The recently reported of Purchasing Managers Index, released from the Institute of Supply Management, has clocked 55.9 for the month of December, up from a projected 54.3. The increase has boosted the prospects of a solid economic recovery, chiefly attributed to a rise in the manufacturing industry. And the reason for optimism lies in this being the highest level since 2006. There is further reason to cheer, given the fact that the index rose to only 38 in September, three months earlier, compared with the current figures.
Clearly, the US economy could breathe a sigh of relief, with the current data – the Unemployment rates have stabilised after steep declines, which have hinted at an economy that is gaining traction. Now, the increase in Purchasing Managers Index shows that companies in the computers, electronics and telecommunication sectors have been able to perform much better than the rest of their peers, given the fact that these companies are the ones that have been able to preserve cash to persist through the economic downturn – cash flow and cash flow management are crucial tricks in business in tough times.
While the manufacturing industry is not all that would matter in an economic recovery, there is a possibility of analysts getting excited at the quantum of rise in manufacturing in December, from September levels. However, the fact is that this increase is to be seen in the context of a prolonged recession, where GDP has actually receded much lower than normally acceptable levels and standards. Naturally, when there is economic growth from much lower levels of production, after a long period of dwindling consumer confidence, given the existing capacity of industries and the draught in consumer demand, it is only expected that the rate of increase would be much more and economic growth would appear much stronger, while the relative position of the economy would still be lower than what it used to be before the recession.
Hence, while the hike in industrial manufacturing data is good news for the economy, it should actually be seen in the context of the fall in GDP and the stage of the economic cycle from which growth has started. From this perspective, the Purchasing Managers Index as it stands in December is good news for the economy, but this is no reason to celebrate.
Passion for Writing and Business; Post-graduation in Management; Some useful managerial experience and International Exposure; Belief in Risk-taking and in the spirit of the entrepreneur. That's me. 
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