Wednesday, February 01, 2012

ISM Manufacturing index indicates faster expansion in January

by Bill McBride on 2/01/2012 10:00:00 AM

PMI was at 54.1% in January, up from a revised 53.1% in December. The employment index was at 54.3%, down from a revised 54.8%, and new orders index was at 57.6%, up from a revised 54.8%.

From the Institute for Supply Management: January 2012 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in January for the 30th consecutive month, and the overall economy grew for the 32nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 54.1 percent, an increase of 1 percentage point from December's seasonally adjusted reading of 53.1 percent, indicating expansion in the manufacturing sector for the 30th consecutive month. The New Orders Index increased 2.8 percentage points from December's seasonally adjusted reading to 57.6 percent, reflecting the 33rd consecutive month of growth in new orders. Prices of raw materials increased for the first time in the last four months. Manufacturing is starting out the year on a positive note, with new orders, production and employment all growing in January."
ISM PMIClick on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was below expectations of 54.5%, but the consensus was before the revisions. This suggests manufacturing expanded at a faster rate in January than in December. It appears manufacturing employment expanded in January with the employment index at 54.3%.

On revisions: Yesterday the ISM released their annual revisions and addressed the seasonality issue that was raised by analysts at Nomura last year. It appears the ISM index (and other indexes) overstated the strength in December after understating the strength earlier in the year. Nomura analysts noted last night that they believe the ISM revision reduces, but does not eliminate, the seasonal adjustment bias due to the financial crisis.

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