Better News For Manufacturing Sector

Back in November, I reported on the optimism expressed by purchasing managers in the Institute of Supply Management (ISM) October report.

The latest report, for March 2010, shows that the US manufacturing sector expanded for an 8th consecutive month, showing that the optimism was justified.

As noted previously, The Institute uses its Purchasing Managers' Index (PMI) as an indicator of performance. A PMI score of below 50 indicates that the sector is contracting, whilst a score above 50 indicates that the sector is expanding. The data for the index is collected using a survey of 400 purchasing managers in the manufacturing sector on five elements; production level, new orders from customers, speed of supplier deliveries, inventories and employment level. Studies have shown that the PMI gives reasonably good correlation with the state of the economy and GDP growth.

The index has rebounded from a low point of 32.9% in December 2008 and now stands at a figure of 59.6%, a very positive score, reflecting the growing optimism throughout US manufacturing.

For chemicals, the news is mixed. Automobile sales have improved significantly and with each new car containing almost $3000 worth of chemicals, this is very welcome news. Meanwhile, another major consumer of chemicals, the construction sector, remains relatively flat.

More positive signs. Still a long way to go to reach 2008 levels but a major improvement on 2009.