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Economics Dept.: Purchasing Managers See Slower But Steady Growth

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The Southeast Michigan Purchasing Managers Index dipped nearly 10 points to 56.7 in July, suggesting that the local economy experienced growth, but at a slower rate than in May and June.

July marks the sixth consecutive month with PMI values over 50. An index above 50 indicates an expanding economy. The higher the value is above 50, the greater the rate of expansion. The three month average for the Southeast Michigan PMI is 61.6.

According to the survey of local purchasing managers, employment experienced the greatest rate of growth in July when compared to other components of the index such as production, new orders and deliveries. Those areas also experienced growth, but at a slower rate than in recent months.

The local index is compiled monthly by the Wayne State University School of Business Administration and the Southeast Michigan chapter of the Institute for Supply Management. According to Nitin Paranjpe, an economist and member of the global supply chain faculty at Wayne State’s business school, the employment index is a lagging indicator, hinting at how the economy performed over the preceding months.

“Purchasing managers’ confidence grew as economic conditions improved during the last quarter,” Paranjpe said. “That is now showing up as an increase in the employment index and a slight decrease in Michigan’s unemployment rate.”

A slow but steady rate of economic growth was apparent across the country and other parts of the world in July, though some areas experienced growth and others a slowdown. The national version of the PMI, a compilation of manufacturing data for the United States as a whole, experienced a slight drop from 56.2 to 55.5. Chicago’s PMI expanded from 59.1 to 62.3. The Euro Zone PMI increased to 56.7 from 55.6, primarily a result of a strong showing by Germany, but China’s PMI showed a slight slowing.

In Southeast Michigan, more than 95 percent of purchasing managers surveyed in July said they expect that the local economy will remain the same or become more stable over the next six months. Stabilization of automotive sales, recovery in home sales and unemployment remain concerns, though there is a sense of relief that those with jobs appear to be spending money.

Paranjpe said that as purchasing managers start to see and have seen some sustained growth in the economy, they will become more comfortable with the idea of hiring again.

Purchasing Manager Indexes are among the most closely watched business surveys in the world. They are used by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate, and often unique monthly indicators of economic trends. To download the complete Southeast Michigan Purchasing Managers Index report for July, or to view an archive of prior reports, visit the Institute for Supply Management – Southeast Michigan economic surveys library at www.ism-sem.org/cat/Additional+Links-9.html?49.

The Institute for Supply Management – Southeast Michigan serves its members as an affiliate of the Institute for Supply Management by providing superior opportunities for education, networking, and career enhancement as a means of advancing and promoting the leading edge practices and profession of Purchasing and Supply Management.

The School of Business Administration at Wayne State University provides quality business education through degree programs accredited by AACSB International.

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