Wednesday, July 2, 2008

PMI comes in strong at 50.2%


On Tuesday, the Institute for Supply Management released their monthly Manufacturing ISM Report on Business. The Purchasing Managers' Index (PMI) came in at 50.2% for June which was 0.6% higher than May.

A PMI reading of 50.2% suggests that the manufacturing economy is growing just a tad. Per ISM:

"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 41.1 percent, over a period of time, generally indicates an expansion of the overall economy."

This breaks a streak of 4 months under 50. Economists had expected PMI to come in at 48.6%.

Here is what some of the respondents to the ISM survey are saying:

  • "The shock waves from high crude price continue to put pressure on derivative pricing." (Chemical Products)
  • "Business appears to have bottomed out." (Transportation Equipment)
  • "Seeing renewed interest in outstanding quotes." (Machinery)
  • "Volume is normal, and we are able to recover some of the raw material (steel cost) increases." (Fabricated Metal Products)
  • "Commodity bubble is killing profitability." (Food, Beverage & Tobacco Products)
  • "Orders have slowed, and prices for metals are going up." (Computer & Electronic Products)

Manufacturing and business are not leading us into a recession. It is the housing crisis and the consumer being hit hard by energy and food prices that is dragging the economy down. Manufacturing has held up its end so far.


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