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Driven in large part by new orders, the U.S. manufacturing industry bounced back from a contraction in August to return to growth in September. The Institute for Supply Management’s leading production index, the PMI, increased by 2.1 percent from August to reach 51.5 percent in September, signaling the 88th consecutive month of growth for the U.S. economy.
“We see the PMI declining month-to-month [ in August], but [the U.S. is] in growth mode and we must be pleased with that since other economies cannot say that,” according to Brad Holcomb, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee. “We can say that we see growth due to the U.S.’s ability to offer quality, innovation, and selection.”
“Customers take breathers and sometimes it takes a while to get back to store,” he added. “With the holidays coming up and consumer confidence strengthening, my comments are that we are leaning toward the positive in a forward-looking manner.”
New orders – which increased by 6 points in September to 55.1—set the pace for other ISM indices. The production index registered 52.8 percent, 3.2 percentage points higher than the August reading of 49.6 percent. The employment index registered 49.7 percent, an increase of 1.4 percentage points from the August reading of 48.3 percent. Inventories of raw materials registered 49.5 percent, an increase of 0.5 percentage point from the August reading of 49 percent. The prices index registered 53 percent in September, the same reading as in August, indicating higher raw materials prices for the seventh consecutive month.
“There are not really any negatives,” said Holcomb: “Prices are stable at 53 percent — slow growth in pricing under any scenario — exports of finished goods to overseas continued [the growth trend], and the dollar has attenuated some.”
While a stronger dollar does impact the prices of U.S. exports, purchasing and procurement departments can still take advantage of pricing trends, Holcomb added. Given the dollar’s strength and the effect on pricing of metals, in conjunction with the lower price of oil, now is a favorable time to review and possibly renegotiate metals and energy contracts.
Overall, it looks like the August contraction was an anomaly, Holcomb said. “We have to admit the global economy is one in slow if not slow growth overall,” he added. “Looking at China’s PMI, [which] barely moved above 50 in the last months, and the Eurozone, which is starting to show improvement, looking at U.S. manufacturing the data point to the economy doing better. The U.S. economy is proving consistent and more resilient to the ups and downs. Nevertheless, we are part of the global economy, and hence in the low 50s.”
“We’re back on track and positioned well as we enter the fourth quarter,” Holcomb concluded.
