U.S. Manufacturing Grows 12 Months Straight; Jobs Up in Sector 8 Months in a Row

The ISM released its manufacturing report on business on Monday. Their index continued to show healthy growth in the sector. Perhaps even more encouraging is the employment growth measured in the report. It now registers an increase in jobs for 8 straight months and now at an accelerated pace.

Manufacturing continued to grow in July as their PMI registered 55.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

According to their report on business: “The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (58 percent) corresponds to a 5.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for July (55.5 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually.”

Economic Events on April 30, 2010

At 8:30 AM EDT, the Employment Cost Index for the first quarter of 2010 will be announced.  The consensus is an increase of 0.4%, which would be a decline of 0.1% compared to the last quarter of 2009.

Also at 8:30 AM EDT, the advance GDP report for the first quarter of 2010 will be announced.  The consensus is an increase of 3.4% in real GDP and an increase of 1.0% in the GDP price index.  These estimates are lower than the actuals from the previous quarter, but still indicate moderate growth.

At 9:45 AM EDT, the Chicago PMI Index for April will be announced.  The consensus index value is 60.0, which would be a slight increase from March as the economy continues to improve in the Chicago area.

At 9:55 AM EDT, Consumer Sentiment for the second half of April will be announced.  The consensus is that the index will be at 71, which would be an increase of 1.5 points from the first half of April, which had an unexpected decline.

At 3:00 PM EDT, the Farm Prices report for April will be released, giving investors and economists an indication of the direction of food prices in the coming months.

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Economic Events on March 31, 2010

At 8:15 AM EDT, the ADP Employment Report will be released.  Investors will be watching this number to get advance notice on the state of the job market in advance of the government’s report on Friday.

At 9:45 AM EDT, the Chicago PMI Index for March will be announced.  The consensus index value is 61.0, which would be a slight decline from February, but still represents an improving economy in Chicago.

At 10:00 AM EDT, the Factory Orders report will be released.  The consensus is for an increase of 0.4% in orders in February.

At 10:30 AM EDT, the EIA Petroleum Status Report will be released.  Given that oil prices have been on the rise over the last month, this report will be used as evidence of inflation and an improving economy.

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Purchasing Managers Worldwide: Manufacturing Blossoming

Global factory activity continues to accelerate. According to business managers worldwide, manufacturing vivification is now at the highest rate in nearly four years and new orders growth is now at a rate not seen in more that five and a half years.

The global PMI index is produced by JP Morgan with input from research and supply management organizations around the world. The firm’s report on its PMI was released on Monday and combines survey data from countries including the United States, Japan, Germany, France, Britain, China and Russia.

“December PMI data indicate that the global manufacturing sector approaches 2010 on a positive footing,” said David Hensley of JP Morgan.

The global employment index has also moved into positive territory for the first time since March 2008, indicating net job growth on a global scale.

Earlier on Monday additional data showed Chinese manufacturing activity expanded at the fastest rate on record in December.

Also on Monday, the Institute for Supply Management said the U.S. manufacturing sector grew for a fifth month in December, with the index hitting its highest level since April 2006. If the ISM’s PMI for December is annualized, it corresponds to a 4.6% increase in US GDP annually.

Perhaps the best news in the ISM report is new orders level which — despite a run of very strong gains in prior months — jumped again. The new order strength points to continued rising activity in the US manufacturing sector in the months ahead.

Production continues to show strong monthly gains and firms now report adding to their workforces again.

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US Economic Growth Rate Now Likely Near 3.7% Annually

We’ve continued to point to the ISM Manufacturing Index as a superb indicator of what is occuring in the overall US economy. In addition to reporting the manufacturing sector conditions, the ISM’s PMI index has an impressive track record in GDP growth correlation. A PMI in excess of 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. On Tuesday the PMI was reported at 52.9 by the ISM and thus indicates growth in the overall US economy for the fourth consecutive month.

Additionally, a reading above 50 percent indicates that the manufacturing sector of the economy is generally expanding. Tuesday’s reading of 52.9 represents an end to the 18 months of decline in that sector. The August reading is the highest since June 2007. Much of the PMI reading was caused by significant strength in the New Orders Index, which was driven to its highest level since December 2004.

Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee punctuated their report by stating, “If the PMI for August (52.9 percent) is annualized, it corresponds to a 3.7 percent increase in real GDP annually.”

The report is the strongest indicator yet that second half growth is coming on strong.

US Economy Grows for Second Consecutive Month

On Wednesday the Institute for Supply Management published its manufacturing report for June 2009. It’s overall index (PMI) bumped up for the sixth straight month and stood at 44.8%. The reading suggests, “the overall economy grew for the second consecutive month” in June.

The reading also shows the overall manufacturing sector still on track for a return to growth in the fourth quarter of this year.

Norbert J. Ore, chair of ISM’s Survey Committee was quoted as saying “Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June. Most encouraging is the gain in the Production Index, which is up 12.1 percentage points in the last two months to 52.5 percent. Aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries.”

The overall manufacturing trend continues to collorate well with the several manufacturing graphs we’ve published and tracked earlier in the year.

With the June ISM index we have yet another concrete indictor that recovery has begun for this cycle.