Economic activity in the United States manufacturing sector expanded in September for the 14th consecutive month, and the overall economy grew for the 17th 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 October 1 by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee.
"While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging," said Ore. "The growth of new orders continued to slow, as the index is down significantly from its cyclical high of 65.9 percent (January 2010). Production is currently growing at a faster rate than new orders, but it typically lags and would be expected to weaken further in the fourth quarter. Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter. Both the Inventories and Backlog of Orders Indexes are sending strong negative signals of weakening performance in the sector."
PERFORMANCE BY INDUSTRY
Of the 18 manufacturing industries, 13 are reporting growth in September, in the following order: Apparel, Leather & Allied Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; Computer & Electronic Products; Furniture & Related Products; Plastics & Rubber Products; Chemical Products; Paper Products; Machinery; and Food, Beverage & Tobacco Products. The three industries reporting contraction in September are: Wood Products; Printing & Related Support Activities; and Nonmetallic Mineral Products.
WHAT RESPONDENTS ARE SAYING ...
- "Business results (top and bottom line) continue to meet or exceed our operating plan and exceed prior year performance by double digits." (Chemical Products)
- "Business continues flat relative to prior month and is expected to remain flat. Commodities continue to be the main concern heading into 2011." (Food, Beverage & Tobacco Products)
- "Our business is softening due to seasonal considerations. Overall, our situation is much better than 2009." (Machinery)
- "Customers seem to be pulling back on orders. I suspect that they are trying to reduce their inventory for the approaching year-end." (Transportation Equipment)
- "Strategic customers reducing order quantities." (Computer & Electronic Products)
|
MANUFACTURING AT A GLANCE SEPTEMBER 2010 |
||||||
|---|---|---|---|---|---|---|
|
Index |
Series Index September |
Series Index August |
Percentage Point Change |
Direction |
Rate of Change |
Trend* (Months) |
| PMI | 54.4 | 56.3 | -1.9 | Growing | Slower | 14 |
| New Orders | 51.1 | 53.1 | -2.0 | Growing | Slower | 15 |
| Production | 56.5 | 59.9 | -3.4 | Growing | Slower | 16 |
| Employment | 56.5 | 60.4 | -3.9 | Growing | Slower | 10 |
| Supplier Deliveries | 52.3 | 56.6 | -4.3 | Slowing | Slower | 16 |
| Inventories | 55.6 | 51.4 | +4.2 | Growing | Faster | 3 |
| Customers' Inventories | 42.5 | 43.5 | -1.0 | Too Low | Slower | 18 |
| Prices | 70.5 | 61.5 | +9.0 | Increasing | Faster | 15 |
| Backlog of Orders | 46.5 | 51.5 | -5.0 | Contracting | From Growing | 1 |
| Exports | 54.5 | 55.5 | -1.0 | Growing | Slower | 15 |
| Imports | 56.5 | 56.5 | 0.0 | Growing | Same | 13 |
| OVERALL ECONOMY | Growing | Slower | 17 | |||
| Manufacturing Sector | Growing | Slower | 14 | |||
*Number of months moving in current direction
COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY
Commodities Up in Price
Aluminum; Caustic Soda (2); Copper (2); Corn; Corrugate; Corrugated Containers (7); Lubricants; Plastic Resins; Polyethylene; Polypropylene; Rubber Products; Stainless Steel; Stainless Steel Sheets; Steel*; Sugar; and Wheat.
Commodities Down in Price
Natural Gas; and Steel* (3).
Commodities in Short Supply
Capacitors (3); Cocoa Powder; Electronic Components; Lubricants; and Titanium Dioxide.
Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.
SEPTEMBER 2010 MANUFACTURING INDEX SUMMARIES
Purchasing Managers' Index (PMI)
Manufacturing continued to grow in September, but at a slower rate as the PMI registered 54.4 percent, a decrease of 1.9 percentage points when compared to August's reading of 56.3 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 17th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 14th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (57.4 percent) corresponds to a 5.2 percent increase in real gross domestic product (GDP). In addition, if the PMI for September (54.4 percent) is annualized, it corresponds to a 4.2 percent increase in real GDP annually."
THE LAST 12 MONTHS
| Month | PMI | Month | PMI | |
|---|---|---|---|---|
| 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 | |
| Apr 2010 | 60.4 | Oct 2009 | 55.2 | |
|
Average for 12 months – 56.7 High – 60.4 Low –53.7 |
||||
New Orders
ISM's New Orders Index registered 51.1 percent in September, which is a decrease of 2 percentage points when compared to the 53.1 percent reported in August. This is the 15th consecutive month of growth in the New Orders Index. 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 seven industries reporting growth in new orders in September — listed in order — are: Furniture & Related Products; Fabricated Metal Products; Primary Metals; Electrical Equipment, Appliances & Components; Paper Products; Transportation Equipment; and Computer & Electronic Products. The seven industries reporting decreases in new orders in September — listed in order — are: Wood Products; Printing & Related Support Activities; Machinery; Chemical Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.
|
New Orders |
% Better |
% Same |
% Worse |
Net |
Index |
|---|---|---|---|---|---|
| Sep 2010 | 26 | 52 | 22 | +4 | 51.1 |
| Aug 2010 | 29 | 49 | 22 | +7 | 53.1 |
| Jul 2010 | 27 | 53 | 20 | +7 | 53.5 |
| Jun 2010 | 36 | 50 | 14 | +22 | 58.5 |
Production
ISM's Production Index registered 56.5 percent in September, which is a decrease of 3.4 percentage points from the August reading of 59.9 percent. 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 16th consecutive month the Production Index has registered above 50 percent.
The 11 industries reporting growth in production during the month of September — listed in order — are: Apparel, Leather & Allied Products; Transportation Equipment; Fabricated Metal Products; Furniture & Related Products; Miscellaneous Manufacturing; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Machinery; and Chemical Products. The four industries reporting a decrease in production in September are: Petroleum & Coal Products; Wood Products; Nonmetallic Mineral Products; and Printing & Related Support Activities.
|
Production |
% Better |
% Same |
% Worse |
Net |
Index |
|---|---|---|---|---|---|
| Sep 2010 | 31 | 54 | 15 | +16 | 56.5 |
| Aug 2010 | 33 | 53 | 14 | +19 | 59.9 |
| Jul 2010 | 31 | 50 | 19 | +12 | 57.0 |
| Jun 2010 | 40 | 47 | 13 | +27 | 61.4 |
Employment
ISM's Employment Index registered 56.5 percent in September, which is 3.9 percentage points lower than the 60.4 percent reported in August. This is the 10th 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.
Eight of the 18 manufacturing industries reported growth in employment in September in the following order: Petroleum & Coal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Paper Products; Chemical Products; Machinery; and Transportation Equipment. The three industries reporting a decrease in employment during September are: Wood Products; Plastics & Rubber Products; and Food, Beverage & Tobacco Products.
|
Employment |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Sep 2010 | 25 | 62 | 13 | +12 | 56.5 |
| Aug 2010 | 26 | 69 | 5 | +21 | 60.4 |
| Jul 2010 | 26 | 66 | 8 | +18 | 58.6 |
| Jun 2010 | 26 | 63 | 11 | +15 | 57.8 |
Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in September as the Supplier Deliveries Index registered 52.3 percent, which is 4.3 percentage points lower than the 56.6 percent registered in August. This is the 16th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.
The eight industries reporting slower supplier deliveries in September — listed in order — are: Plastics & Rubber Products; Primary Metals; Chemical Products; Miscellaneous Manufacturing; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; and Transportation Equipment. The two industries reporting faster deliveries in September are: Nonmetallic Mineral Products; and Printing & Related Support Activities.
|
Supplier Deliveries |
% Slower |
% Same |
% Faster |
Net |
Index |
|---|---|---|---|---|---|
| Sep 2010 | 17 | 76 | 7 | +10 | 52.3 |
| Aug 2010 | 19 | 78 | 3 | +16 | 56.6 |
| Jul 2010 | 28 | 66 | 6 | +22 | 58.3 |
| Jun 2010 | 23 | 71 | 6 | +17 | 57.3 |
Inventories
Manufacturers' inventories grew in September as the Inventories Index registered 55.6 percent. The index is 4.2 percentage points higher than the 51.4 percent reported in August. 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 seven industries reporting higher inventories in September — listed in order — are: Apparel, Leather & Allied Products; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; Machinery; Chemical Products; and Miscellaneous Manufacturing. The four industries reporting decreases in inventories in September are: Wood Products; Plastics & Rubber Products; Paper Products; and Food, Beverage & Tobacco Products.
|
Inventories |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Sep 2010 | 27 | 58 | 15 | +12 | 55.6 |
| Aug 2010 | 19 | 68 | 13 | +6 | 51.4 |
| Jul 2010 | 19 | 60 | 21 | -2 | 50.2 |
| Jun 2010 | 13 | 66 | 21 | -8 | 45.8 |
Customers' Inventories*
The ISM Customers' Inventories Index registered 42.5 percent in September, 1 percentage point lower than in August when the index registered 43.5 percent. This is the 18th consecutive month the Customers' Inventories Index has been below 50 percent, indicating that respondents believe their customers' inventories are too low at this time.
Food, Beverage & Tobacco Products is the only manufacturing industry reporting customers' inventories as being too high during September. The nine industries reporting customers' inventories as too low during September — listed in order — are: Nonmetallic Mineral Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Transportation Equipment; Electrical Equipment, Appliances & Components; Paper Products; Machinery; Fabricated Metal Products; and Plastics & Rubber Products.
|
Customers' Inventories |
% Reporting |
%Too High |
%About Right |
%Too Low |
Net |
Index |
|---|---|---|---|---|---|---|
| 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 |
| Jun 2010 | 67 | 4 | 68 | 28 | -24 | 38.0 |
Prices*
The ISM Prices Index registered 70.5 percent in September, 9 percentage points higher than the 61.5 percent reported in August. This is the 15th consecutive month the Prices Index has registered above 50 percent. While 45 percent of respondents reported paying higher prices and 4 percent reported paying lower prices, 51 percent of supply executives reported paying the same prices as in August. 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 September — listed in order — are: Wood Products; Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; Machinery; Fabricated Metal Products; Transportation Equipment; Paper Products; Computer & Electronic Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Chemical Products; and Electrical Equipment, Appliances & Components. There were no industries reporting paying lower prices on average during September.
|
Prices |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Sep 2010 | 45 | 51 | 4 | +41 | 70.5 |
| Aug 2010 | 35 | 53 | 12 | +23 | 61.5 |
| Jul 2010 | 33 | 49 | 18 | +15 | 57.5 |
| Jun 2010 | 32 | 50 | 18 | +14 | 57.0 |
Backlog of Orders*
ISM's Backlog of Orders Index registered 46.5 percent in September, 5 percentage points lower than the 51.5 percent reported in August. Of the 86 percent of respondents who reported their backlog of orders, 19 percent reported greater backlogs, 26 percent reported smaller backlogs, and 55 percent reported no change from August.
The four industries reporting increased order backlogs in September are: Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Furniture & Related Products; and Miscellaneous Manufacturing. The eight industries reporting decreases in order backlogs during September — listed in order — are: Wood Products; Machinery; Computer & Electronic Products; Printing & Related Support Activities; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Chemical Products.
|
Backlog of Orders |
% Reporting |
% Greater |
% Same |
% Less |
Net |
Index |
|---|---|---|---|---|---|---|
| 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 |
| Jun 2010 | 85 | 31 | 52 | 17 | +14 | 57.0 |
New Export Orders*
ISM's New Export Orders Index registered 54.5 percent in September, which is 1 percentage point lower than the 55.5 percent reported in August. This is the 15th consecutive month of growth in the New Export Orders Index.
The seven industries reporting growth in new export orders in September — listed in order — are: Nonmetallic Mineral Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Chemical Products; and Computer & Electronic Products. The three manufacturing industries reporting a decrease in export orders during September are: Food, Beverage & Tobacco Products; Machinery; and Transportation Equipment.
|
New Export Orders |
% Reporting |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|---|
| 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 |
| Jun 2010 | 78 | 19 | 74 | 7 | +12 | 56.0 |
Imports*
Imports of materials by manufacturers continued to expand in September as the Imports Index registered 56.5 percent, which is the same rate of growth as reported in August. This is the 13th consecutive month of growth in imports.
The eight industries reporting growth in imports during the month of September — listed in order — are: Plastics & Rubber Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; Chemical Products; Computer & Electronic Products; and Fabricated Metal Products. The two industries reporting a decrease in imports during September are: Paper Products; and Food, Beverage & Tobacco Products.
|
Imports |
% Reporting |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|---|
| 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 |
| Jun 2010 | 77 | 20 | 73 | 7 | +13 | 56.5 |
* The Backlog of Orders, Prices, Customers' Inventories, Imports and New Export Orders Indexes do not meet the accepted criteria for seasonal adjustments.
Buying Policy
Average commitment lead time for Capital Expenditures decreased 19 days to 108 days. Average lead time for Production Materials decreased two days to 50 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased three days to 24 days.
| Percent Reporting | |||||||
|---|---|---|---|---|---|---|---|
|
Capital Expenditures |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| 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 |
| Jun 2010 | 28 | 8 | 9 | 16 | 29 | 10 | 112 |
|
Production Materials |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| 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 |
| Jun 2010 | 25 | 36 | 22 | 11 | 4 | 2 | 50 |
|
MRO Supplies |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| 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 |
| Jun 2010 | 48 | 38 | 11 | 3 | 0 | 0 | 23 |
About this Report
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.
Data and Method of Presentation
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 October 2010 data, will be released on Monday, November 1.
