PMI is flat for April; not at recessionary levels

The Institute for Supply Management (ISM) released their April 2008 Manufacturing ISM Report on Business today. PMI came in at 48.6% unchanged from March. A reading below 50% indicates that the manufacturing economy is contracting, but a reading over 41.1% indicates that the overall economy is still expanding. This is consistent with the GDP growth of 0.6% that was announced yesterday for the first quarter of 2008. PMI at 48.6% corresponds with a 2.4% increase in real GDP annually.

Here is what some of the respondents are saying:

• "The decline in the value of the dollar is dramatically affecting our material prices because we purchase over half of our material requirements from overseas." (Transportation Equipment)
• "Higher energy rates, unfavorable exchange rates, high levels of inflation in Asia and a drop in demand are challenging our business and supply chain." (Nonmetallic Mineral Products)
• "Continued bio-fuel/spec investor driven inflation of commodities is stifling!" (Food, Beverage & Tobacco Products)
• "Still strong in spite of general business slowdown." (Primary Metals)
• "Oil, oil, oil, energy, energy, energy, metals, metals, metals." (Fabricated Metal Products)

ISM's Employment Index dropped 3.8% to 45.4%. The ISM Prices Index rose 1% to 84.5%. Exports rose for the 65th month in a row to 57.5% from 56.5% and Imports also rose to 48% from 45%.

The PMI report is consistent with other data (GDP, employment, income, retail sales). While we may be at the brink of a recession, we have not yet entered a full blown recession.

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