Manufacturing ISM for June 2011 - 55.3%

The June 2011 ISM Manufacturing Survey increased slightly by 1.8 percentage points to 55.3%. Last month PMI plunged -6.9 percentage points to 53.5%, from 60.4% in April.



New orders barely budged, up 0.6 percentage points from last month.



Production, which is the current we're makin' stuff now meter, is only up 0.5 percentage points from last month's cliff dive of -9.8 percentage points. Production correlates to the Federal Reserve's industrial production, which the June figures will be out mid-July.



Below is the ISM table data, reprinted, for a quick view. It's an anemic rise from last month's blood bath.





PMI 55.3 53.5 +1.8 Growing Faster 23
New Orders 51.6 51.0 +0.6 Growing Faster 24
Production 54.5 54.0 +0.5 Growing Faster 25
Employment 59.9 58.2 +1.7 Growing Faster 21
Supplier Deliveries 56.3 55.7 +0.6 Slowing Faster 25
Inventories 54.1 48.7 +5.4 Growing From Contracting 1
Customers' Inventories 47.0 39.5 +7.5 Too Low Slower 27
Prices 68.0 76.5 -8.5 Increasing Slower 24
Backlog of Orders 49.0 50.5 -1.5 Contracting From Growing 1
Exports 53.5 55.0 -1.5 Growing Slower 24
Imports 51.0 54.5 -3.5 Growing Slower 22
OVERALL ECONOMY Growing Faster 25
Manufacturing Sector Growing Faster 23


Now we come to employment. where are the damn jobs? The manufacturing ISM employment index also increased 1.7 percentage points. Yet overall, not just manufacturing, we have seen initial unemployment claims high the unemployment report. According to the ISM, anything about 50.1 correlates to an increase in manufacturing employment as reported by the BLS.

Below are the BLS manufacturing non-farm payrolls (jobs) for the past decade on the left (June's numbers are not released yet), 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 5.4 percentage points to 54.1%. The ISM says inventories above 42.7% indicate expansion. Q1 2011 GDP was 69% changes in private inventories. Manufacturing's customer inventories also increased 7.5 percentage points.



Exports new orders dropped another -1.5 percentage points to 53.5%.



Prices declined -8.5 percentage points to 68.0% and is the second consecutive month prices have dropped below 80 since December 2010.



In terms of which industries are officially contracting, the ISM lists Plastics & Rubber Products; Apparel, Leather & Allied Products; Primary Metals; Wood Products; and Food, Beverage & Tobacco Products.

The ISM has a correlation formula to annualized GDP, but they are now noting the past correlation, versus current, probably due to the meager 1.9% annualized GDP growth for Q1 2011.

The past relationship between the PMI and the overall economy indicates that the average PMI for January through June (58.8 percent) corresponds to a 5.7 percent increase in real gross domestic product (GDP). In addition, if the PMI for June (55.3 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually.

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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