PMI Falls To 59 Percent

Sept. 10, 2004
Economic activity in the manufacturing sector grew in August for the 15th consecutive month, while the overall economy grew for the 34th consecutive month, according to the latest survey of purchasing managers by the Institute for Supply Management (ISM), Tempe, Ariz.

Economic activity in the manufacturing sector grew in August for the 15th consecutive month, while the overall economy grew for the 34th consecutive month, according to the latest survey of purchasing managers by the Institute for Supply Management (ISM), Tempe, Ariz. ISM’s Purchasing Managers Index is 59 percent in August, a decrease of 3 percentage points when compared to 62 percent in July.

“The rate of growth in the manufacturing sector decelerated during August, but overall the sector is still quite positive as both new orders and production remain at high levels. August’s PMI at 59 percent represents the end of a period of nine consecutive months when the PMI was at 60 percent or higher,” said Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia Pacific Corp.

Comments from respondents this month focus on energy costs, price inflation in basic materials — particularly steel — and slowing sales growth. The growth in inventories seems to be part of a “catch up” strategy to meet higher demand on the sales side; this seems to be particularly the case with the continued strength in imports. Many still rate their business as “strong,” while others believe they are starting to see new orders taper off.

“August was another good month for the manufacturing sector,” said Ore. “While the near-term outlook remains positive, both the Inventories and Customers’ Inventories Indexes show signs of inventory building. Such a build may be justified if it is to meet additional sales demand, and if new orders and production remain strong,” said Ore.

In August, 17 industries reported growth. These include industrial and commercial equipment, electronic components and equipment and fabricated metals.

The commodities listed in short supply include aluminum and hot rolled steel.