The January 2011 ISM Manufacturing Survey is out and PMI came in at booming 60.8%. December 2010 manufacturing ISM was revised to 58.5% from 57% originally reported. This is a +2.3% jump in the factory index, or PMI, the overall manufacturing ISM index and it's highest level since May 2004. While this is the 18th month for expansion (anything above 50 is an expansion), there is finally some good news for workers, the employment index rose to 61.7%, also the highest since May 2004.
The ISM has a correlation formula to annualized GDP. They claim this month's PMI correlates to a 6.4% annualized GDP increase. Wouldn't that be nice! This is what the Institute of Supply Management survey respondents said about a weaker dollar. One respondent also said they were reluctant to hire. Last month they also commented a weaker dollar was helping their exports.
Continued weakness in the dollar is having a negative effect on the components we purchase overseas and increasing our material costs.
New orders jumped 5.8 percentage points to 67.8%. That's pretty damn awesome!
Production, which is the current we're makin' stuff now meter, only increased 0.5 percentage points to 63.5%, but last month's 63% appears to be revised upward as does most of last month's reported percentages.
Below is the ISM table data, reprinted, for a quick view.
|MANUFACTURING AT A GLANCE January 2011|
|Customers' Inventories||45.5||40.0||+5.5||Too Low||Slower||22|
|Backlog of Orders||58.0||47.0||+11.0||Growing||From Contracting||1|
Now we come to employment. If manufacturing has expanded for the last 18 months, 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. Really ISM? From the below graph we have the ISM manufacturing employment index above 50.1 consecutively since December 2009. Want to know how many manufacturing jobs have been gained in those 12 months? 136,000.
I believe your employment correlation is getting weaker. Is there an offshore outsourcing coefficient in your midst?
Below is the ISM manufacturing employment graph so you can see the trend line. The good news is the backlog of orders blew up, 11 percentage points higher, for January, so assuredly they must add a few wage slaves at this point to catch up.
Inventories, in the below St. Louis FRED graph, increased 0.6 percentage points to expansion, 52.4%. The ISM says inventories above 42.7% indicate expansion, yet it's clear past inventory numbers were revised. Considering the massive negative blow out inventories had on Q4 GDP, I'd say this increase doesn't imply an acceleration of inventories, at least for manufacturing. (private inventories is much more than just manufacturing).
Exports & imports increased, exports up 7.5 percentage points, and imports 4.5. That's always good news when exports exceed imports, especially since the deceleration of imports was the reason we had reasonable Q4 GDP growth.
Prices had a blow out, with a 9.0 percentage increase to 81.5. Thank you oil commodities, although it appears goods for making cloth blew up as well.
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 (see their report). For example, A PMI above 42, over time, also indicates growth.
In terms of which industries were doing really well, Petroleum and Coal topped many of the lists. In terms of which industry was most affected by increased prices, it was textiles, followed by plastics.
The ISM has much more data and tables, on their website.