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July 2011 Report on Business: Omen or Correction?

Posted 4:31 PM by

Many of us who continuously scan the manufacturing landscape anxiously await the monthly Report on Business published by the Institute for Supply Management. The ISM’s manufacturing activity index (PMI) for July 2011 of 50.9% has been received with some alarm, after first quarter activity ran optimistically high at over 60%. Certainly, there is a downturn in activity as the index (tracked since 1948) has corroborating support from similar industry metrics on customer orders, supplier prices and hiring activity.

However, we do keep in mind that July 2011 was the 24th straight month of economic expansion in domestic manufacturing, and that a correction may be timely. The fact that supplier prices and hiring are being adjusted to the changes in manufacturing activity may indicate management’s healthy sensitivity to economic fluctuations. Strong productivity figures and cash reserves are still worthy indicators of our overall industry condition, to be used in concert with these other activity metrics.

We next look to July unemployment figures, set to be released very early in August. While an increase in unemployment is anticipated, the extent to which it supports either a correction or true contraction in manufacturing activity is of great interest.

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Katz, Sapper & Miller’s Manufacturing and Distribution Services Group provides traditional tax compliance and assurance services, but what sets us apart is the entrepreneurial spirit. Our strategic solutions will make your company more efficient, competitive and profitable. Learn more.

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