ISM November data continues to show good growth momentum

When it comes to assessing the current state of manufacturing, it is hard to find better data than the Institute for Supply Management’s (ISM) Manufacturing Report on Business.

The most recent edition of the report, which was issued on Friday, December 1, pointed to another growth month, one in an ongoing series of 102 consecutive months, or 8.5 years, actually.

The report’s key metric, known as the PMI, was 58.2 in November, which was off a mere 0.5% from October’s 58.2. Even with this decline, though, that number is still very good. And I am fairly certain that is exactly what Tim Fiore, ISMs Manufacturing Business Survey Committee Chair, would have told me during our monthly interview on the report (I was on the road last week so we did not connect this time).

The November PMI is 0.8% of the 2017 average of 57.4 and is 1.1% higher than the 12-month average of 57.1, both pretty good benchmarks to be sure.

Here is a quick recap of some of the report’s other key metrics:

• New orders i.e. the engine that drives manufacturing increased 0.6% to 64.0, growing for the 15th straight month
• Production rose 2.9% to 63.9, growing for the 15th straight month
• Employment dipped 0.1% to 59.7, but still grew for the 14th straight month
• Supplier deliveries slowed for the 19th month at 56.5, down 4.9% (a reading above 50 for this metric indicates contraction) but it is also a byproduct of strong new order activity, too
• Inventories dropped 1% to 47, contracting for the second month in a row
• Prices were down 3% to 65.5, increasing for the 21st consecutive month

The overall trend of these orders suggest that manufacturers i.e. ISM member respondents seem to think things are trending in the right direction, as evidenced by comments submitted in the report.

A chemical products respondent said that continuing increased orders are expected for the next 6-12 months. A machinery respondent said that strong sales are intact for the third, and fourth quarters, with backlog increasing and capacity at suppliers tightening.

There were other submitted comments akin to these as well, each with underlying themes that things are looking pretty good. That is something that should be viewed as more than positive, too.

Why? For one thing, all that not long ago it could be argued that manufacturing was the one bright star amid an economy short of across the board momentum and traction. Now, though, the story has shifted in a positive way, too, considering how GDP appears to be showing signs of a decent growth track, coupled with excellent import numbers in recent months, and decent retail sales, too.

Are we in the early innings of a true economic recovery? It really may still be too early to say so for sure, but things are trending in the right direction, and we should all be pleased about that.