Purchasing Managers Index suggests local economy may be contracting
The Southeast Michigan Purchasing Managers Index (PMI) came in at 45.7 in August, declining from 54.6 in July. The Index dropped for the third consecutive month, falling below 50 for the first time since December, 2011. August marks the lowest PMI in 31 months, since January, 2010, when the Index was 45.2. A PMI value greater than 50 generally signifies an expanding economy, while a PMI below 50 indicates a contracting economy.
“The components of the PMI that are responsible for the declining score are new orders and production, which both had an index value of 41.9,” said Timothy Butler, associate professor of supply chain management at Wayne State’s business school who analyzed the survey data.
Butler said the Finished Goods Inventory Index also indicated contraction, with an August index value of 45.2, down noticeably from the July index of 58.0.
“The Employment Index, while down sharply, is still above 50 at 53.2, suggesting that a modest level of hiring continues,” he said.
The Commodity Price Index value in August suggests sharply rising prices, according to Ken Doherty, assistant vice president for procurement and strategic sourcing at Wayne State University and a member of the Institute for Supply Management.
“The Commodity Price Index was below 50 during June and July, indicating declining prices overall, but in August, it increased to 61.3, suggesting a spike in prices,” he said.
Twenty-nine percent of respondents said that they expect the business environment will become less stable over the next six months, while 12.9 percent indicated that they believe the environment will become more stable. The remaining 58.1 percent expect that the economy will remain about the same.
Purchasing managers reported concern over the presidential election, as well as the impact of European economic problems.
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.
