The Institute for Supply Management’s PMI rose to 51.5 last month from 49.6 in August, an increase of 1.9 percentage points and the highest reading since May, above analysts’ estimates of a 49.7 reading.
A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI in excess of 42.6 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the September PMI indicates growth for the 40th consecutive month in the overall economy, and indicates a return to growth in the manufacturing sector following three consecutive months of slight contraction. Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee, stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (52.1 percent) corresponds to a 3.2 percent increase in real gross domestic product (GDP). In addition, if the PMI for September (51.5 percent) is annualized, it corresponds to a 3 percent increase in real GDP annually.”
The PMI evolution over the last year shows that economic activity in the manufacturing sector expanded except for June, July and August 2012.
Although the US seems to get better, Euro area manufacturing PMIs points to continued contraction in overall manufacturing activities in the region, albeit at a slower pace. The overall eurozone manufacturing PMI increased from 45.1 to 46.1, slightly better than estimates of 46.0.
China’s official manufacturing managers’ index (PMI) showed factory activity shrank for a second month in September, even though the number rose slightly to 49.8 from 49.2 in August.