Manufacturing Rebound Continues as ISM Index Hits Five-Year High

Manufacturing Rebound Continues as ISM Index Rises
Manufacturing Rebound Continues as ISM Index Rises

Positive signs from the nation's factory sector continued to emerge in April as the Institute for Supply Management's manufacturing index rose to 60.4 -- its highest level since June 2004, the ISM announced Monday. It was the ninth consecutive, monthly rise for the index.

Economists surveyed by Bloomberg News had expected the index to rise to 61 in April from 59.6 in March. The index was at 56.5 in February. Readings above 50 indicate an expansion; under 50, a contraction.

Another bright spot in April: The index's new orders component, a measure of future demand, surged to 65.7 in April from 61.5 in March.

Three other index components also rose in April. The production component increased to 66.9 from 61.1; the employment component rose to 58.5 from 55.1; and the prices-paid component climbed to 78.0 from 75.0.

"Extraordinary Strength in New Orders"

Norbert J. Ore, chairman of the ISM's Manufacturing Business Survey Committee, said the data point to continued growth.

"The rate of growth as indicated by the PMI is the fastest since June 2004 when the index hit 60.5%. Manufacturers continue to see extraordinary strength in new orders, as the new orders index has averaged 61.6% for the past 10 months," Ore said, in a statement. "The signs for employment in the sector continue to improve as the employment index registered its fifth consecutive month of growth. Overall, the recovery in manufacturing continues quite strong."

In sum, April witnessed a broad-based rise in manufacturing activity, and the long-term trend is obvious: The expansion is gaining steam. The new orders component is especially encouraging because it's a harbinger of future demand, and it has been rising for three months -- a bullish sign for the immediate quarters ahead. Also worthy of note: April's rise in the employment component to 58.5 suggests manufacturers will keep adding employees. While the sector's recovery was initially uneven, the expansion in manufacturing is becoming more broad-based -- and that's a healthy sign for the U.S. economy.