The September PMI shows continued growth in US manufacturing as production reaches a 4-year high.
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U.S. manufacturing is still expanding.
The September PMI, issued by the Institute for Supply Management, was 56.6%, indicating manufacturing expansion, but down from the August reading of 59%. A reading of 50 or more shows growth in the sector. “The ISM index moved from extremely strong to very strong last month,” said Daniel Meckstroth chief economist for the MAPI Foundation.
The pace of manufacturing production picked up.
ISM’s production index edged up to 64.6% in September from 64.5% in August. That is the highest reading since May 2010.
Growth in manufacturing is widespread.
Of the 18 manufacturing industries covered by ISM, 15 reported growth. The growth leader was wood products. Contraction was reported in machinery; plastics & rubber products; and electrical equipment, appliances & components.
New orders remain strong.
While slipping from August, ISM’s new order index was at 60%. Said one manufacturer: "Overall, orders are at the strongest point this year."
Employment grows in manufacturing for the 15th consecutive month.
ISM’s employment index was 54.6% in September, down from the 58.1% in August. "While it is disappointing that the employment index declined somewhat in September, the longer term trend line reflects improvements from earlier in the year," noted NAM Chief Economist Chad Moutray. "For instance, the hiring measures averaged 57.0 in the third quarter, a nice step up from the 51.9 and 53.4 averages in the first and second quarters, respectively."
Inventories of raw materials grew for the second month in a row.
The inventories index registered 51.5 % in September, 0.5% lower than the 52% recorded in August.
Customers are not building inventories.
The customers’ inventories index registered 44.5% in September, a decrease of 4.5% from August when customer inventories registered 49%. ISM says customers’ inventories have been too low for 34 consecutive months.
Prices are going up for manufacturers’ supplies.
The prices index increased 1.5 points to register 59.5% in September. In September, ISM found, 28% of respondents reported paying higher prices, 9% reported paying lower prices and 63% reported paying the same prices as in August.
Export orders continue to grow but at a slower pace.
The new export orders index registered 53.5% in September, down from the 55% reported in August. September’s reading reflects growth in exports for the 22nd consecutive month.
Ditto for imports.
The imports index registered 53% in September, off by 3 percentage points from the 56% reported in August. September’s reading was the 20th consecutive month of growth in imports. “The only weak area in the report is trade, said MAPI's Meckstroth. "Imports and exports are growing at a similar pace and since imports constitute a much larger dollar figure than exports, similar growth rates lead to a larger trade deficit. The United States is a growth leader among advanced economies and our demand for goods attracts imports."