June ISM PMI Report-Resumption of Growth in Manufacturing

Good news/ bad news: Manufacturing growth resumes, but Employment shrinks in Manufacturing  for first time since September 2009…

“Manufacturing expanded in June as the PMI™ registered 50.9 percent, an increase of 1.9 percentage points when compared to May’s reading of 49 percent. June’s reading of 50.9 percent reflects the resumption of growth in the manufacturing sector for 2013, following the only month of contraction for the year in May.”- Bradley Holcomb, Chairman of the Institute for Supply Management Business Survey Committee.

Graph Courtesy Calculated Risk Blog

Graph Courtesy Calculated Risk Blog

Precision machined products are widely used key components used in a host of manufactured and durable goods. Precision machined products are a submarket of Fabricated Metals, which is tracked in this ISM Report on Manufacturing.

“A PMI™ in excess of 42.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the June PMI™ indicates growth for the 49th consecutive month in the overall economy, and indicates expansion in the manufacturing sector following one month of contraction. Holcomb stated, “The past relationship between the PMI™ and the overall economy indicates that the average PMI™ for January through June (51.5 percent) corresponds to a 2.9 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI™ for June (50.9 percent) is annualized, it corresponds to a 2.7 percent increase in real GDP annually.” (PMI™ stands for Purchasing Managers Index.)

ISM’s Production Index registered 53.4 percent in June, which is an increase of 4.8 percentage points when compared to the 48.6 percent reported in May.

How do your  June shipments compare to this benchmark?

The ISM report showed  11 industries reporting growth in production during the month of June — listed in order —  Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Nonmetallic Mineral Products; Wood Products; Fabricated Metal Products; Primary Metals; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The three industries reporting a decrease in production in June are: Chemical Products; Machinery; and Transportation Equipment.

We are glad to see manufacturing back in growth mode, however, we were not pleased with this month’s first sign of contraction in employment.

ISM’s Employment Index registered 48.7 percent in June, which is 1.4 percentage points lower than the 50.1 percent reported in May. This month’s reading indicates contraction in employment for the first time since September 2009, when the index registered 47.8 percent. An Employment Index above 50.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.”

Dollars-2-donuts-image2

We are betting dollars to donuts (remember when there used to be a real difference between dollars and donuts?) that the  slowdown in hiring is related to employers’ concerns over Affordable Care Act.

Dollars to Donuts

Calculated Risk

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