The PMI index
—that telltale monthly economic indicator from the Institute of Supply Management—has been on the rise for the last 11 months: 55.7 as of October, compared to 32.9 in December 2008. Rule of thumb: A PMI index above 50 indicates that the economy is expanding, while anything below 50 signifies economic contraction. The PMI Index, a key barometer of national economic activity, reflects the confidence of purchasing managers across a variety of key manufacturing sectors and serves as a reliable yardstick of manufacturing activity across multiple levels of the supply chain. Naturally, when major manufacturers detect tangible—and consistent—increases in purchase orders, it gives industry good reason to be cautiously optimistic.
“The jump in the index was driven by production and employment, with both registering significant gains,” said Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee. “Production appears to be benefiting from the continuing strength in new orders, while the improvement in employment is due to some callbacks and opportunities for temporary workers. Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode.”
Other economic indicators point to positive movement. Newly released (and revised) data from the Bureau of Economic Analysis
show real gross domestic product, or GDP—the output of goods and services produced by labor and property located in the United States—increased at an annual rate of 2.8% in the third quarter of 2009. The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures, exports, private inventory investment, federal government spending, and residential fixed investment. But more importantly, it confirms reports that businesses have been replenishing depleted inventories.
Among the PMI performance leaders: computer and electronic products; transportation equipment; machinery; fabricated metal products, which includes automotive; and electrical equipment, appliances, and components.