The overall health of our economy is often measured by the state of our manufacturing sector. We’ve seen some pretty good news here recently and I thought it a good time to share how you, the individual investor, can learn more about these measurements and how I view them.
PMI – Purchasing Managers Index
The PMI is an indicator of the economic health of the manufacturing sector. It is based on five major indicators: new orders, inventory levels, production, supplier deliveries and employment environment. This data is released by the Institute for Supply Management (ISM) on the first business day of each month with stats pertaining to the previous month. The June report was released 7/3/2013 and came in at 50.9% up from May as reported by the ISM on 6/5/2013.
Growth is good but our manufacturing sector is far more complex than a simple percentage so I like to read the comments from those in the various industries reporting to the ISM. You can find their comments in the reports at www.ism.ws/ISMReport.
Here are a few from June’s report:
•”Business remains good to improving.” (Miscellaneous Manufacturing)
•”Industry volumes picking up with improved housing starts.” (Electrical Equipment, Appliances & Components)
•”Indications are that customers have acceptable inventory levels, and as a result, are backing down on new orders and reassessing market conditions.” (Wood Products)
•”Last couple of weeks a little slower.” (Furniture & Related Products)
•”Seeing signs of life through summer retail [sales] promotions – still an overall soft market.” (Food, Beverage & Tobacco Products)
•”Business is steady. Qualified CNC machinists are hard to find.” (Fabricated Metal Products)
•”Weather conditions are causing uncertainty in agricultural markets.” (Machinery)
•”Continued slow improvements.” (Transportation Equipment)
•”June sales appear to have rebounded from what was a lackluster May.” (Paper Products)
•”Slow growth continues to choke the recovery. We are not out of the woods yet by any stretch of the imagination.” (Chemical Products)
Putting It Together
A PMI figure above 50% is a general indication of expansion in manufacturing while a number less than 50% indicates contraction.
I use this data as a means to stay informed and would encourage you to do the same. No single report should have a major impact on your overall investment strategy. Seek professional advice before investing and remember that past results don’t guarantee future ones.
Let me know if you have any questions.
Until next week,
Susan R. Linkous