November Manufacturing: Still Strong

December 1, 2005 – The ISM diffusion index of U.S. manufacturing activity (also known as the Purchasing Managers’ Index, or PMI) fell by 1 index point to 58.1 in November, but continued to signal exceptionally strong manufacturing growth for the third straight month (Chart 1).

Chart 1. The ISM diffusion index of U.S. manufacturing activity. January 1987 through November 2005.

According to the ISM press release, “While energy costs and supply interruptions remain a concern, purchasers are satisfied in general with current business conditions.”

Within the data detail, the new order index fell by 1.9 index points to 59.8 in November and the production index fell by 1.4 index points to 60.6, but both remained unusually buoyant even after these declines.

The input price index fell by 10 index points to 74.0 in November, but continued to signal exceptionally strong growth in manufacturers’ costs (Chart 2).

Chart 2. The ISM diffusion index of manufacturing input prices. January 1987 through November 2005.

The employment index rose by 1.6 index points to 56.6 in November (Chart 3). This might be a bullish omen for November manufacturing payrolls (coming tomorrow), but the fate of non-manufacturing payrolls carries far more economic weight.

Chart 3. The ISM diffusion index of manufacturing employment and the monthly change in manufacturing payrolls. January 1987 to date.

Suzanne Rizzo

Sources:

Institute for Supply Management (http://www.ism.ws) - the PMI (Purchasing Managers' Index) and other related manufacturing indicators.
U.S. Department of Labor, Bureau of Labor Statistics (http://www.bls.gov) - manufacturing payroll employment.
National Bureau of Economic Research (http://www.nber.org) - recession dates.