Report details changes in U.S. manufacturing new orders, employment, inventories

September 2, 2008

The recently released report for August, Report On Business, by the Institute for Supply Management’s (ISM), reflecting the entire United States, found activity in the manufacturing sector failed to grow in August, while the overall economy grew for the 82nd consecutive month.

Norbert J. Ore, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee said “This month’s report is showing the first signs of lower prices as the Prices Index fell significantly, though it is still at an inflationary level. Export orders picked up additional momentum, and that is important to manufacturers as domestic demand remains soft for most industries.”

The five industries reporting growth in August, listed in order, are: Paper Products; Computer and Electronic Products; Miscellaneous Manufacturing; Apparel, Leather and Allied Products; and Chemical Products.

The industries reporting contraction in August are: Wood Products; Plastics and Rubber Products; Fabricated Metal Products; Transportation Equipment; Furniture and Related Products; Machinery; and Primary Metals.

August 2008 manufacturing index

Manufacturing contracted in August as the PMI registered 49.9 percent, 0.1 percentage point lower than the 50 percent reported in July. 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 41.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates the overall economy is growing and the manufacturing sector is contracting. Ore stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (49.5 percent) corresponds to a 2.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for August (49.9 percent) is annualized, it corresponds to a 2.8 percent increase in real GDP annually.”

New orders

ISM’s New Orders Index registered 48.3 percent in August, 3.3 percentage points higher than the 45 percentage points registered in July. A New Orders Index above 51.6 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

Five industries reported increases during August: Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The industries failing to grow in August are: Wood Products; Fabricated Metal Products; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; and Primary Metals.

Production

ISM’s Production Index decreased to 52.1 percent in August, a decrease of 0.8 percentage point from the 52.9 percent reported in July. An index above 49.9 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

Of the industries reporting in August, four registered growth: Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The industries failing to grow in August are: Printing & Related Support Activities; Wood Products; Furniture & Related Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; and Fabricated Metal Products.

Employment

ISM’s Employment Index registered 49.7 percent in August, which is a decrease of 2.2 percentage points when compared to the 51.9 percent reported in July. An Employment Index above 49.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The seven industries reporting growth in employment during August are: Petroleum & Coal Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products. The industries that reported decreases in employment during August are: Plastics & Rubber Products; Wood Products; Primary Metals; Furniture & Related Products; Fabricated Metal Products; and Transportation Equipment.

Supplier deliveries

The delivery performance of suppliers to manufacturing organizations continued to slow, but at a slower rate in August, as the Supplier Deliveries Index registered 50.3 percent, which is 4.8 percentage points lower than the 55.1 percent registered in July. A reading above 50 percent indicates slower deliveries.

The six industries reporting slower supplier deliveries in August are: Primary Metals; Plastics & Rubber Products; Paper Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Transportation Equipment. The industries reporting faster deliveries in August are: Miscellaneous Manufacturing; Fabricated Metal Products; and Machinery.

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Publication Date: September 2, 2008

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September 2, 2008 The recently released report for August, Report On Business, by the Institute for Supply Management's (ISM), reflecting the entire United States, found activity in the manufacturing sector failed to grow in August, while the overall economy grew for the 82nd consecutive month. Norbert J. Ore, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee said "This month's report is showing the first signs of lower prices as the Prices Index fell significantly, though it is still at an inflationary level. Export orders picked up additional momentum, and that is important to manufacturers as domestic demand remains soft for most industries." The five industries reporting growth in August, listed in order, are: Paper Products; Computer and Electronic Products; Miscellaneous Manufacturing; Apparel, Leather and Allied Products; and Chemical Products. The industries reporting contraction in August are: Wood Products; Plastics and Rubber Products; Fabricated Metal Products; Transportation Equipment; Furniture and Related Products; Machinery; and Primary Metals. August 2008 manufacturing index Manufacturing contracted in August as the PMI registered 49.9 percent, 0.1 percentage point lower than the 50 percent reported in July. 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 41.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates the overall economy is growing and the manufacturing sector is contracting. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (49.5 percent) corresponds to a 2.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for August (49.9 percent) is annualized, it corresponds to a 2.8 percent increase in real GDP annually." New orders ISM's New Orders Index registered 48.3 percent in August, 3.3 percentage points higher than the 45 percentage points registered in July. A New Orders Index above 51.6 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). Five industries reported increases during August: Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The industries failing to grow in August are: Wood Products; Fabricated Metal Products; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; and Primary Metals. Production ISM's Production Index decreased to 52.1 percent in August, a decrease of 0.8 percentage point from the 52.9 percent reported in July. An index above 49.9 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in August, four registered growth: Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The industries failing to grow in August are: Printing & Related Support Activities; Wood Products; Furniture & Related Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; and Fabricated Metal Products. Employment ISM's Employment Index registered 49.7 percent in August, which is a decrease of 2.2 percentage points when compared to the 51.9 percent reported in July. An Employment Index above 49.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The seven industries reporting growth in employment during August are: Petroleum & Coal Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products. The industries that reported decreases in employment during August are: Plastics & Rubber Products; Wood Products; Primary Metals; Furniture & Related Products; Fabricated Metal Products; and Transportation Equipment. Supplier deliveries The delivery performance of suppliers to manufacturing organizations continued to slow, but at a slower rate in August, as the Supplier Deliveries Index registered 50.3 percent, which is 4.8 percentage points lower than the 55.1 percent registered in July. A reading above 50 percent indicates slower deliveries. The six industries reporting slower supplier deliveries in August are: Primary Metals; Plastics & Rubber Products; Paper Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Transportation Equipment. The industries reporting faster deliveries in August are: Miscellaneous Manufacturing; Fabricated Metal Products; and Machinery. Inventories Manufacturers' inventories contracted in August as the Inventories Index registered 49.3 percent, which is 4.3 percentage points higher than the 45 percent reported in July. An Inventories Index greater than 42.4 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 August are: Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery. The industries that reported decreases in August are: Petroleum & Coal Products; Plastics & Rubber Products; Paper Products; Chemical Products; Miscellaneous Manufacturing; and Transportation Equipment. Customers' inventories The ISM Customers' Inventories Index registered 54.5 percent in August, an increase of 7.5 percentage points when compared to July's reading of 47 percent. The index indicates that respondents believe their customers' inventories are too high at this time. Six industries reported higher customers' inventories during August: Furniture & Related Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Chemical Products; Food, Beverage & Tobacco Products; and Machinery. The industries that reported lower customers' inventories during August are: Plastics & Rubber Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Fabricated Metal Products. Prices The ISM Prices Index registered 77 percent in August, indicating manufacturers are paying higher prices on average when compared to July. While 60 percent of respondents reported paying higher prices and 6 percent reported paying lower prices, 34 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In August, 17 industries reported paying higher prices: Textile Mills; Apparel, Leather & Allied Products; Wood Products; Petroleum & Coal Products; Paper Products; Miscellaneous Manufacturing; Chemical Products; Plastics & Rubber Products; Machinery; Fabricated Metal Products; Transportation Equipment; Nonmetallic Mineral Products; Computer & Electronic Products; Printing & Related Support Activities; Furniture & Related Products; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. Primary Metals is the only industry reporting paying lower prices on average in August. Backlog of orders ISM's Backlog of Orders Index registered 43.5 percent in August, 0.5 percentage point higher than the 43 percent reported in July. Of the 87 percent of respondents who reported their backlog of orders, 15 percent reported greater backlogs, 28 percent reported smaller backlogs, and 57 percent reported no change from July. The four industries reporting an increase in order backlogs in August are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The industries that reported decreases in order backlogs during August are: Nonmetallic Mineral Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Primary Metals; Wood Products; Furniture & Related Products; Transportation Equipment; and Chemical Products. New export orders ISM's New Export Orders Index registered 57 percent in August, an increase of 3 percentage points when compared to July's index of 54 percent. This is the 69th consecutive month of growth in the New Export Orders Index. The ten industries reporting growth in new export orders in August are: Apparel, Leather & Allied Products; Paper Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Fabricated Metal Products; and Transportation Equipment. Machinery is the only industry reporting a decrease in new export orders in August. Imports Imports of materials by manufacturers contracted during August as the Imports Index registered 48.5 percent, 2 percentage points higher than the 46.5 percent reported in July. This is the seventh consecutive month of contraction in imports. The six industries reporting growth in import activity for August are: Printing & Related Support Activities; Plastics & Rubber Products; Nonmetallic Mineral Products; Computer & Electronic Products; Transportation Equipment; and Machinery. The industries that reported decreases in imports during August are: Wood Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Chemical Products; and Food, Beverage & Tobacco Products. Buying policy Average commitment lead time for Capital Expenditures remained unchanged at 117 days. Average lead time for Production Materials increased 7 days to 55 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 2 days to 22 days. Source: Institute for Supply Management

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