ECON: ISM Manufacturing Much Stronger Than Expected
- PMI at 55.4 vs 52.0 forecast, 50.9 in June
- New Orders 58.3 vs 51.9 in June
- Employment Index 54.4 vs 48.7 in June
- Prices Paid 49.0 vs 54.2 forecast, 52.5 in June
- PMI and New Orders Highest since mid 2011
- Employment Highest since June 2012
Market Reaction: This was outside the boundaries of an average "beat" or "miss." The movement was quick in response. Yesterday's post-FOMC gains are now erased.
Manufacturing expanded in July as the PMI™ registered 55.4 percent, an increase of 4.5 percentage points when compared to June's reading of 50.9 percent. July's reading of 55.4 percent reflects the sixth month of growth, and the highest overall PMI™ reading, in the first seven months of 2013. 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 42.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the July PMI™ indicates growth for the 50th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the second consecutive month. Holcomb stated, "The past relationship between the PMI™ and the overall economy indicates that the average PMI™ for January through July (52.1 percent) corresponds to a 3.1 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI™ for July (55.4 percent) is annualized, it corresponds to a 4.1 percent increase in real GDP annually."