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PMI Index Rises in April

Key economic indicator shows continuous growth in manufacturing.

A newly released report from the Institute for Supply Management showed economic activity in the manufacturing sector expanded in April. The bellwether PMI Index—a barometer of confidence among purchasing executives—registered 54.8%, marking the 33rd consecutive month of expansion. What’s more, the increase reflects an expansion in the U.S. economy overall.

“The past relationship between the PMI1 and the overall economy indicates that the average PMI for January through April (53.7 percent) corresponds to a 3.8 percent increase in real gross domestic product (GDP),” said Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “In addition, if the PMI for April (54.8 percent) is annualized, it corresponds to a 4.1 percent increase in real GDP annually.”

According to Holcomb, 16 of the 18 reporting industries (or 88%) reflected overall growth in April. Among them: Furniture & Related Products; Printing & Related Support Activities; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Primary Metals; Paper Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; and Petroleum & Coal Products.

Furthermore, comments from those surveyed generally indicate stable to strong demand. Following is a sampling:

(Chemical Products) “We expect our production levels to remain at the current level or increase over the next quarter.”

(Miscellaneous Manufacturing) “Positive increase in volume of sales and orders, and slight uptick in inventories, indicate the overall outlook remains robust through summer at least.”

(Machinery) “In general, demand remains strong for products, and we [are experiencing] more supply disruptions now than four to five months ago.”

NEW ORDERS

Another noteworthy trend in the Institute for Supply Management’s latest report is the uptick in new orders. According to Holcomb, this particular index registered 58.2 percent in April—an increase of 3.7 percentage points over March. What’s more, this represents a continuation of growth for the 36th consecutive month, and at a faster rate than in March.

The 15 industries reporting growth in new orders in April—listed in order—are: Furniture & Related Products; Printing & Related Support Activities; Paper Products; Machinery; Primary Metals; Transportation Equipment; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Chemical Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; and Petroleum & Coal Products. No industries reported a decrease in new orders during April.

The complete April ISM report, which includes historic tables, is available online.

REFERENCES

  1. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 42.6 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 35th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 33rd consecutive month.
     

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