Manufacturing Orders, Production Continue to Grow

American flag planted in money to indicate economic growth

Sep 06, 2017

According to their most recent report, The Institute for Supply Management (ISM) states that the U.S. economy continues its growth streak, with August representing the 99th consecutive month of growth for the overall economy. When the manufacturing sector is examined specifically, the data reflected by the Purchasing Managers Index (PMI) indicates the net growth over July's reading was 2.5 percent, with the PMI sitting at 58.8 percent.

The PMI has increased for 12 consecutive months, the current August reading representing a high value not seen since the month of  April 2011. When this growth rate is annualized, the net change in real gross domestic product would equate to a 4.2 percent increase.

Some of the additional key findings of the ISM report are as follows:

  • The index measuring new orders showed a drop of 1/10 of 1 percent over the value recorded in the prior month (July 2017).
  • The index reflecting production volume rose by 0.4 percent, to finish at 61 percent. This increase tracks the growth in both the PMI and the index of new orders.
  • Not surprisingly, employment increased as well for the 11th consecutive month. When measured using the Employment Index, a growth of 4.7 percentage point was noted, registering a value of 59.9 percent. The level of employment has been on the rise since October 2016, now representing the highest level of expansion since June 2011.
  • The measure of inventory also showed an increase in value over that registered for July. The index rose 5.5 percent, now sitting at 55.5 percent, which represents the highest level of the index since September 2010. Generally, a value greater than 42.9 percent is usually associated with economic expansion. Another related metric, The Customers’ Inventories Index, moved afull 8 percentage points lower in August, finishing at 41 percent. This value is a reflection the level of customers inventory being too low. With this last change, the index is at its lowest level since May 2011.
  • The measure of price for raw materials remained flat from July to August, sitting at 62 percent, thus indicating raw materials prices remain high for the 18th consecutive month.
  • Order backlog, a sign of health in new orders, also saw an increase to land at 57.5 percent in August. The net increase of 2.5 percent over July represents an growth for the seventh consecutive month.
  • The index for imports fell 1.5 percent from July, to finish at 54.5 percent. This shows that there is growth in imports for the seventh consecutive month, but the growth rate has slowed. Those industries or which import growth was noted include textiles, electronics, machinery, plastics and rubber, fabricated metal products, and food and beverage.
  • Those industries showing overall growth included textiles, petroleum and coal products, heavy machinery, fabricated metal, electronics, chemicals, plastics and rubber and food and beverage.
  • Commodities that saw an increase in price included aluminum, copper, corrugated boxes, electronic components and steel.
  • Capacitors, integrated circuits, and memory components are among those commodities which are viewed as being in the shortest supply.
  • The average lead time associated with the commitment to capital expenditures fell to 143 days from 146 days.
  • The average production materials lead time rose by a day to 61 days.
  • Average lead time for MRO Supplies also lengthened by a day to 36 days.