TEMPE, Ariz.¡ªThe latest indications from the Institute for Supply Management (ISM) don¡¯t show growth yet, but April¡¯s manufacturing industry figures have taken a big leap in that direction for the first time in over a year.
¡°It¡¯s good news, in my opinion,¡± said Norbert Ore, chair of ISM¡¯s manufacturing business survey committee.
April marks the 15th straight month of official contraction, rather than growth, and until now, the best the manufacturing industry could hope for was a slightly less steep decline.
But Ore said the current PMI is now at 40.1 percent, up 3.8 points from 36.3 percent in March.
Technically, the PMI should pass 50¡ªand stay there¡ªbefore the economic indicators record ¡°growth,¡± but Ore said the overall picture of the manufacturing sector is on an upswing.
¡°I think there¡¯s enough of a trend that we should have confidence that the business cycle is behaving the way it¡¯s supposed to,¡± he said.
Ore also said the new orders index for April was 47.2 percent, which is six points higher than the 41.2 percent index recorded in March. Ore said those numbers were ¡°very encouraging.¡±
Inventories in April indicate that new orders may continue to grow. ISM¡¯s April report shows all industries except textiles have shrinking inventories, which is good news for manufacturing, Ore said.
¡°The draw down of inventories is progressing very aggressively,¡± he said.
Now, Ore said he¡¯s going to be watching customer inventories very closely over the next month. Right now, the April report shows the customer inventory index at 49.5 percent, which is down 4.5 points from the 54 percent mark recorded in March. This marks the first time inventories have been this low since July 2008.
According to Ore, any figure under 50 for customer inventories is good, and if it stays there, that will be an even stronger indicator that the economy is on the rebound.
Ore said it will take time to know when the recovery will begin in earnest, especially with the uncertainty of the auto industry threatening to sandbag expansion in the sector, but even the worst case scenarios, he said, still won¡¯t stop things from continuing to improve.
¡°It would appear the worst is behind us,¡± he said.
