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SE Michigan Purchasing Managers Index At Highest Point This Year

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DETROIT — What economic slowdown? The Southeast Michigan Purchasing Managers Index bounced back from April’s 62.6 reading to 66.3 in May, the highest reading in 2012.

PMI index values above 50 generally indicate a favorable economic environment; the farther above 50 the faster the growth.

The three month average is almost the same, at 65, which implies stability in the region’s economy. The May survey shows that the Southeast Michigan economy continues a strong economic recovery, with an index above 50 for 27 of the last 28 months.

Production, new orders, and employment were the primary components responsible for the high reading, at 69.2, 67.3 and 78.8, respectively. The Employment Index is at a five year high and continues to indicate that employment and hiring conditions in Southeast Michigan are favorable.

“This portends extremely well for the labor market in Michigan which for the longest period of time had struggled with a very high unemployment rate; one in excess of the nation,” said Nitin Paranjpe, an economist and supply chain management faculty member at Wayne State’s business school, who analyzed the survey data.  “It is anticipated that the unemployment rate in Michigan will continue to drop, perhaps bringing it in line with the national rate, or even lower than the national rate.”

According to the Bureau of Labor Statistics, Michigan registered the largest jobless rate decrease from April 2011 to April 2012, decreasing 2.2 percent from 10.5 percent to 8.3 percent.

Commodity prices also moderated their prior upward pressure, pointing to stability or even some price drops. The Commodity Price Index dropped, from 65.5 in February and March to 50 in May. The three month average remained relatively unchanged at 57.5.

“It is not clear whether the drop in the Commodity Price Index reflects more competition or liquidation of inventories,” said Ken Doherty, a member of the Institute for Supply Management and assistant vice president for procurement and strategic sourcing at Wayne State University.

Doherty said that May showed aluminum, brass, gas, plastics, plastic resins, PVC items, steel, transportation, and zinc higher in price. Copper and petrochemicals were down in price.

“Michigan’s growth is in sharp contrast to the slowing growth reported in the overall U.S. economy, in China, and the Euro zone where early indicators of manufacturing activity show sharp contractions in their respective economies. These are headwinds that would certainly affect the strong economic recovery,” Paranjpe said.

Comments from survey participants indicate that over 75 percent expect stability in the coming six months.

The Southeast Michigan Purchasing Managers Index (PMI) is a research partnership between Wayne State University’s School of Business Administration and the Institute for Supply Management – Southeast Michigan. The complete report for May is available for download at this link.

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.

More at www.ism-sem.org.

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