From ProfitConfidential
PMI, U.S. Manufacturing Indicator, Warns of Slow Growth Ahead
By Jing Pan BSc, MA • Tuesday, May 5, 2015
On Friday, May 1, 2015, the Institute for Supply Management (ISM) published its April report on the U.S. manufacturing sector. The key number to look at in this report is the Purchasing Managers’ Index (PMI), which is an indicator of the economic health of the manufacturing sector.
According to the institute, the U.S. national PMI is at 51.5%. This number is unchanged from March’s report. However, it is short of the expected 52%. (Source: Institute for Supply Management, May 1, 2015.)
U.S. PMI Above 50; Employment Still Troubling
PMI is based on five individual indicators: new orders, output, supplier delivery times, inventory, and employment. A PMI of above 50 indicates an expansion of the manufacturing sector, while being below 50 means a contraction.
Some analysts are taking the 51.5 PMI as a sign of growth. Indeed April 2015 is the 28th consecutive month in which PMI is above 50. However, looking at the components of the index, you will find that the performance is really lackluster.
First, the bright side of things: new orders index improved to 53.5 from 51.8 in March. Production also increased; jumping from 53.8 in March to 56.0 in April.
The not-so-bright side shows the employment index is at 48.3, indicating that employment in the manufacturing sector is contracting. Moreover, the 48.3 reading in April is the lowest since September 2009. This is quite troubling: the March job report already showed a slowdown in growth in the U.S. labor market. This signals yet another continuation in the slowdown.
Note that the sectors with decreasing employment include computer and electronic products as well as chemical products. These sectors usually have more skilled labor than, say, restaurant services. The decline in employment in these sectors will likely contribute to stagnant wages, which will put constraints on workers’ disposable income.
Also making up the PMI is the institute’s price index. It is now at 40.5 in April, implying decreasing prices, or deflation, in the manufacturing sector.
World Economy: Similar Contracting Scenario
Three days later, on May 4, 2015, HSBC published the April PMI for China.
Read more from ProfitConfidential >>
PMI, U.S. Manufacturing Indicator, Warns of Slow Growth Ahead
By Jing Pan BSc, MA • Tuesday, May 5, 2015
On Friday, May 1, 2015, the Institute for Supply Management (ISM) published its April report on the U.S. manufacturing sector. The key number to look at in this report is the Purchasing Managers’ Index (PMI), which is an indicator of the economic health of the manufacturing sector.
According to the institute, the U.S. national PMI is at 51.5%. This number is unchanged from March’s report. However, it is short of the expected 52%. (Source: Institute for Supply Management, May 1, 2015.)
U.S. PMI Above 50; Employment Still Troubling
PMI is based on five individual indicators: new orders, output, supplier delivery times, inventory, and employment. A PMI of above 50 indicates an expansion of the manufacturing sector, while being below 50 means a contraction.
Some analysts are taking the 51.5 PMI as a sign of growth. Indeed April 2015 is the 28th consecutive month in which PMI is above 50. However, looking at the components of the index, you will find that the performance is really lackluster.
First, the bright side of things: new orders index improved to 53.5 from 51.8 in March. Production also increased; jumping from 53.8 in March to 56.0 in April.
The not-so-bright side shows the employment index is at 48.3, indicating that employment in the manufacturing sector is contracting. Moreover, the 48.3 reading in April is the lowest since September 2009. This is quite troubling: the March job report already showed a slowdown in growth in the U.S. labor market. This signals yet another continuation in the slowdown.
Note that the sectors with decreasing employment include computer and electronic products as well as chemical products. These sectors usually have more skilled labor than, say, restaurant services. The decline in employment in these sectors will likely contribute to stagnant wages, which will put constraints on workers’ disposable income.
Also making up the PMI is the institute’s price index. It is now at 40.5 in April, implying decreasing prices, or deflation, in the manufacturing sector.
World Economy: Similar Contracting Scenario
Three days later, on May 4, 2015, HSBC published the April PMI for China.
Read more from ProfitConfidential >>
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