ISM Purchasing Managers Index

From the National Association of Manufacturers Monday Economic Report
January 9th, 2012
By: Chad Moutray

The Institute for Supply Management’s (ISM) Purchasing Managers Index (PMI) rose from 52.7 in November to 53.9 in December its highest point since June. After experiencing some weaknesses in July and August, the PMI rose gradually for the remaining months of the year. The index has been over 50 – its threshold for expansion – every month since August 2009.

Overall, these figures suggest that manufacturing activity has started to pick up some steam – a good sign as we begin 2012. The index for new orders rose from 56.7 to 57.6 for the month, suggesting growth in future activity. Indicators for production, employment, exports and imports were also higher in December. Inventories, which fell from 48.3 to 47.1, were one of the few areas to contract.

Many of the comments from respondents to the survey reflected this positivity. One manufacturer said, “Our business is stable with a very good outlook for 2012.” Others noted some unease moving forward. A computer and electronic products manufacturer wrote, “Continued conservative hiring, with tight discretionary spending controls due to slower growth expectations for 2012, driven by Euro sovereign debt concerns and lack of viable U.S. legislative process through the 2012 election.”

These anxieties will continue over the coming months, especially as European and U.S. policymakers struggle with solutions to their respective fiscal challenges. It is notable that most of the respondents were more positive than negative, and the fact that the employment variable moved higher is a welcome sign for the industry. It suggests that increased activity will hopefully lead to higher manufacturing employment in the coming months. In the end, these figures are a sign that manufacturers have become more optimistic about activity. We have seen this in other surveys, as well, including the regional surveys released last week.