Manufacturing continued to grow in August as the PMI registered 56.3 percent, an increase of 0.8 percentage point when compared to July's reading of 55.5 percent. According to the Institute for Supply Management, which calculates the index, a reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. Additionally, a PMI Index in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 16th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 13th consecutive month.
"Manufacturing activity continued at a very positive rate in August, as the PMI rose slightly when compared to July,” said Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee.
According to Ore, the past relationship between the PMI and the overall economy indicates that the average PMI for January through August, 57.8 percent, corresponds to a 5.3 percent increase in real gross domestic product, or GDP. In addition, if the PMI for August, 56.3 percent, is annualized, it corresponds to a 4.8 percent increase in real GDP annually, he noted.
Eleven of the 18 manufacturing industries reported growth in August, in the following order: Primary Metals; Apparel, Leather & Allied Products; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Computer & Electronic Products; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; and Printing & Related Support Activities.
Other highlights: ISM's New Orders Index registered 53.1 percent in August, which is a decrease of 0.4 percentage point when compared to the 53.5 percent reported in July. This is the 14th consecutive month of activity above 50 percent in the New Orders Index. A New Orders Index above 50.2 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).
ISM's Employment Index registered 60.4 percent in August, which is 1.8 percentage points higher than the 58.6 percent reported in July. This is the ninth consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
The full August PMI report is available from the Institute for Supply Management.