14 months and counting

Don Hogsett, Staff Staff, August 9, 2004

Still picking up steam, the nation's manufacturing economy grew for a 14th straight month during July, according to the nation's purchasing managers.

The widely watched Purchasing Managers Index (PMI), a key barometer of U.S. manufacturing activity, rose 0.9 percent to a July reading of 62, the Institute for Supply Management (ISM) reported.

"The manufacturing sector continues to grow at a rapid rate as the PMI has now been above 60 percent for nine consecutive months," said Norbert Ore, chairman of the Institute's Manufacturing Business Survey Committee. "This is the longest period of growth above 60 percent since the 12-month period of July 1972 through June 1973, when the index was over 60 percent each month and reached a high of 72.1 percent in January 1973."

An index reading of more than 50 indicates growth in the manufacturing economy, while a reading beneath that point indicates it is generally contracting.

The ISM said, "Comments from respondents indicate that many consider their business to be 'strong,' with a number indicating significant year-over-year progress. Others continue to indicate only minor improvement. Energy prices remain a major concern for purchasers, as prices are at or near record highs."

Fueling overall growth in the July PMI was continued growth in two key components — new orders and production.

The New Orders Index grew to a reading of 64.7 percent, up a strong 4.7 percent from a level of 60 in June. It marks a 15th straight month that the index has exceeded 50 percent. The Production Index rose sharply, 2.9 percent, to a level of 66.1, again a 15th straight month of growth.

But on a worrisome note for the manufacturing sector, the Prices Index — a gauge of what suppliers pay for raw materials and supplies — remained high in July, even if moderating somewhat from June's even higher level. The Prices Index registered 77, down from a level of 81 the prior month. A total of 58 percent of purchasing executives reported paying higher prices, while only 4 percent said prices were lower. Another 38 percent said prices were unchanged. July marked the 29th consecutive month the index has registered higher prices.

Manufacturing benchmarks
month-over-month percentage-point change

Source: Institute for Supply Management
Purchasing Managers' Index +0.9%
New +4.7
Production +2.9
Employment -2.4
Inventories -1.2
Customers' Inventories -1.5
Prices Manufacturers Pay -4.0
Order Backlogs -1.0
Export Orders -0.5
Imports +2.3

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