Purchasing Managers Index drops in wake of election

The Southeast Michigan Purchasing Managers Index (PMI) lost more than 10 points, dropping to 57.0 for November 2016; the three-month average fell to 61.4. Despite the steep decline, a PMI above 50 is considered an indication of an expanding economy.

“This month’s drop may be a result of post-election nervousness in the marketplace, but the PMI value of 57.0 is still a strong showing of economic vitality,” said Tim Butler, associate professor of global supply chain management in Wayne State University’s Mike Ilitch School of Business, who interpreted this month’s results. “The lower number indicates that respondents are less optimistic than they were previously, but they remain confident in the economic strength of Southeast Michigan.”

Fewer respondents — only about 20% compared to last month’s 31% — predict that the economy will become less stable over the next six months.

There were three precipitous drops in the specific indexes which comprise the PMI, although the November score is still relatively healthy. New Orders fell from 70.6 to 58.3; Production dropped from 73.5 to 58.3; and Employment declined from 75.0 to 62.5. No commodities were identified as being down in price; paper was reportedly up in price.

“PMI dropped down to 57.0, which seems more realistic, but it may also reflect people’s perception of the impact of the election on their own organization,” said Kenneth Doherty, assistant vice president of procurement and strategic sourcing at WSU and an Institute for Supply Management board member. “The upcoming holidays play a role as well. Customer spending slowed midyear but is now picking up.”

The Southeast Michigan Purchasing Managers Index (PMI) is a research partnership between Wayne State University’s Mike Ilitch School of Business and the Institute for Supply Management – Southeast Michigan.

The full report can be found at http://www.ism-sem.org/resources/files/Report-on-Business_November-2016.pdf