The ISM’s PMI (Purchasing Manager’s Index) is an important parameter to gage the state of the economy. It gives an idea of the health of the manufacturing sector and many businesses use it as a leading indicator to the state of the economy in the months to come. With so much importance associated with the PMI, its good to note that the latest numbers indicate an overall “expansion in the economy”.
Here’s a screenshot from the report that lets you look at how the PMI has been moving in the past year. The entire report is free to view online.
That write-up certainly makes me feel better. Especially the last line about a 4.6 increase in the “Real GDP”.
ANALYSIS:
One thing makes me especially happy. The fact that the increase in real GD
P between the whole year (1.6%) and the increase in real GDP for December alone (4.6%) is an extremely significant number (3%). The Significance of the Real GDP is encompassed in this one line.If a set of real GDPs from various years are calculated, each using the quantities from its own year, but all using the prices from the same base year, the differences in those real GDPs will reflect only differences in volume.What does this mean? This means that, compared to individual months in the rest of the year, a considerably larger amount was purchased in December. And that is exciting. Especially for the Supply Chain Industry. Why? Because if people (not just end-consumers but enterprise spending too) purchased so much more in December, it means the products got from one place to another – and that spells revenue for the SCM industry. The reason I specify just products and not services is because the ISM’s Non-Manufacturing index is still not as stable in its upward trend as the manufacturing index. Take a look.
And in case you don’t want to read the rest of the ISM report, here’s a few snippets from the manufacturing side of things.
