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Tuesday, September 1, 2009

US Economic Growth Rate Now Likely Near 3.7% Annually

We've continued to point to the ISM Manufacturing Index as a superb indicator of what is occuring in the overall US economy. In addition to reporting the manufacturing sector conditions, the ISM's PMI index has an impressive track record in GDP growth correlation. A PMI in excess of 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. On Tuesday the PMI was reported at 52.9 by the ISM and thus indicates growth in the overall US economy for the fourth consecutive month.

Additionally, a reading above 50 percent indicates that the manufacturing sector of the economy is generally expanding. Tuesday's reading of 52.9 represents an end to the 18 months of decline in that sector. The August reading is the highest since June 2007. Much of the PMI reading was caused by significant strength in the New Orders Index, which was driven to its highest level since December 2004.

Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee punctuated their report by stating, "If the PMI for August (52.9 percent) is annualized, it corresponds to a 3.7 percent increase in real GDP annually."

The report is the strongest indicator yet that second half growth is coming on strong.

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