Economic activity in the United States manufacturing sector expanded in October for the 15th consecutive month, and the overall economy grew for the 18th consecutive month, say the nation's supply executives in the Institute for Supply Management's latest Manufacturing ISM Report On Business.
The report was issued November 1 by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee.
"The manufacturing sector grew during October, with both new orders and production making significant gains," said Ore. "Since hitting a peak in April, the trend for manufacturing has been toward slower growth. However, this month's report signals a continuation of the recovery that began 15 months ago, and its strength raises expectations for growth in the balance of the quarter. Survey respondents note the recovery in autos, computers and exports as key drivers of this growth. Concerns about inventory growth are lessened by the improvement in new orders during October. With 14 of 18 industries reporting growth in October, manufacturing continues to outperform the other sectors of the economy."
Of the 18 manufacturing industries, 14 are reporting growth in October, in the following order: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; Printing & Related Support Activities; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Chemical Products. The two industries reporting contraction in October are: Nonmetallic Mineral Products; and Furniture & Related Products.
|
MANUFACTURING AT A GLANCE OCTOBER 2010 |
||||||
|---|---|---|---|---|---|---|
|
Index |
Series Index October |
Series Index September |
Percentage Point Change |
Direction |
Rate of Change |
Trend* (Months) |
| PMI | 56.9 | 54.4 | +2.5 | Growing | Faster | 15 |
| New Orders | 58.9 | 51.1 | +7.8 | Growing | Faster | 16 |
| Production | 62.7 | 56.5 | +6.2 | Growing | Faster | 17 |
| Employment | 57.7 | 56.5 | +1.2 | Growing | Faster | 11 |
| Supplier Deliveries | 51.2 | 52.3 | -1.1 | Slowing | Slower | 17 |
| Inventories | 53.9 | 55.6 | -1.7 | Growing | Slower | 4 |
| Customers' Inventories | 44.0 | 42.5 | +1.5 | Too Low | Slower | 19 |
| Prices | 71.0 | 70.5 | +0.5 | Increasing | Faster | 16 |
| Backlog of Orders | 46.0 | 46.5 | -0.5 | Contracting | Faster | 2 |
| Exports | 60.5 | 54.5 | +6.0 | Growing | Faster | 16 |
| Imports | 51.5 | 56.5 | -5.0 | Growing | Slower | 14 |
| OVERALL ECONOMY | Growing | Faster | 18 | |||
| Manufacturing Sector | Growing | Faster | 15 | |||
*Number of months moving in current direction.
Aluminum (2); Aluminum Extrusions; Caustic Soda (3); Chemicals; Copper (3); Corn (2); Corrugated Containers (8); Lubricants (2); Polyethylene (2); Polypropylene (2); Silver; Stainless Steel Sheets (2); Steel (2); Sulfuric Acid; and Transportation.
No commodities are reported down in price.
Cocoa Powder (2); and Electronic Components (2).
Note: The number of consecutive months the commodity is listed is indicated after each item.
Manufacturing continued to grow in October, and at an accelerated rate as the PMI registered 56.9 percent, an increase of 2.5 percentage points when compared to September's reading of 54.4 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 18th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 15th consecutive month.
Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (57.4 percent) corresponds to a 5.2 percent increase in real gross domestic product (GDP). In addition, if the PMI for October (56.9 percent) is annualized, it corresponds to a 5 percent increase in real GDP annually."
| Month | PMI | Month | PMI | |
|---|---|---|---|---|
| Oct 2010 | 56.9 | Apr 2010 | 60.4 | |
| Sep 2010 | 54.4 | Mar 2010 | 59.6 | |
| Aug 2010 | 56.3 | Feb 2010 | 56.5 | |
| Jul 2010 | 55.5 | Jan 2010 | 58.4 | |
| Jun 2010 | 56.2 | Dec 2009 | 54.9 | |
| May 2010 | 59.7 | Nov 2009 | 53.7 | |
|
Average for 12 months – 56.9 High – 60.4 Low –53.7 |
||||
ISM's New Orders Index registered 58.9 percent in October, which is an increase of 7.8 percentage points when compared to the 51.1 percent reported in September. This is the 16th consecutive month of growth in the New Orders Index and the largest month-over-month improvement since January 2009. A New Orders Index above 50.2 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).
The 11 industries reporting growth in new orders in October — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Primary Metals; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Machinery; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Transportation Equipment. The five industries reporting contraction in October are: Nonmetallic Mineral Products; Printing & Related Support Activities; Wood Products; Chemical Products; and Furniture & Related Products.
|
New Orders |
% Better |
% Same |
% Worse |
Net |
Index |
|---|---|---|---|---|---|
| Oct 2010 | 36 | 39 | 25 | +11 | 58.9 |
| Sep 2010 | 26 | 52 | 22 | +4 | 51.1 |
| Aug 2010 | 29 | 49 | 22 | +7 | 53.1 |
| Jul 2010 | 27 | 53 | 20 | +7 | 53.5 |
ISM's Production Index registered 62.7 percent in October, which is an increase of 6.2 percentage points from the September reading of 56.5 percent. This is the largest month-over-month improvement since January 2010. An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the 17th consecutive month the Production Index has registered above 50 percent.
The 11 industries reporting growth in production during the month of October — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products. The two industries reporting contraction in October are: Nonmetallic Mineral Products; and Furniture & Related Products.
|
Production |
% Better |
% Same |
% Worse |
Net |
Index |
|---|---|---|---|---|---|
| Oct 2010 | 37 | 49 | 14 | +23 | 62.7 |
| Sep 2010 | 31 | 54 | 15 | +16 | 56.5 |
| Aug 2010 | 33 | 53 | 14 | +19 | 59.9 |
| Jul 2010 | 31 | 50 | 19 | +12 | 57.0 |
ISM's Employment Index registered 57.7 percent in October, which is 1.2 percentage points higher than the 56.5 percent reported in September. This is the 11th consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
Ten of the 18 manufacturing industries reported growth in employment in October in the following order: Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; Paper Products; Machinery; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Chemical Products. The four industries reporting lower employment in October are: Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.
|
Employment |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Oct 2010 | 26 | 64 | 10 | +16 | 57.7 |
| Sep 2010 | 25 | 62 | 13 | +12 | 56.5 |
| Aug 2010 | 26 | 69 | 5 | +21 | 60.4 |
| Jul 2010 | 26 | 66 | 8 | +18 | 58.6 |
The delivery performance of suppliers to manufacturing organizations was slower in October as the Supplier Deliveries Index registered 51.2 percent, which is 1.1 percentage points lower than the 52.3 percent registered in September. This is the 17th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.
The six industries reporting slower supplier deliveries in October — listed in order — are: Primary Metals; Miscellaneous Manufacturing; Plastics & Rubber Products; Machinery; Electrical Equipment, Appliances & Components; and Chemical Products. The two industries reporting faster deliveries in October are: Computer & Electronic Products; and Transportation Equipment.
|
Supplier Deliveries |
% Slower |
% Same |
% Faster |
Net |
Index |
|---|---|---|---|---|---|
| Oct 2010 | 13 | 77 | 10 | +3 | 51.2 |
| Sep 2010 | 17 | 76 | 7 | +10 | 52.3 |
| Aug 2010 | 19 | 78 | 3 | +16 | 56.6 |
| Jul 2010 | 28 | 66 | 6 | +22 | 58.3 |
Manufacturers' inventories grew in October as the Inventories Index registered 53.9 percent. The index is 1.7 percentage points lower than the 55.6 percent reported in September. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).
The nine industries reporting higher inventories in October — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Primary Metals; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Chemical Products; and Transportation Equipment. The six industries reporting decreases in inventories in October — listed in order — are: Furniture & Related Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing.
|
Inventories |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Oct 2010 | 27 | 52 | 21 | +6 | 53.9 |
| Sep 2010 | 27 | 58 | 15 | +12 | 55.6 |
| Aug 2010 | 19 | 68 | 13 | +6 | 51.4 |
| Jul 2010 | 19 | 60 | 21 | -2 | 50.2 |
The ISM Customers' Inventories Index registered 44 percent in October, 1.5 percentage points higher than in September when the index registered 42.5 percent. This is the 19th consecutive month the Customers' Inventories Index has been below 50 percent, indicating that respondents believe their customers' inventories are too low at this time.
Fabricated Metal Products is the only manufacturing industry reporting customers' inventories as being too high during October. The nine industries reporting customers' inventories as too low during October — listed in order — are: Printing & Related Support Activities; Computer & Electronic Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Chemical Products; and Machinery.
|
Customers' Inventories |
% Reporting |
%Too High |
%About Right |
%Too Low |
Net |
Index |
|---|---|---|---|---|---|---|
| Oct 2010 | 72 | 15 | 58 | 27 | -12 | 44.0 |
| Sep 2010 | 79 | 13 | 59 | 28 | -15 | 42.5 |
| Aug 2010 | 65 | 11 | 65 | 24 | -13 | 43.5 |
| Jul 2010 | 81 | 6 | 66 | 28 | -22 | 39.0 |
The ISM Prices Index registered 71 percent in October, 0.5 percentage point higher than the 70.5 percent reported in September. This is the 16th consecutive month the Prices Index has registered above 50 percent. While 49 percent of respondents reported paying higher prices and 7 percent reported paying lower prices, 44 percent of supply executives reported paying the same prices as in September. A Prices Index above 49.3 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.
The 13 industries reporting paying increased prices during the month of October — listed in order — are: Petroleum & Coal Products; Primary Metals; Paper Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; Printing & Related Support Activities; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Machinery; Electrical Equipment, Appliances & Components; and Computer & Electronic Products. Fabricated Metal Products is the only industry reporting paying lower prices on average during October.
|
Prices |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Oct 2010 | 49 | 44 | 7 | +42 | 71.0 |
| Sep 2010 | 45 | 51 | 4 | +41 | 70.5 |
| Aug 2010 | 35 | 53 | 12 | +23 | 61.5 |
| Jul 2010 | 33 | 49 | 18 | +15 | 57.5 |
ISM's Backlog of Orders Index registered 46 percent in October, 0.5 percentage point lower than the 46.5 percent reported in September. Of the 89 percent of respondents who reported their backlog of orders, 23 percent reported greater backlogs, 31 percent reported smaller backlogs, and 46 percent reported no change from September.
The six industries reporting increased order backlogs in October — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Plastics & Rubber Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The seven industries reporting decreases in order backlogs during October — listed in order — are: Nonmetallic Mineral Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Chemical Products; Machinery; Transportation Equipment; and Computer & Electronic Products.
|
Backlog of Orders |
% Reporting |
% Greater |
% Same |
% Less |
Net |
Index |
|---|---|---|---|---|---|---|
| Oct 2010 | 89 | 23 | 46 | 31 | -8 | 46.0 |
| Sep 2010 | 86 | 19 | 55 | 26 | -7 | 46.5 |
| Aug 2010 | 84 | 25 | 53 | 22 | +3 | 51.5 |
| Jul 2010 | 86 | 28 | 53 | 19 | +9 | 54.5 |
ISM's New Export Orders Index registered 60.5 percent in October, which is 6 percentage points higher than the 54.5 percent reported in September. This is the 16th consecutive month of growth in the New Export Orders Index.
The 11 industries reporting growth in new export orders in October — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; Paper Products; Machinery; Food, Beverage & Tobacco Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Chemical Products. Nonmetallic Mineral Products is the only manufacturing industry reporting a decrease in export orders during October.
|
New Export Orders |
% Reporting |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|---|
| Oct 2010 | 82 | 30 | 61 | 9 | +21 | 60.5 |
| Sep 2010 | 79 | 19 | 71 | 10 | +9 | 54.5 |
| Aug 2010 | 80 | 16 | 79 | 5 | +11 | 55.5 |
| Jul 2010 | 78 | 20 | 73 | 7 | +13 | 56.5 |
Imports of materials by manufacturers continued to expand in October as the Imports Index registered 51.5 percent, which is 5 percentage points lower than the 56.5 percentage points reported in September. This is the 14th consecutive month of growth in imports.
The five industries reporting growth in imports during the month of October are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Machinery; Fabricated Metal Products; and Electrical Equipment, Appliances & Components. The six industries reporting a decrease in imports during October — listed in order — are: Furniture & Related Products; Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; and Transportation Equipment.
|
Imports |
% Reporting |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|---|
| Oct 2010 | 83 | 15 | 73 | 12 | +3 | 51.5 |
| Sep 2010 | 82 | 22 | 69 | 9 | +13 | 56.5 |
| Aug 2010 | 80 | 18 | 77 | 5 | +13 | 56.5 |
| Jul 2010 | 78 | 14 | 77 | 9 | +5 | 52.5 |
* The Backlog of Orders, Prices, Customers' Inventories, Imports and New Export Orders Indexes do not meet the accepted criteria for seasonal adjustments.
Average commitment lead time for Capital Expenditures decreased two days to 105 days. Average lead time for Production Materials increased seven days to 57 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased three days to 21 days.
| Percent Reporting | |||||||
|---|---|---|---|---|---|---|---|
|
Capital Expenditures |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Oct 2010 | 29 | 9 | 13 | 13 | 27 | 9 | 105 |
| Sep 2010 | 27 | 7 | 12 | 20 | 24 | 10 | 108 |
| Aug 2010 | 26 | 4 | 10 | 14 | 33 | 13 | 127 |
| Jul 2010 | 30 | 7 | 11 | 13 | 28 | 11 | 112 |
|
Production Materials |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Oct 2010 | 19 | 33 | 28 | 13 | 4 | 3 | 57 |
| Sep 2010 | 16 | 44 | 22 | 13 | 4 | 1 | 50 |
| Aug 2010 | 23 | 34 | 25 | 13 | 2 | 3 | 52 |
| Jul 2010 | 23 | 35 | 24 | 11 | 5 | 2 | 52 |
|
MRO Supplies |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Oct 2010 | 51 | 38 | 9 | 2 | 0 | 0 | 21 |
| Sep 2010 | 49 | 36 | 13 | 1 | 1 | 0 | 24 |
| Aug 2010 | 54 | 35 | 8 | 3 | 0 | 0 | 21 |
| Jul 2010 | 50 | 38 | 7 | 5 | 0 | 0 | 23 |
The data presented herein is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.
The Manufacturing ISM Report On Business is based on data compiled from purchasing and supply executives nationwide. Membership of the Manufacturing Business Survey Committee is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).
Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers' Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).
The resulting single index number for those meeting the criteria for seasonal adjustments (PMI, New Orders, Production, Employment, Supplier Deliveries and Inventories) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The PMI is a composite index based on the seasonally adjusted diffusion indexes for five of the indicators with equal weights: New Orders, Production, Employment, Supplier Deliveries and Inventories.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI in excess of 42 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42 percent, it is generally declining. The distance from 50 percent or 42 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.
Responses to Buying Policy reflect the percent reporting the current month's lead time, the approximate weighted number of days ahead for which commitments are made for Production Materials; Capital Expenditures; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.
The Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management. ISM, established in 1915, is the largest supply management organization in the world as well as one of the most respected. Its mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. This report has been issued by the association since 1931, except for a four-year interruption during World War II.
The next Manufacturing ISM Report On Business, featuring the November 2010 data, will be released on Wednesday, December 1.