Manufacturing's Bright August Tinged With Gray By Falling Production

The Houston Purchasing Managers Index rose 0.7 of a point in August to 60.3.

The main drivers in the August index were declines in purchased inventory and finished goods inventory. A fall in these two indicators reflects an increase in consumption.  When that happens, manufacturers ordinarily ramp up production to meet demand. Instead, production dropped sharply from July.

Mike Valant is business survey chair with the Institute of Supply Management — Houston.

“They’re letting their inventories drill down, and I’m not really sure why, because sales were up last month, and they’re continuing to stay strong.”

Valant says one reason for the fall in production may be manufacturers’ uncertainty heading into the November elections.

The PMI indicates likely shifts in production three or four months in advance. It has a range of 0 to 100, with readings over 50 pointing to near term production gains.

August 2012 PMI

graph provided by ISM-Houston, Inc.

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