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Southeast Michigan Purchasing Managers Index Rebounds After Slump

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DETROIT — The Southeast Michigan Purchasing Managers Index showed improvement for the second consecutive month.

The index value of 58.9 in October is a considerable improvement over the September PMI of 50.6. An index value greater than 50 generally indicates an expanding economy.

The Southeast Michigan PMI has maintained a value of over 50 for 31 of the past 33 months, indicating a steady strengthening of the regional economy. The three month average is lagging at 51.7 as a result of low scores in August and September.

“The rebounding October index should be viewed as an encouraging sign after the declining index results from late summer,” said Timothy Butler, associate professor of supply chain management at Wayne State’s business school who analyzed the survey data.

Butler said the economic factors contributing to the current PMI value includes the production index, new orders index, employment index and commodity prices index. The production index is up sharply in October to 58.5 from a September score of 47.1; and the new orders index is up substantially to 64.7 from 51.5. The employment index is also up to 58.8 from the threshold index of 50 in September. The commodity prices index was down significantly to 51.5 from a September index of 60.3. This component of the PMI is showing volatility over the past six months, with index values ranging from 43.5 to 61.3.

The purchasing managers survey includes a confidence element, and the percentage of respondents expecting the business environment to become more or less stable is equally divided. Total respondents expecting the economy to become more stable and less stable each came in at 21.2 percent, while the remaining 57.6 percent expect the economic environment to remain about the same.

“The majority of purchasing managers responded that the economy will remain about the same or become more stable over the next six months, and a good number of comments indicate improving business activity,” said Ken Doherty, assistant vice president for procurement and strategic sourcing at Wayne State University and a member of the Institute for Supply Management.

“Some respondents mentioned production bottlenecks, others mentioned increasing lead times on raw materials. These are indicators of increasing economic activity,” he said.   “Some of the more apprehensive respondents indicated concern about the ramifications of the U.S. election.”

The Southeast Michigan Purchasing Managers Index 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 October is available for download at http://www.ism-sem.org/uploaded_pics/pdf-20121101131855.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. Visit their website at http://www.ism-sem.org.

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