Latest ISM Report On Business reports on US manufacturing in June

Latest ISM Report on Business reports on US manufacturing in June

PMI® at 53.2%; June Manufacturing ISM® Report On Business®; new Orders, Production and Employment Growing; Inventories Contracting; Supplier Deliveries Slower. Economic activity in the manufacturing sector expanded in June for the fourth consecutive month, while the overall economy grew for the 85th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM(®) Report On Business(®).

The report was issued July 1, 2016 by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management(®) (ISM(®)) Manufacturing Business Survey Committee. “The June PMI(®) registered 53.2 percent, an increase of 1.9 percentage points from the May reading of 51.3 percent. The New Orders Index registered 57 percent, an increase of 1.3 percentage points from the May reading of 55.7 percent. The Production Index registered 54.7 percent, 2.1 percentage points higher than the May reading of 52.6 percent. The Employment Index registered 50.4 percent, an increase of 1.2 percentage points from the May reading of 49.2 percent. Inventories of raw materials registered 48.5 percent, an increase of 3.5 percentage points from the May reading of 45 percent. The Prices Index registered 60.5 percent, a decrease of 3 percentage points from the May reading of 63.5 percent, indicating higher raw materials prices for the fourth consecutive month. Manufacturing registered growth in June for the fourth consecutive month, as 12 of our 18 industries reported an increase in new orders in June (down from 14 in May), and 12 of our 18 industries reported an increase in production in June (same as in May).”

 Of the 18 manufacturing industries, 13 are reporting growth in June in the following order: Printing & Related Support Activities; Textile Mills; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Primary Metals; Machinery; and Nonmetallic Mineral Products. The three industries reporting contraction in June are: Electrical Equipment, Appliances & Components; Transportation Equipment; and Plastics & Rubber Products.

What respondents are saying

–        “We are gaining new customers through better sales management.” (Food Beverage & Tobacco Products)

–        “Slower shipments because of weather related flooding.” (Chemical Products)

–         “Conditions have remained steady from [the] past month and are in line with our forecast.” (Computer & Electronic Products)

–        “Very good start of summer for business levels/orders.” (Fabricated Metal Products)

–        “Business is steady with some signs of increase.” (Machinery)

–        “Business is still strong, but slowing slightly.” (Transportation Equipment)

–         “Business conditions are good, production and demand are stable.” (Miscellaneous Manufacturing)

–        “Orders are slowing from China. American customers still steady. (Primary Metals)

    –      “Demand continues to be robust.” (Plastics & Rubber Products)

–        Business is still slower than expected.” (Non-metallic Mineral Products)


US Manufacturing in June 2016


JUNE 2016 Manufacturing Index summary

PMI(®)Manufacturing expanded in June as the PMI(®) registered 53.2 %, an increase of 1.9 percentage points from the May reading of 51.3 %, indicating growth in manufacturing for the fourth consecutive month, and is the highest reading since February 2015 when the PMI registered 53.3 %. A reading above 50 % indicates that the manufacturing economy is generally expanding; below 50 % indicates that it is generally contracting.

A PMI(®) above 43.2 %, over a period of time, generally indicates an expansion of the overall economy. Therefore, the June PMI(®) indicates growth for the 85th consecutive month in the overall economy, while indicating growth in the manufacturing sector for the fourth consecutive month. Holcomb stated, “The past relationship between the PMI(®) and the overall economy indicates that the average PMI(®) for January through June (50.8 %) corresponds to a 2.4 % increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI(®) for June (53.2 %) is annualised, it corresponds to a 3.2 % increase in real GDP annually.”

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers’ Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).

The resulting single index number for those meeting the criteria for seasonal adjustments (PMI(®), New Orders, Production, Employment and Supplier Deliveries) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The PMI(®) is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), and Inventories.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI(®) reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI(®) above 43.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 43.2 percent, it is generally declining. The distance from 50 percent or 43.2 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM(®) has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.

The Manufacturing ISM(®) Report On Business(®) survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM(®) receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM(®) then compiles the report for release on the first business day of the following month.

The industries reporting growth, as indicated in the Manufacturing ISM(®) Report On Business(®) monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

Responses to Buying Policy reflect the percent reporting the current month’s lead time, the approximate weighted number of days ahead for which commitments are made for Capital Expenditures; Production Materials; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.

Institute for Supply Management(®) (ISM(®)) serves supply management professionals in more than 90 countries. Its 48000 members around the world manage about USD 1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business(®), its highly regarded certification programs and the newly launched ISM Mastery Model(TM). This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM(®) Report On Business(®) is posted on ISM(®)’s website indicated below.                                                                                         

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