Some Bright Spots for Manufacturing

Economic activity in the manufacturing sector grew in August for the second consecutive month, while the overall economy grew for the 22nd consecutive month, say the nation's supply executives in the latest Institite for Suppy Management's (ISM) Manufacturing Report On Business®.

According to ISM, "the manufacturing sector showed improvement for the second month as the PMI is at its highest level since December of last year. Though two months of growth do not establish a trend, there is strength in the various segments of this report that we have not seen for some time. New Orders and Production have both been above 50 percent for four consecutive months; the continuation of a second half recovery appears on track."

ISM's Backlog of Orders Index indicates that order backlogs improved again in August. However, manufacturing Employment continued to decline in August as the index remained below the breakeven point (an index of 50 percent) for the 35th consecutive month. ISM's Prices Index indicates that manufacturers experienced higher prices for the 18th consecutive month. New Export Orders grew in August for the 20th consecutive month, while August's Imports Index grew for the 10th consecutive month.

Comments from purchasing and supply managers appear to be divided by industry. Reports from the Food and Primary Metals industries indicate continuing softness, while the Electronic Components & Equipment, Fabricated Metals, and Industrial & Commercial Equipment & Computers industries claim to be improving. Manufacturers supplying the construction industry continue to mention a positive effect from the seasonal upswing in the industry. Natural gas costs have stabilized somewhat, but are still at a rate that concerns manufacturers.

ISM's PMI is 54.7 percent in August, an increase of 2.9 percentage points when compared to 51.8 in July. ISM's New Orders Index rose 3 percentage points from 56.6 percent in July to 59.6 percent in August. ISM's Production Index rose 8.3 percentage points from 53.3 percent in July to 61.6 percent in August. The ISM Employment Index is at 45.9 percent for August, a decrease of 0.2 percentage point when compared to the 46.1 percent reported in July.

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