PMI Shows Manufacturing, GDP Growth Continues

The Purchasing Managers Index for July came in at 56.3 percent, a decrease of 1.5 percentage points from a month ago, but still indicative of manufacturing sector expansion. This latest report from the Institute for Supply Management shows growth in the manufacturing sector for the 11th consecutive month and in the U.S. economy for the 98th consecutive month.

The relationship between the PMI and the overall economy points to the potential for a 4.1 percent increase in real gross domestic product in 2017. The average PMI reading for 2017 is 56.4, and 54.7 over the last 12 months.

The manufacturing industries reporting growth in July included: Plastics & Rubber; Electrical Equipment, Appliances & Components; Wood Products; Fabricated Metal Products; Machinery; Chemical Products; Paper Products; Food, Beverage & Tobacco Products; Printing & Related Activities; Computer & Electronic Products; Nonmetallic Mineral Products; Furniture; Primary Metals; and Transportation Equipment.

ISM also noted that aluminum, corn, corrugated boxes, LCD displays, steel, and wheat were among the commodities experiencing price increases. Milk was listed as seeing a price decrease. Electrical components, including computer memory and integrated circuits, are listed as commodities in short supply.

Additional findings follow, with readings over 50 indicating expansion or growth:

  • The New Orders Index registered a reading of 60.4 percent, a decrease of 3.1 percentage points from June, but still showing growth for the 11th consecutive month.
  • The Production Index registered 60.6 percent, a 1.8 percent decline from June, but continuing on a growth trend for the 11th consecutive month.
  • The Employment Index registered 55.2 percent, a two percent drop from last month, but still representative of employment growth for the tenth consecutive month.
  • The Supplier Deliveries Index registered 55.4 percent, a 1.6 percentage point decrease from the June reading of 57 percent. The Inventories Index registered 50 percent, an increase of one percentage point from June. This is the 15th straight month of slowing supplier deliveries, and indicates that supplier inventory levels are too low and could impact production.
  • The Prices Index registered 62 percent in July, an increase of seven percentage points from June. This is the 17th straight month of higher raw materials prices, with a faster rate of increase in July compared with June.
  • The New Export Orders Index registered 57.5 percent in July, a decrease of two percent from June but the 17th consecutive month of growth in new export orders.
  • The Imports Index registered 56 percent in July, an increase of two percent over June, and the sixth straight month of import growth.
  • The average lead time for capital expenditures remained constant in July at 146 days and the average lead time for MRO supplies increased by one day to 35 days.
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