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Manufacturing posts gains for sixth straight month, reports ISM

PMI is at its highest level since April 2011
By Jeff Berman, Group News Editor
December 02, 2013

The Institute of Supply Management (ISM) reported today that economic activity in the manufacturing sector was strong for the sixth straight month.

The PMI, the index used by the ISM to measure manufacturing activity, headed up 0.9 percent to 57.3 in November, which is now the new high for the PMI in 2013, topping October’s 56.4. It also is the highest PMI level since April 2011’s 60.4. What’s more, the November PMI is 4.1 percent ahead of the 12-month average of 53.4 and is again over the 50 mark—which is the benchmark of strong economic activity—in 11 of the last 12 months. The ISM also noted that overall economy has grown for 54 consecutive months.

Highlighting the growth track manufacturing continues to travel was the fact that each of the report’s three other key metrics posted gains from October to November.

New Orders, which are often referred to as the engine that drives manufacturing saw a 3.0 percent gain in November to 63.6 for the sixth straight month of growth and its highest level since reaching 61.7 in April 2011. Production rose 2.0 percent to 62.8 and also headed up for the sixth straight month. Employment saw a 3.3 percent uptick and showed growth for the fifth consecutive month after dipping 3.2 percent from September to October for its highest level since April 2012.

A sampling of ISM members surveyed in the report was somewhat mixed, even with strong monthly data. This is a reflection, in some cases, of the seasonal nature of their respective businesses, as well as some macroeconomic factors, too.

A machinery respondent said that federal debt, deficit, and inefficiency are causing a level of caution and uncertainty, and a computer and electronic products respondent pointed out that sequestration and cutbacks in defense spending continue to impact business. On a more positive note, a transportation equipment respondent noted the overall business climate is good and business is steady, and a wood products respondent said that the market continues to be stronger than normal for this time of year.

“This report is essentially the continuation of a trend over the past several months in which from June on there has been growth at an increasing level month-over-month,” said Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, in an interview. “It definitely has been a strong second half relative to the first half, and I don’t see any detractors on the horizon that would stop this momentum. We are in good shape.”

This report blends nicely with sentiment from Holcomb last month, when he said this positive growth activity was likely to continue through year-end.

In addressing the ISM member comments, Holcomb said these comments are often more forward-looking, with a decent majority of them having a positive and optimistic tone.

Other key metrics in the report were positive, with Backlog of Orders up 2.5 percent at 54.0, and exports up 2.5 percent at 59.5. Inventories dipped 2.0 percent to 50.5 but are still in positive territory, and Prices were off 3.0 percent at 52.5. Supplier Deliveries decreased 1.5 percent to 53.2.

Holcomb said the slowing of Supplier Deliveries was consistent with a tightened supply chain, with suppliers trying to catch up, which he said is not a negative at all, adding that it represents a good amount of supply chain energy and activity.

As for Prices, he said things are basically in neutral, with very few commodities up and very few commodities down.
“Suppliers are just ‘holding their powder’ and riding out the rest of the year as they wait for any price increase for the first part of next year, which is typical,” he said. “But it also speaks to some energy prices being down and suppliers cognizant of a decent pricing environment as things are flowing nicely.”

Looking ahead, Holcomb said it is reasonable to expect December’s manufacturing activity to be fairly close to November’s, explaining there is no reason to see anything different as the report’s metrics continue to head in the right direction.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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Article Topics

News · Manufacturing · PMI · ISM · All topics

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