ISM report says manufacturing sector expanded for the tenth consecutive month

Source: Institute for Supply Management

Jul 08, 2010

Economic activity in the manufacturing sector expanded in May for the tenth consecutive month, and the overall economy grew for the thirteenth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee. "The manufacturing sector grew for the tenth consecutive month during May. The rate of growth as indicated by the PMI is driven by continued strength in new orders and production. Employment continues to grow as manufacturers have added to payrolls for six consecutive months. The recovery continues to broaden as 16 of 18 industries report growth. There are a number of reports, particularly in the tech sector, of shortages of components; this is the result of excessive inventory de-stocking during the downturn."

Sixteen of the 18 manufacturing industries are reporting growth in May, in the following order: Paper Products; Wood Products; Transportation Equipment; Electrical Equipment, Appliances and Components; Fabricated Metal Products; Computer and Electronic Products; Furniture and Related Products; Miscellaneous Manufacturing; Plastics and Rubber Products; Primary Metals; Printing and Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Machinery; Apparel, Leather and Allied Products; and Food, Beverage and Tobacco Products. The only industry reporting contraction in May is Petroleum and Coal Products.


PMI

Manufacturing continued to grow in May as the PMI registered 59.7%, a decrease of 0.7 percentage point when compared to April's reading of 60.4%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI in excess of 42%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the thirteenth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the tenth consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (58.9%) corresponds to a 5.7% increase in real gross domestic product (GDP). In addition, if the PMI for May (59.7%) is annualized, it corresponds to a 6% increase in real GDP annually."

Month PMI   Month PMI

May 2010

59.7

 

Nov 2009

53.7

Apr 2010

60.4

 

Oct 2009

55.2

Mar 2010

59.6

 

Sep 2009

52.4

Feb 2010

56.5

 

Aug 2009

52.8

Jan 2010

58.4

 

Jul 2009

49.1

Dec 2009

54.9

 

Jun 2009

45.3

Average for 12 months – 54.8

High – 60.4

Low – 45.3

New orders

ISM's New Orders Index registered 65.7% in May, which is the same rate of growth reported for the preceding month. This is the eleventh consecutive month of growth in the New Orders Index. A New Orders Index above 50.2%, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 15 industries reporting growth in new orders in May— listed in order — are: Wood Products; Electrical Equipment, Appliances and Components; Plastics and Rubber Products; Fabricated Metal Products; Miscellaneous Manufacturing; Paper Products; Primary Metals; Furniture and Related Products; Transportation Equipment; Computer and Electronic Products; Printing and Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Machinery; and Food, Beverage and Tobacco Products. The only industry reporting a decrease in new orders in May is Petroleum and Coal Products.

New
Orders
%
Better
%
Same
%
Worse

Net

Index

May 2010

50

38

12

+38

65.7

Apr 2010

52

40

8

+44

65.7

Mar 2010

41

48

11

+30

61.5

Feb 2010

36

49

15

+21

59.5

Production

ISM's Production Index registered 66.6% in May, which is a decrease of 0.3 percentage point from the April reading of 66.9%. An index above 51%, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the twelfth consecutive month the Production Index has registered above 50%.

The 15 industries reporting growth in production during the month of May — listed in order — are: Wood Products; Paper Products; Printing and Related Support Activities; Plastics and Rubber Products; Electrical Equipment, Appliances and Components; Fabricated Metal Products; Transportation Equipment; Computer and Electronic Products; Apparel, Leather and Allied Products; Primary Metals; Furniture and Related Products; Miscellaneous Manufacturing; Chemical Products; Nonmetallic Mineral Products; and Machinery. The two industries reporting a decrease in production in May are: Petroleum and Coal Products; and Food, Beverage and Tobacco Products.


Production
%
Better
%
Same
%
Worse

Net

Index

May 2010

51

37

12

+39

66.6

Apr 2010

49

44

7

+42

66.9

Mar 2010

36

53

11

+25

61.1

Feb 2010

32

54

14

+18

58.4

Employment

ISM's Employment Index registered 59.8% in May, which is 1.3 percentage points higher than the 58.5% reported in April. This is the sixth consecutive month of growth in manufacturing employment. An Employment Index above 49.8%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Twelve of the 18 manufacturing industries reported growth in employment in May in the following order: Petroleum and Coal Products; Paper Products; Transportation Equipment; Fabricated Metal Products; Printing and Related Support Activities; Machinery; Computer and Electronic Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances and Components; Miscellaneous Manufacturing; Food, Beverage and Tobacco Products; and Chemical Products. The two industries reporting a decrease in employment during May are: Plastics and Rubber Products and Primary Metals.


Employment
%
Higher
%
Same
%
Lower

Net

Index

May 2010

28

66

6

+22

59.8

Apr 2010

26

68

6

+20

58.5

Mar 2010

21

69

10

+11

55.1

Feb 2010

22

68

10

+12

56.1

Supplier deliveries

The delivery performance of suppliers to manufacturing organizations was slower in May as the Supplier Deliveries Index registered 61%, which is 0.3 percentage point lower than the 61.3% registered in April. This is the twelfth consecutive month the Supplier Deliveries Index has been above 50%. A reading above 50% indicates slower deliveries.

The 12 industries reporting slower supplier deliveries in May — listed in order — are: Plastics and Rubber Products; Paper Products; Chemical Products; Electrical Equipment, Appliances and Components; Printing and Related Support Activities; Transportation Equipment; Miscellaneous Manufacturing; Machinery; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; and Computer and Electronic Products. The three industries reporting faster deliveries in May are: Petroleum and Coal Products; Apparel, Leather and Allied Products; and Food, Beverage and Tobacco Products.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index

May 2010

29

66

5

+24

61.0

Apr 2010

22

76

2

+20

61.3

Mar 2010

27

73

0

+27

64.9

Feb 2010

23

72

5

+18

61.1

Inventories

Manufacturers' inventories contracted in May for the second consecutive month as the Inventories Index registered 45.6%. The index is 3.8 percentage points lower than the April reading of 49.4%. An Inventories Index greater than 42.6%, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The six industries reporting higher inventories in May — listed in order — are: Apparel, Leather and Allied Products; Furniture and Related Products; Computer and Electronic Products; Transportation Equipment; Food, Beverage and Tobacco Products; and Paper Products. The eight industries reporting decreases in inventories in May — listed in order — are: Plastics and Rubber Products; Printing and Related Support Activities; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances and Components; and Machinery.


Inventories
%
Higher
%
Same
%
Lower

Net

Index

May 2010

13

66

21

-8

45.6

Apr 2010

20

61

19

+1

49.4

Mar 2010

26

61

13

+13

55.3

Feb 2010

17

64

19

-2

47.3

Customers' inventories*

The ISM Customers' Inventories Index registered 32% in May, 1 percentage point lower than in April when the index registered 33%, and the fourteenth consecutive month the Customers' Inventories Index has been below 50%. The index indicates that respondents believe their customers' inventories are too low at this time.

Food, Beverage and Tobacco Products is the only industry reporting customers' inventories as being too high during May. The 14 industries reporting customers' inventories as too low during May — listed in order — are: Nonmetallic Mineral Products; Petroleum and Coal Products; Wood Products; Electrical Equipment, Appliances and Components; Fabricated Metal Products; Plastics and Rubber Products; Apparel, Leather and Allied Products; Paper Products; Machinery; Printing and Related Support Activities; Transportation Equipment; Chemical Products; Primary Metals; and Computer and Electronic Products.

Customers'
Inventories
%
Reporting
%Too
High
%About
Right
%Too
Low

Net

Index

May 2010

69

5

54

41

-36

32.0

Apr 2010

72

9

48

43

-34

33.0

Mar 2010

75

11

56

33

-22

39.0

Feb 2010

71

7

60

33

-26

37.0

Prices*

The ISM Prices Index registered 77.5% in May, 0.5 percentage point lower than the 78% reported in April. This is the eleventh consecutive month in which the Prices Index has registered above 50%. While 60% of respondents reported paying higher prices and 5% reported paying lower prices, 35% of supply executives reported paying the same prices as in April. A Prices Index above 49.3%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

The 17 industries reporting paying increased prices during the month of May — listed in order — are: Wood Products; Plastics and Rubber Products; Furniture and Related Products; Paper Products; Miscellaneous Manufacturing; Chemical Products; Printing and Related Support Activities; Fabricated Metal Products; Transportation Equipment; Textile Mills; Apparel, Leather and Allied Products; Primary Metals; Food, Beverage and Tobacco Products; Electrical Equipment, Appliances and Components; Machinery; Nonmetallic Mineral Products; and Computer and Electronic Products. There were no industry reports of paying lower prices on average during May.


Prices
%
Higher
%
Same
%
Lower

Net

Index

May 2010

60

35

5

+55

77.5

Apr 2010

60

36

4

+56

78.0

Mar 2010

53

44

3

+50

75.0

Feb 2010

39

56

5

+34

67.0

Backlog of orders*

ISM's Backlog of Orders Index registered 59.5% in May, 2 percentage points higher than the 57.5% reported in April. Of the 85% of respondents who reported their backlog of orders, 30% reported greater backlogs, 11% reported smaller backlogs, and 59% reported no change from April.

The seven industries reporting increased order backlogs in May — listed in order — are: Electrical Equipment, Appliances and Components; Fabricated Metal Products; Paper Products; Transportation Equipment; Printing and Related Support Activities; Plastics and Rubber Products; and Food, Beverage and Tobacco Products. The five industries reporting decreases in order backlogs during May are: Miscellaneous Manufacturing; Chemical Products; Computer and Electronic Products; Primary Metals; and Nonmetallic Mineral Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index

May 2010

85

30

59

11

+19

59.5

Apr 2010

82

31

53

16

+15

57.5

Mar 2010

84

30

56

14

+16

58.0

Feb 2010

86

33

56

11

+22

61.0

New export orders*

ISM's New Export Orders Index registered 62% in May, 1 percentage point higher than the 61% reported in April. This is the eleventh consecutive month of growth in the New Export Orders Index.

The nine industries reporting growth in new export orders in May — listed in order — are: Apparel, Leather and Allied Products; Machinery; Fabricated Metal Products; Chemical Products; Electrical Equipment, Appliances and Components; Paper Products; Transportation Equipment; Miscellaneous Manufacturing; and Food, Beverage and Tobacco Products. The only industry reporting a decrease in export orders during May is Plastics and Rubber Products.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index

May 2010

78

28

68

4

+24

62.0

Apr 2010

79

23

76

1

+22

61.0

Mar 2010

75

30

63

7

+23

61.5

Feb 2010

79

17

79

4

+13

56.5

Imports*

Imports of materials by manufacturers expanded in May as the Imports Index registered 56.5%, 1.5 percentage points lower than the 58% reported in April. This is the ninth consecutive month of growth in imports.

The seven industries reporting growth in imports during the month of May — listed in order — are: Food, Beverage and Tobacco Products; Electrical Equipment, Appliances and Components; Fabricated Metal Products; Transportation Equipment; Machinery; Chemical Products; and Miscellaneous Manufacturing. The only industry reporting a decrease in imports during May is Computer and Electronic Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index

May 2010

82

17

79

4

+13

56.5

Apr 2010

83

23

70

7

+16

58.0

Mar 2010

79

21

72

7

+14

57.0

Feb 2010

81

18

76

6

+12

56.0

* 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 1 day to 106 days. Average lead time for Production Materials decreased 2 days to 48 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 1 day to 23 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days

May 2010

32

8

9

15

26

10

106

Apr 2010

32

5

10

17

26

10

107

Mar 2010

26

9

13

14

25

13

116

Feb 2010

27

6

13

15

26

13

118

 


Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days

May 2010

22

41

21

10

5

1

48

Apr 2010

20

48

18

8

3

3

50

Mar 2010

26

40

20

10

2

2

45

Feb 2010

22

42

21

8

5

2

50

 


MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days

May 2010

51

36

10

2

1

0

23

Apr 2010

50

38

8

4

0

0

22

Mar 2010

49

39

8

4

0

0

23

Feb 2010

48

36

13

3

0

0

24

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