US manufacturing still weak but shows improvement - ISM

01 May 2009 16:47  [Source: ICIS news]

US manufacturing shows signs of heating up againWASHINGTON (ICIS news)--The US manufacturing sector continued to contract in April, the Institute for Supply Management (ISM) said on Friday, but the decline is easing and shows “significant improvement” and a good start for the second quarter.

The institute said that its closely watched purchasing managers index (PMI) rose to 40.1% in April from 36.3% in March.

A reading of 40.1% is still low, but it marks the first reading above 40% in six months.

A PMI of 50% or higher indicates that manufacturing industries - key downstream consuming sectors for chemicals and resins - are experiencing growth.  A reading below 50% means that the broad manufacturing sector is in contraction.

The PMI has been below 40% since October last year and was last in the 40% range in September 2008 when it registered 43.4%.

So while the April reading of 40.1% shows that manufacturing industries, including chemicals, are still in decline, it is a better showing that any time in the previous half-year, the institute noted.

“The decline in the manufacturing sector continues to moderate,” said Norbert Ore, chairman of the institute’s survey committee. 

“After six consecutive months below the 40% mark, the PMI ... shows a significant improvement,” Ore said.

He said the new orders index - one of ten separate indexes that combine to generate the overall PMI - shot up to 47.2% in April from a March reading of 41.2%.

In addition, Ore said that the measure of supplies among manufacturers’ customers “indicates that channels are paring inventories to acceptable levels after reporting inventories as too high for eight consecutive months”.

“This is definitely a good start for the second quarter,” Ore said.

He cautioned, however, that “While this is a big step forward, there is still a large gap that must be closed before manufacturing begins to grow once again”.

To compile the monthly PMI, the institute surveys 19 key industries on ten business performance measures. Chemicals make up one of those surveyed industries and plastics and rubber products constitute another.

Among comments from manufacturers in the April survey was one from an executive at a chemical products firm who said that “We are optimistic that things will change for the better in the third quarter”.

To discuss issues facing the chemical industry go to ICIS connect

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
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