The September 2017 ISM Manufacturing Index (PMI®) – Understanding the Results

November 3, 2017

The PMI® (also referred to as the ISM Index or the ISM Manufacturing Index) results for September were released on Oct. 2 with the PMI coming in at 60.8 percent – up two percentage points from the August results. So, what does this mean?

On the ISM Index, a reading greater than 50 percent indicates that manufacturing economic activity is generally expanding, while a reading lower than 50 percent indicates that it is generally contracting. Therefore, the September PMI figure of 60.8 percent indicates continued general expansion in the manufacturing sector and at a faster pace than August.

This month’s results show manufacturing expansion for the thirteenth consecutive month and the highest reading since May 2004. The largest contributors to this month’s faster pace were the diffusion indexes for Supplier Deliveries, coming in at 64.4 percent, and New Orders, registering 64.6 percent. While the consensus is strong for manufacturing activity in September, it must be noted that Hurricanes Harvey and Irma played a role in some of the survey results.

The following is a closer look at some of the specific components of the September results:

Supplier Deliveries –The Supplier Deliveries Index came in at 64.4 percent in September, up 7.1 points from the August reading. This high reading indicates that supplier deliveries to manufacturing organizations were reported to be slower in September. Slower supplier deliveries tend to be a result of higher demand by manufacturing organizations, a clear growth indicator. However, supply chain disruptions can also contribute to slower delivery times. For example, some survey respondents shared general commentary on Hurricanes Harvey and Irma causing supply chain and input cost issues.

New Orders – The New Orders Index came in at 64.6 percent in September, up 4.3 percentage points from August. All but four of 18 industries reported an increase in new orders. The two industries indicating the highest overall growth were Apparel, Leather & Allied Products and Plastics & Rubber Products. Three industries reported a decrease in new orders: Textile Mills, Furniture & Related Products and Printing and Related Support Activities.

Inventories – The Inventories Diffusion Index registered 52.5 percent in September, a three point decrease from August. Although inventories were the lowest registered component of the PMI® for September, the measure is still indicative of growth. Slower inventory growth may also be a result of slower supplier deliveries, as noted above.