The September 2009 ISM manufacturing report PMI came in at 52.6% with new orders, production increasing, but the all important inventories are still contracting, supplier deliveries slower and unemployment still increasing. The overall PMI is slightly down from last month but still way above 41.2%, which is the inflection point between expansion and contraction.
The manufacturing sector grew for the second consecutive month in September. While the rate of growth moderated slightly when compared to August, the recovery broadened as the number of industries reporting growth increased from 11 to 13. Both new orders and production are growing, but at a slower rate when compared to August
| MANUFACTURING AT A GLANCE SEPTEMBER 2009 | ||||||
|---|---|---|---|---|---|---|
|
Index |
Series Index Sept. |
Series Index Aug. |
% Point Change |
Direction |
Rate of Change |
Trend* (Months) |
| PMI | 52.6 | 52.9 | -0.3 | Growing | Slower | 2 |
| New Orders | 60.8 | 64.9 | -4.1 | Growing | Slower | 3 |
| Production | 55.7 | 61.9 | -6.2 | Growing | Slower | 4 |
| Employment | 46.2 | 46.4 | -0.2 | Contracting | Faster | 14 |
| Supplier Deliveries | 58.0 | 57.1 | +0.9 | Slowing | Faster | 4 |
| Inventories | 42.5 | 34.4 | +8.1 | Contracting | Slower | 41 |
| Customers' Inventories | 39.0 | 39.0 | 0 | Too Low | Same | 6 |
| Prices | 63.5 | 65.0 | -1.5 | Increasing | Slower | 3 |
| Backlog of Orders | 53.5 | 52.5 | +1.0 | Growing | Faster | 2 |
| Exports | 55.0 | 55.5 | -0.5 | Growing | Slower | 3 |
| Imports | 52.0 | 49.5 | +2.5 | Growing | From Contracting | 1 |
| OVERALL ECONOMY | Growing | Slower | 5 | |||
| Manufacturing Sector | Growing | Slower | 2 | |||
How indicative of GDP change is the ISM?
The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (43.3 percent) corresponds to a 0.7 percent increase in real gross domestic product (GDP).
So, while this report still shows growth, it's tepid growth, down from August. Still inventories are contracting, but at least much slower than last month. While this means they must ramp up production to meet sales, it's also an indicator of just how many sales companies think they will have in the future.
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