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Purchasing Managers Index Jumps 18 Points In Post-Holiday Surge

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ISM - Southeast Michigan

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DETROIT — The Southeast Michigan Purchasing Managers Index made a sharp rebound in January, alleviating concerns about a slowdown for the Michigan economy.

The index, which measures activity such as production, new orders, inventories, and employment, rose to 65.9 in January after falling below 50 in December for the first time in more than a year.

An index above 50 means an expanding economy, while an index below 50 indicates a shrinking economy — better known as a recession. The Purchasing Managers Index is an early indicator of economic activity, often forecasting where the overall economy is heading.

“Almost every component of the index improved in this month’s survey,” said Nitin Paranjpe, an economist and supply chain faculty member at Wayne State University’s School of Business Administration, who conducted the analysis. “This bodes extremely well for the future of Michigan’s economy.”

From December to January, the production index rose from 44 to 63.3, new orders grew from 46 to 71.7, employment expanded from 58.3 to 66.7, and finished goods inventories jumped from 42 to 60.

Commodity prices increased slightly, from 50 to 55, but the three-month average of 55 is the lowest average of the year, continuing what has been a steady decline since August.

“With very little pricing power on the part of producers, there is not much ability to pass on these price increases, thereby keeping inflation in check,” Paranjpe said.

When asked about their expectations for the next six months, most purchasing managers were optimistic, with 20 percent expecting more stability and nearly 67 percent expecting the business environment to remain unchanged. Only 13 percent said they expect a decline.

“The January PMI is encouraging, and lends credibility to what’s been reported in the media about a rebounding economy and a rebounding auto industry,” said Ken Doherty, a member of the Institute for Supply Management and assistant vice president for procurement and strategic sourcing at Wayne State University. “The last two reports were not very favorable, but we assume they reflected a business and industry downturn related to the holidays.”

The complete PMI survey for January can be downloaded from the Institute for Supply Management – Southeast Michigan website at http://www.ism-sem.org/uploaded_pics/pdf-20120130130847.pdf.

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.

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