Signs point to stronger manufacturing sector

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Although a composite indicator of manufacturing in July still slows that the sector is contracting, two individual leading indicators were positive. The Institute of Supply Management reported Monday, Aug. 3, that it’s PMI – formerly known as the Purchasing Managers’ Index – stood at 48.9 percent in July. Anything below an index value of 50 percent indicates a contracting manufacturing sector, but the PMI was significantly better than the June PMI of 44.8 percent. The PMI now has been below 50 percent for 18 consecutive months.

Two indexes that figure into PMI – new orders and production – showed strong growth in July, ISM said. New orders were up 6.1 percent over June to 55.3 percent. Production was up 5.4 percent to 57.9 percent. Both measures could indicate a near-term uptick in transportation demand from the manufacturing sector.

The fact that the more leading components of the PMI were significantly above 50 percent sets an expectation for future growth in the sector, says Norbert Ore, chair of ISM’s Manufacturing Business Survey Committee. Employment and inventories indexes are still contracting, but the rate is slowing and they are moving in the right direction, Ore adds. And growth in the new export orders index suggests a recovery in the global economy, he says. “Overall, it would be difficult to convince many manufacturers that we are on the brink of recovery, but the data suggests that we will see growth in the third quarter if the trends continue.”