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Manufacturing Sector Economic Activity Expands

November 12, 2009
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TEMPE, AZ - Economic activity in the manufacturing sector expanded in October for the third consecutive month, and the overall economy grew for the sixth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee. "The manufacturing sector grew for the third consecutive month in October, and the rate of growth is the highest since April 2006 when the PMI registered 56 percent. The jump in the index was driven by production and employment, with both registering significant gains. Production appears to be benefiting from the continuing strength in new orders, while the improvement in employment is due to some callbacks and opportunities for temporary workers. Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode."

The recovery in manufacturing strengthened in October as the PMI registered 55.7%, which is 3.1 percentage points higher than the 52.6% reported in September, and the highest reading for the index since April 2006 (56%). A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI in excess of 41.2%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the sixth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the third consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (44.6%) corresponds to a 1.1% increase in real gross domestic product (GDP). However, if the PMI for October (55.7%t) is annualized, it corresponds to a 4.5% increase in real GDP annually."

The Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management. The Institute for Supply Management, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM Report On Business is posted at www.ism.ws on the first business day of every month after 10:10 a.m. (ET).

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