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Electronics and Semiconductors

U.S. Manufacturing Index Rises Again

15 November 2013

U.S. manufacturing activity rose in October for the fifth consecutive month, according to the Institute of Supply Management (ISM).

The ISM's leading manufacturing index, the PMI, increased to 56.4 percent in October, up from 56.2 percent in September. The PMI has increased steadily each month since June.

A PMI reading above 50 percent indicates that the manufacturing economy is expanding. Below 50 percent indicates that it is contracting.

Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said the data indicated that U.S. manufacturing remained unfazed by the federal government shutdown that occurred in October.

Respondents to the ISM's monthly survey expressed opinions ranging from concern over the shutdown to saying it had no impact on business.

"Manufacturing is responding to the marketplace, not to Washington," Holcomb said.

Holcomb added that manufacturers have become accustomed to periodic budget battles that can disrupt government business. "We've learned to expect disruption from Washington," Holcomb said.

The electronics and related markets had mixed reviews in October. Outlook in the general appliance market continues in a positive direction; respondents said; the telecom market—wireless and VOIP—appear to be spiking, according to one player in the computer and electronics space.

All but one leading ISM index—production—increased in October; all remain in the over-50-percent growth range. ISM's production index registered 60.8 percent in October, a decrease of 1.8 percentage points when compared to the 62.6 percent reported in September.

"Production has been above 60 for the fifth consecutive month," Holcomb noted. "One of the rules of manufacturing is to try to level out production [when it has accelerated] and that's what the industry is doing. October's data showed new orders have been up for three consecutive months and backlog is growing. The trick is to maintain levels and use backlog as a reserve."

New orders increased slightly in October by 0.1 percentage point to 60.6 percent, and exports increased by 5 percentage points to 57 percent, ISM reports. October's reading is the highest level since April 2012 when the index registered 59 percent. This month's reading also represents the 11th consecutive month of growth in new export orders.

"The increase in exports is a very positive development—it says the international community likes our products," said Holcomb. "I think every single underlying metric is pointing in the right direction and that is quite amazing. We are continuing the momentum and we see no reason to believe that won't continue."

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