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New Orders, Employment Increases Drive Manufacturing Expansion

The June PMI registered above 50 for the sixth consecutive month, spurred by positive new order, production and employment numbers.

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Economic activity in the manufacturing sector expanded in June for the fourth consecutive month, while the overall economy grew for the 85th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM (Institute for Supply Management) Report On Business. Key points from the report included:

  • The June PMI (Purchasing Managers Index) registered 53.2 percent, an increase of 1.9 percentage points from the May reading of 51.3 percent.
  • The New Orders Index registered 57 percent, an increase of 1.3 percentage points from the May reading of 55.7 percent – the sixth straight month of growth.
  • The Production Index registered 54.7 percent, 2.1 percentage points higher than the May reading of 52.6 percent, and also showing growth for the sixth straight month.
  • The Employment Index registered 50.4 percent, an increase of 1.2 percentage points from the May reading, and the first positive employment indicator of 2016.
  • Inventories of raw materials registered 48.5 percent, an increase of 3.5 percentage points from the May reading of 45 percent.
  • The Prices Index registered 60.5 percent, a decrease of three percentage points from the May reading, indicating higher raw materials prices for the fourth consecutive month.
  • Average commitment lead time for capital expenditures increased in June by 4 days to 131 days.
  • Average lead time for production materials decreased by 4 days to 59 days.
  • Average lead time for MRO Supplies remained the same at 30 days.

A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. According to ISM, the average PMI for the first half of 2016 (50.8 percent) corresponds to a 2.4 percent increase in real GDP on an annualized basis.

Among those segments reporting growth in June:

  • Textile Mills
  • Petroleum & Coal Products
  • Food, Beverage & Tobacco Products
  • Fabricated Metal Products
  • Paper Products
  • Computer & Electronic Products
  • Chemical Products
  • Primary Metals
  • Machinery

Industries reporting contraction included:

  • Electrical Equipment
  • Appliances & Components
  • Transportation Equipment
  • Plastics & Rubber Products

Commodities that saw price increases included:

  • Aluminum
  • Corn
  • Diesel
  • Gasoline
  • Natural Gas
  • Oil
  • Stainless Steel  

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