Quality Magazine

Economic Activity Expanded in September

October 1, 2009

TEMPE, AZ - Economic activity in the manufacturing sector expanded in September for the second consecutive month, and the overall economy grew for the fifth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today 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 second consecutive month in September. While the rate of growth moderated slightly when compared to August, the recovery broadened as the number of industries reporting growth increased from 11 to 13. Both new orders and production are growing, but at a slower rate when compared to August. It appears the fundamentals for continuing recovery are still at work as inventories and sales are gaining balance. This month, we asked a special question with regard to the American Recovery and Reinvestment Act. Twelve of the 18 manufacturing industries expect to derive some benefit from the program, and 12 manufacturing industries responded that they expect their companies to see some benefit."

The recovery in manufacturing continues as the PMI registered 52.6% in September, which is 0.3 percentage point lower than the 52.9% reported in August, and the second month of expansion following 18 months of decline. 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 fifth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the second consecutive month since January 2008. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (43.3%) corresponds to a 0.7% increase in real gross domestic product (GDP). However, if the PMI for September (52.6%) is annualized, it corresponds to a 3.6% 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. 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. For more information, visit www.ism.ws/ISMReport/MfgROB.cfm.