The July 2017 ISM Manufacturing Index (PMI®) – Understanding the Results
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The PMI® (also sometimes referred to as the ISM Index or the ISM Manufacturing Index) results for July were released on Aug. 1, with the PMI coming in at 56.3 percent—down 1.5 percentage points from the June results. So, what does this mean? (If you aren’t familiar with the PMI® or would like a refresh, click here for a quick primer).
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. So, the July PMI figure of 56.3 percent indicates continued general expansion in the manufacturing sector, however, at a slightly slower pace than in June. The primary categorical drivers for the slower pace in July were a 3.1 percentage point downtick in new orders, a two-point downtick in unemployment and 1.8 points down in production. Keep in mind that these figures are seasonally adjusted. While the results indicate a slightly slower pace than June, this was the eleventh consecutive month of expansion in the manufacturing sector.
The following is a closer look at some of the specific components of the July results:
New Orders – The New Orders Index came in at 60.4 percent in July. All but four of 18 industries reported an increase in new orders. The top two industries indicating the highest overall growth response rates were Plastics & Rubber Products and Electrical Equipment. Only one industry reported a decrease in new orders (Apparel, Leather and Allied Products).
Production – The Production Index registered 60.6 percent in July. Like New Orders results, 14 of 18 industries reported expansion in July. The top producing industry was Wood Products. Again, only one industry, Textile Mills, reported lower production activity from the previous month. This is amidst constraints in supplier deliveries and availability of skilled labor.
Employment – The Employment Index registered 55.2 percent in July. According to Timothy Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee, firms are “beginning to mention an increase in turnover, with employees leaving for other opportunities. Overall, labor issues are becoming more prevalent.” Top of the list for Employment growth was the Paper Products industry. Only three industries reported a decrease in employment in July: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; and Primary Metals.