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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