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U.S. manufacturing industry is slightly exposed to 'morning light'
Although the decline of the U.S. manufacturing industry did not reverse in April, the confidence in the manufacturing industry has stabilized and the 'morning light' has been revealed. On May 1, a report released by the Institute for Supply Management (ISM) showed that the manufacturing index rose to 40.1% in April, which was better than the 36.3% in the previous month. This is the 15th consecutive month that the data has been in contraction (with a reading below 50%). However, a closer look at the sub-item data shows a slight sign of recovery. Among the 11 major indicators reported by ISM, the most important Purchasing Managers' Index (PMI) has recovered to 40.1% in April, up 3.8 percentage points from the previous month. According to a simple estimate of the relationship between PMI and GDP, the annualized data for April indicates that the annual GDP contraction rate is 0.3%; by averaging the ISM manufacturing index from January to April, it can be calculated GDP for the year was roughly 1.3% negative growth. Compared with the existing data, this is a great news. According to the report released by the US Department of Commerce on April 29, the US GDP in the first quarter of 2009 fell by 6.1% year-on-year. The rise in the PMI in April, and the increase in new orders and production 'made a great contributionThese two sub-indicators each have a weight of 20% in the PMI, so the overall PMI has an increase of 2.5 percentage points. Looking at specific industries, six of the 18 manufacturing industries started to see an increase in new orders, and three industries reported an increase in output. Industries with increased new orders include: plastic and rubber products, non-metallic mineral products, electrical equipment and parts, miscellaneous manufacturing, computer and electronic products and machinery; industries with increased output include: miscellaneous manufacturing, computer and electronic products and machinery. Combining all indicators, among the 18 manufacturing industries, only miscellaneous manufacturing did not shrink. That's because miscellaneous manufacturing includes medical equipment, jewelry, sporting goods, toys, and office supplies, among others, whose consumer demand isn't much affected by the downturn. The ISM report also cited interviews with purchasing managers in select industries: 'While demand from international customers remains, new orders may be at risk of insufficient cash flow.' - Computer and electronics industry 'begins to see some Signs of increased customer demand and output in the automotive industry.' - Metal products industry 'Business conditions remain weak, but agricultural-related products are still dynamic.' - Machinery manufacturing industry 'The situation will improve in the third quarter, and we are optimistic about this .' - The chemical products industry 'started to hear the news that the order situation of some sub-sectors has improved slightly, but not all.' - The remarks of the purchasing managers of these industries in the electrical equipment industry indicate that although the ISM manufacturing index in April has Better, but clearly dependent on certain industries, such as the automotive industry and the agricultural machinery manufacturing industry. Moreover, the danger of 'cut-off' of customers' cash flow also makes purchasing managers 'pinch a sweat'.