The April 2011 ISM Manufacturing Survey was released April 1st. PMI dropped 0.8 percent points to 60.4%, from 61.2% in March. This is the 4th month for the manufacturing index to be above 60%. The employment index is at it's highest point in 38 years for the first 4 months of 2011. We'll see if this translates to some manufacturing jobs later in the week.
The ISM has a correlation formula to annualized GDP, but they are now noting the past correlation, probably due to the meager 1.8% annualized GDP growth for Q1 2011.
The past relationship between the PMI and the overall economy indicates that the average PMI for January through April (61 percent) corresponds to a 6.5 percent increase in real gross domestic product (GDP). In addition, if the PMI for April (60.4 percent) is annualized, it corresponds to a 6.3 percent increase in real GDP annually.
New orders dropped -1.6 percentage points to 61.7%.
Production, which is the current we're makin' stuff now meter, decreased 5.2 percentage points to 63.8%. Production correlates to the Federal Reserve's industrial production, which the April figures will be out May 17th.
Below is the ISM table data, reprinted, for a quick view.
| MANUFACTURING AT A GLANCE April 2011 | ||||||
|---|---|---|---|---|---|---|
|
Index |
Series Index April |
Series Index March |
Percentage Point Change |
Direction |
Rate of Change |
Trend* (Months) |
| PMI | 60.4 | 61.2 | -0.8 | Growing | Slower | 21 |
| New Orders | 61.7 | 63.3 | -1.6 | Growing | Slower | 22 |
| Production | 63.8 | 69.0 | -5.2 | Growing | Slower | 23 |
| Employment | 62.7 | 63.0 | -0.3 | Growing | Slower | 19 |
| Supplier Deliveries | 60.2 | 63.1 | -2.9 | Slowing | Slower | 23 |
| Inventories | 53.6 | 47.4 | +6.2 | Growing | From Contracting | 1 |
| Customers' Inventories | 40.5 | 39.5 | +1.0 | Too Low | Slower | 25 |
| Prices | 85.5 | 85.0 | +0.5 | Increasing | Faster | 22 |
| Backlog of Orders | 61.0 | 52.5 | +8.5 | Growing | Faster | 4 |
| Exports | 62.0 | 56.0 | +6.0 | Growing | Faster | 22 |
| Imports | 55.5 | 56.5 | -1.0 | Growing | Slower | 20 |
| OVERALL ECONOMY | Growing | Slower | 23 | |||
| Manufacturing Sector | Growing | Slower | 21 | |||
Now we come to employment. where are the damn jobs? According to the ISM, anything about 50.1 correlates to an increase in manufacturing employment as reported by the BLS and we now have the best ISM manufacturing showing in 38 years. The unemployment report will be released May 6th.
Below is the BLS manufacturing non-farm payrolls (jobs) for the past decade on the left, graphed against the ISM manufacturing employment index on the right. The BLS number is simply raw manufacturing jobs tally, not taking into account population growth or overall sector shrinkage as well as time lag. One can eyeball a slight correlation in the middle of the decade, yet note the divergence this recovery, starting late 2008, to date. We're going to need a massive spike up from the BLS on Friday to correct this divergence.
Inventories increased. In the below St. Louis FRED graph, April inventories increased 6.2 percentage points to 53.6. The ISM says inventories above 42.7% indicate expansion, so that's quite an increase. Inventories had a positive contribution to Q1 GDP.
Exports increased 6 percentage points to 62.0%.
Prices increased another 0.5 percentage points to 85.5% and the ISM reports the March prices index was the highest since July 2008. Survey respondents specifically mention pricing and chemical reported supplies were trying to increase prices after orders were placed.
In terms of which industries were doing really well the only one to report contraction is Furniture & Related Products.
The ISM neutral point is 50. Above is growth, below is contraction, although the ISM is this report is noting some variance in the individual indexes. For example, A PMI above 42, over time, also indicates growth.
The ISM has much more data, tables and analysis on their website. For more graphs, see St. Louis Federal Reserve Fred database and graphing system.
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