.-based trade group.
New orders and production were both up slightly from the previous month, and employment showed continued strength with an increase of 1.7 percentage points to 59.9 percent. The rate of increase in prices slowed for the second consecutive month, dropping 8.5 percentage points in June to 68 percent. This follows a similar reduction of 9 percentage points in the Prices Index in May, and is the lowest figure since August 2010 when the index registered 61.5 percent, ISM reports.
“While the rate of price increases has slowed and the list of commodities up in price has shortened, commodity and input prices continue to be a concern across several industries,” says Bradley J. Holcomb, chairman of ISM’s Manufacturing Business Survey Committee.
Of the 18 manufacturing industries surveyed, 12 reported growth in June, in the following order: miscellaneous manufacturing; printing and related support activities; computer and electronic products; paper products; textile mills; petroleum and coal products; nonmetallic mineral products; transportation equipment; chemical products; fabricated metal products; machinery; and electrical equipment, appliances and components.
The average PMI for the first half of the year of 58.8 percent (a reading above 50 percent indicates growth) corresponds to a 5.7 percent increase in real GDP. In addition, if June’s PMI of 55.3 percent is annualized, it corresponds to a 4.5 percent increase in real GDP, ISM estimates.
ISM’s New Orders Index registered 51.6 percent in June, which is an increase of 0.6 percentage point when compared to the 51 percent reported in May. This is the 24th consecutive month of growth in the New Orders Index. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).
ISM’s Production Index registered 54.5 percent in June, which is an increase of 0.5 percentage point when compared to the May reading of 54 percent. An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures. This is the 25th consecutive month the Production Index has registered above 50 percent.
ISM’s Employment Index registered 59.9 percent in June, which is 1.7 percentage points higher than the 58.2 percent reported in May. This is the 21st consecutive month of growth in manufacturing employment. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in Bureau of Labor Statistics data on manufacturing employment.