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Grading the Manufacturing Sector in 2016—Pass or Fail?

Posted by Melissa Motley, CPA on Feb 13, 2017 8:28:12 AM


There’s little doubt that the economy as a whole closed out 2016 on a particularly high note as the Dow Jones Industrial Average nearly reached the unprecedented 20,000 mark. But despite that broad performance, did the manufacturing sector in particular fare similarly well during this past year?

The Purchasing Managers’ Index, or PMI, is an indicator of the economic health of the manufacturing sector and is comprised of five major indicators: new orders, inventory levels, production, supplier deliveries and employment environment.

The most widely accepted and recognized PMI is issued monthly by the Institute for Supply Management. In the December report, the Institute for Supply Management measured PMI at 54.7, the highest level it’s been at since December 2014. A reading above 50 indicates an expansion in the manufacturing sector.

New orders increased 7.2 percentage points to its highest level since November. The 7.2 percent increase is also the largest individual increase in more than seven years. Twelve industries in particular, including petroleum, electrical equipment, appliances, and components and machinery, reported growth in new orders last month.

Other positive factors causing the rise in PMI include higher prices for raw materials and stronger hiring, which collectively support signs of labor market strength and higher inflation.

For questions about the manufacturing sector in general, or if you have questions about manufacturing challenges your company faces in 2017, please contact Melissa Motley, CPA, at (334) 887-7022 or by leaving us a message below.

Topics: Manufacturing Industry Insights

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