TEMPE, AZ & LONDON-In a positive sign for owners of industrial property, the manufacturing sector continues to rebound. New reports from the Institute of Supply Management (ISM) and JPMorgan show forward movement in both the US and globally after a long period of retreat or stasis.
The Tempe-based ISM's Primary Manufacturing Index (PMI) for the US jumped four percentage points in August to 52.9, the highest level since June 2007. An index above 50 indicates growth. According to the Tempe, AZ-based organization, the boost was driven by growth in new orders and production, with the group's New Orders Index up 9.6 points to 64.9, its highest level since December '04.
"The year-and-a-half decline in manufacturing output has come to an end, as 11 of 18 manufacturing industries are reporting growth when comparing August to July," says Norbert J. Ore, chair of ISM's manufacturing business survey committee. Moreover, he continues, growth appears sustainable, at least in the short term, as inventories have been reduced for 40 consecutive months. "Supply chains will have to restock to meet this new demand," he points out, which should lead to renewed demand for warehouse and distribution space.
At the same time, Ore cautions not to expect substantial improvement as inventories are still contracting, with the ISM Inventory Index coming in at 34.4, well below the level of 42.6 that signals growth over time. In addition, he says, "While [the PMI rise] is certainly a positive occurrence, we have to keep in mind that it is the beginning of a new cycle and that all industries are not yet participating in the growth."
Meanwhile, the JPMorgan Global Manufacturing PMI posted it highest reading in 26 months in August, rising 3.1 points to 53.1. This marks the first time since May '08 the figure registered above the neutral 50 mark. JPMorgan analysts say production not only increased for the third month running but also rose at the fastest pace in 40 months.
According to the August report, expansion was broad-based geographically, with gains especially marked in the US, Japan, China and emerging Asian economies. India, on the other hand, had a generally weak showing. European economies also tended to lag behind, though not all countries fared poorly. France and Germany experienced a strong upturn, and the UK and Eastern Europe had moderate growth. Italy and Ireland, on the other hand, showed only muted growth, and Spain reported a drop in output following an increase in July.
Additionally, says JPMorgan, manufacturing new orders rose in August at the highest rate since July '04. Rates of increase hit 56, 41 and 23-month highs in the US, Japan and China, respectively. The Eurozone saw slight gains in new orders for the first time since March '08, while and Brazil had its first gains since August '08. Gains were posted in almost all of Europe, with the exception of Italy and Ireland. Increased levels of new export business were also reported by global manufacturers.
"Signs are that these gains will be sustained in the coming months, as the stock cycle remains supportive and the new orders-to-inventory ratio hit a record high," says David Hensley, director ofglobal economics coordination at JPMorgan. "Job losses in the sector are abating as production and orders surge."

Instant Insights /

Global Manufacturing Shows Strong Results in August

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