ISA Distributor, Manufacturer Indexes Post Major Rebound In August; PMI Falls

ISA's Distributor and Manufacturer Indexes followed their worst month of the past 12 with large gains in August, while a considerable decline in the PMI indicates the overall manufacturing economy had an abrupt shift to contraction.

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The Industrial Supply Association has posted its September Economic Indicator report, which showed a considerable rebound in both the ISA Distributors and Manufacturers Indexes after a sharp drop for both in July.

The Distributors Index jumped 21.4 points in August to a reading of 66.3 — its third-highest reading of the past 12 months. This comes after the Distributors Index sunk 15.5 points in July to a 12-month-low reading of 44.9.

Likewise, ISA's Manufacturer's Index showed a healthy 11.5-point rebound in August for a reading of 60.1. This follows a 10.5-point decline in July for a 12-month-low reading of 48.6.

For both indexes, it was the largest single-month gain over the past year.

On a sour note, the Producer Manufacturing Index (PMI) fell a considerable 3.2 points to a reading of 49.4 — its first reading under 50.0 since February (49.5). It was the PMI's largest monthly change over the past year.

For each index, a reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction. Thus, while the indexes indicate that distributors and manufacturers had a majorly-improved August over July, the PMI drop says the overall industrial economy had an abrupt shift to contraction after five straight months of expansion.

Distributors indicated large month-over-month gains in business activity, supplier deliveries, inventories, sales revenue, anticipated business conditions and anticipated new orders.

Whereas most distributors and manufacturers had two fewer business days in July 2016 (20) compared to 2015, contributing to last July's large index declines, most companies had two additional business days in August 2016 (23) compared to 2015.

 

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Here's a couple comments from industrial distributors that were included in the index:

  • "Some of our larger accounts, particularly those engaged in exporting their products, have slowed down. Business conditions are challenging but there are opportunities to provide value to customers where the relationship is trusting between the customer, us, and the supplier."
  • "Higher than last year but two extra billing days helped! We will take it in a year where we are trailing high single digits."

And here's a collection of manufacturer comments: 

  • "August was a booming month as we have finally successfully transitioned our sales team from being focused on oil and gas to construction."
  • "August improved over July. Incoming looks like September should be as good as August at least."
  • "August was another persistently sluggish month but showed signs of slight improvement which bodes well for September and the remainder of 2016. Let's hope so. We do expect the second half of 2016 to be better than the first half.
  • "We are starting to hear more optimism in the market, but we are cautious."
  • "Huge unexpected growth coming off a very poor July."
  • "Despite a few bad months this summer, we are still up for the year. Waiting for this election to be over."
  • "Regarding order intake, the first two weeks of the month were terrible. However the last eight business days were tremendous and we actually ended up exceeding our August forecast. August's roller coaster is merely a microcosm of the year so far."
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