ISM Manufacturing Index: Economic Recovery is Real, and Consistent With Real GDP Growth of 5.2%
1. The last time the ISM Manufacturing Index (PMI) remained above 50% (signaling expansion) for 15 straight months was back in the 2005-2006 period (see chart above).
2. Compared to the 16-months following the 2001 recession, the recovery of the manufacturing sector has been much stronger in the recent 16-month period from June 2009 to October 2010 (see chart above). The ISM Index has now been at a level of about 54 or above for the last 12 months, and that marks the strongest 12 month expansion in manufacturing since 2004.
3. ISM's New Orders Index was 58.9 percent in October, an increase of 7.8 percentage points compared to the 51.1 percent in September. This is the 16th consecutive month of growth in the New Orders Index and the largest month-over-month improvement in almost two years.
4. ISM's Employment Index was 57.7 percent in October and 1.2 percentage points higher than the 56.5 percent in September. This is the 11th consecutive month of growth in manufacturing employment.
5. The past relationship between the ISM Index and the overall economy indicates that the average index for January through October (57.4 percent) corresponds to a 5.2 percent increase in real GDP. In addition, if the index for October (56.9 percent) is annualized, it corresponds to a 5 percent annual increase in real GDP.