ISM April 2008 Report
Economic activity in the manufacturing sector failed to grow in April, while the overall economy grew for the 78th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
“Continued bio-fuel/spec investor driven inflation of commodities is stifling!”Tweet this
The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The manufacturing sector failed to grow in April as the PMI fell below 50 percent for the third consecutive month. Manufacturers are in a situation where both new orders and production are slowly declining, but prices continue to rise at highly inflationary rates. Bright spots this month are the growth in the Backlog of Orders Index after six consecutive months of decline, continued strength in new export orders and a reduction in customers’ inventories.”
PERFORMANCE BY INDUSTRY
The seven industries reporting growth in April — listed in order — are: Computer & Electronic Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Paper Products; Transportation Equipment; Machinery; Furniture & Related Products; and Chemical Products. The industries reporting contraction in April are: Wood Products; Textile Mills; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Nonmetallic Mineral Products.
WHAT RESPONDENTS ARE SAYING …
- “The decline in the value of the dollar is dramatically affecting our material prices because we purchase over half of our material requirements from overseas.” (Transportation Equipment)
- “Higher energy rates, unfavorable exchange rates, high levels of inflation in Asia and a drop in demand are challenging our business and supply chain.” (Nonmetallic Mineral Products)
- “Continued bio-fuel/spec investor driven inflation of commodities is stifling!” (Food, Beverage & Tobacco Products)
- “Still strong in spite of general business slowdown.” (Primary Metals)
- “Oil, oil, oil, energy, energy, energy, metals, metals, metals.” (Fabricated Metal Products)
| MANUFACTURING AT A GLANCEAPRIL 2008 | ||||||||||||
| Index | Series Index April | Series Index March | Percentage Point Change | Direction | Rate of Change | Trend(a) (Months) | ||||||
| PMI | 48.6 | 48.6 | 0.0 | Contracting | Same | 3 | ||||||
| New Orders | 46.5 | 46.5 | 0.0 | Contracting | Same | 5 | ||||||
| Production | 49.1 | 48.7 | +0.4 | Contracting | Slower | 2 | ||||||
| Employment | 45.4 | 49.2 | -3.8 | Contracting | Faster | 6 | ||||||
| Supplier Deliveries | 54.0 | 53.6 | +0.4 | Slowing | Faster | 10 | ||||||
| Inventories | 48.1 | 44.9 | +3.2 | Contracting | Slower | 24 | ||||||
| Customers’ Inventories | 45.0 | 51.0 | -6.0 | Too Low | From Too High | 1 | ||||||
| Prices | 84.5 | 83.5 | +1.0 | Increasing | Faster | 16 | ||||||
| Backlog of Orders | 51.5 | 47.5 | +4.0 | Growing | From Contracting | 1 | ||||||
| Exports | 57.5 | 56.5 | +1.0 | Growing | Faster | 65 | ||||||
| Imports | 48.0 | 45.0 | +3.0 | Contracting | Slower | 3 | ||||||
| OVERALL ECONOMY Manufacturing Sector | Growing | Same | 78 | |||||||||
| Contracting | Same | 3 |
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(a) Number of months moving in current direction
COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY
Commodities Up in Price
Aluminum (3); Aluminum Extrusions (2); Caustic Soda (2); Copper (3); Copper Laden Products (2); Corn; Corn Syrup; Diesel Fuel (2); Fuel Surcharges (2); Gasoline; High Density Polyethylene; Natural Gas (6); Polypropylene; Propane; Resins; Solvents; Soybean Oil; Stainless Steel — Sheet; Steel (4); Steel — Cold Rolled; Sulfuric Acid (6); and Transportation Costs.
Commodities Down in Price
Methanol is the only commodity reported down in price.
Commodities in Short Supply
Caustic Soda (2) and Steel.
Note: The number of consecutive months the commodity is listed is indicated after each item.
APRIL 2008 MANUFACTURING INDEX SUMMARIES
PMI
Manufacturing failed to grow for the third consecutive month in April as the PMI registered 48.6 percent, the same as in March. 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 at this time. Ore stated, “The past relationship between the PMI and the overall economyindicates that the average PMI for January through April (49.1 percent) corresponds to a 2.5 percent increase in real gross domestic product (GDP). In addition, if the PMI for April (48.6 percent) is annualized, it corresponds to a 2.4 percent increase in real GDP annually.”
THE LAST 12 MONTHS
| Month | PMI | Month | PMI | ||||||||||||||||||||||||||||||||||||||||
| Apr 2008 | 48.6 | Oct 2007 | 50.4 | ||||||||||||||||||||||||||||||||||||||||
| Mar 2008 | 48.6 | Sep 2007 | 50.5 | ||||||||||||||||||||||||||||||||||||||||
| Feb 2008 | 48.3 | Aug 2007 | 51.2 | ||||||||||||||||||||||||||||||||||||||||
| Jan 2008 | 50.7 | Jul 2007 | 52.3 | ||||||||||||||||||||||||||||||||||||||||
| Dec 2007 | 48.4 | Jun 2007 | 53.4 | ||||||||||||||||||||||||||||||||||||||||
| Nov 2007 | 50.0 | May 2007 | 52.8 | ||||||||||||||||||||||||||||||||||||||||
| Average for 12 months – 50.4High – 53.4Low – 48.3 |
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New Orders
ISM’s New Orders Index registered 46.5 percent in April, the same as in March. 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).
Six industries reported increases during April: Miscellaneous Manufacturing; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Paper Products; Transportation Equipment; and Chemical Products. The industries that reported decreases during April are: Apparel, Leather & Allied Products; Textile Mills; Petroleum & Coal Products; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.
| New Orders | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Apr 2008 | 26 | 48 | 26 | 0 | 46.5 | |||||||||||||||||||||
| Mar 2008 | 25 | 50 | 25 | 0 | 46.5 | |||||||||||||||||||||
| Feb 2008 | 27 | 48 | 25 | +2 | 49.1 | |||||||||||||||||||||
| Jan 2008 | 25 | 43 | 32 | -7 | 49.5 |
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Production
ISM’s Production Index increased to 49.1 percent in April, an increase of 0.4 percentage point from the 48.7 percent reported in March. 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 April, eight registered growth: Apparel, Leather & Allied Products; Computer & Electronic Products; Miscellaneous Manufacturing; Machinery; Chemical Products; Furniture & Related Products; Paper Products; and Transportation Equipment. The industries that reported decreased production during April are: Textile Mills; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products.
| Production | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Apr 2008 | 28 | 50 | 22 | +6 | 49.1 | |||||||||||||||||||||
| Mar 2008 | 20 | 60 | 20 | 0 | 48.7 | |||||||||||||||||||||
| Feb 2008 | 25 | 52 | 23 | +2 | 50.7 | |||||||||||||||||||||
| Jan 2008 | 26 | 51 | 23 | +3 | 55.2 |
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Employment
ISM’s Employment Index registered 45.4 percent in April, which is a decrease of 3.8 percentage points when compared to the 49.2 percent reported in March. 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 five industries reporting growth in employment during April are: Miscellaneous Manufacturing; Furniture & Related Products; Transportation Equipment; Machinery; and Computer & Electronic Products. The industries that reported decreases in employment during April are: Wood Products; Textile Mills; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Chemical Products; and Nonmetallic Mineral Products.
| Employment | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Apr 2008 | 12 | 72 | 16 | -4 | 45.4 | |||||||||||||||||||||
| Mar 2008 | 15 | 70 | 15 | 0 | 49.2 | |||||||||||||||||||||
| Feb 2008 | 10 | 74 | 16 | -6 | 46.0 | |||||||||||||||||||||
| Jan 2008 | 11 | 68 | 21 | -10 | 47.1 |
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Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations continued to slow in April as the Supplier Deliveries Index increased 0.4 percentage point to 54 percent from the 53.6 percent registered in March. A reading above 50 percent indicates slower deliveries.
The five industries reporting slower supplier deliveries in April are: Petroleum & Coal Products; Fabricated Metal Products; Computer & Electronic Products; Machinery; and Transportation Equipment. The only industry reporting faster deliveries during April is Nonmetallic Mineral Products.
| Supplier Deliveries | %Slower | %Same | %Faster | Net | Index | |||||||||||||||||||||
| Apr 2008 | 10 | 88 | 2 | +8 | 54.0 | |||||||||||||||||||||
| Mar 2008 | 11 | 85 | 4 | +7 | 53.6 | |||||||||||||||||||||
| Feb 2008 | 6 | 87 | 7 | -1 | 50.1 | |||||||||||||||||||||
| Jan 2008 | 6 | 91 | 3 | +3 | 52.8 |
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Inventories
Manufacturers’ inventories contracted in April as the Inventories Index registered 48.1 percent, which is 3.2 percentage points higher than the 44.9 percent reported in March. This is the 24th consecutive month of inventory liquidation. 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 five industries reporting higher inventories in April are: Printing & Related Support Activities; Primary Metals; Computer & Electronic Products; Fabricated Metal Products; and Chemical Products. The industries that reported decreases during April are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Wood Products; Petroleum & Coal Products; Furniture & Related Products; Miscellaneous Manufacturing; Machinery; and Transportation Equipment.
| Inventories | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Apr 2008 | 16 | 66 | 18 | -2 | 48.1 | |||||||||||||||||||||
| Mar 2008 | 15 | 63 | 22 | -7 | 44.9 | |||||||||||||||||||||
| Feb 2008 | 13 | 68 | 19 | -6 | 45.4 | |||||||||||||||||||||
| Jan 2008 | 17 | 64 | 19 | -2 | 49.1 |
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Customers’ Inventories(b)
The ISM Customers’ Inventories Index registered 45 percent in April, a decrease of 6 percentage points when compared to March’s reading of 51 percent. The index indicates that respondents believe their customers’ inventories are too low at this time.
Three industries reported higher customers’ inventories during April: Textile Mills; Plastics & Rubber Products; and Fabricated Metal Products. The industries that reported lower customers’ inventories during April are: Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Transportation Equipment; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; Machinery; and Furniture & Related Products.
| Customers’ Inventories | % Reporting | %Too High | %About Right | %Too Low | Net | Index | ||||||||||||
| Apr 2008 | 72 | 12 | 66 | 22 | -10 | 45.0 | ||||||||||||
| Mar 2008 | 78 | 16 | 70 | 14 | +2 | 51.0 | ||||||||||||
| Feb 2008 | 70 | 13 | 72 | 15 | -2 | 49.0 | ||||||||||||
| Jan 2008 | 70 | 13 | 73 | 14 | -1 | 49.5 |
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Prices(b)
The ISM Prices Index registered 84.5 percent in April, indicating manufacturers are paying higher prices on average when compared to March. This is the highest reading for the index since it registered 86 percent in May 2004. While 71 percent of respondents reported paying higher prices and 2 percent reported paying lower prices, 27 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 April, 16 industries reported paying higher prices: Wood Products; Plastics & Rubber Products; Chemical Products; Machinery; Miscellaneous Manufacturing; Fabricated Metal Products; Furniture & Related Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Primary Metals; Transportation Equipment; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Paper Products.
| Prices | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Apr 2008 | 71 | 27 | 2 | +69 | 84.5 | |||||||||||||||||||||
| Mar 2008 | 69 | 29 | 2 | +67 | 83.5 | |||||||||||||||||||||
| Feb 2008 | 55 | 41 | 4 | +51 | 75.5 | |||||||||||||||||||||
| Jan 2008 | 55 | 42 | 3 | +52 | 76.0 |
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Backlog of Orders(b)
ISM’s Backlog of Orders Index registered 51.5 percent in April, 4 percentage points higher than the 47.5 percent reported in March. This is the first month of growth following six consecutive months of contraction in the Backlog of Orders Index. Of the 85 percent of respondents who reported their backlog of orders, 23 percent reported greater backlogs, 20 percent reported smaller backlogs, and 57 percent reported no change from March.
The eight industries reporting an increase in order backlogs in April are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Miscellaneous Manufacturing; Paper Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Computer & Electronic Products. The industries that reported decreases in order backlogs during April are: Wood Products; Nonmetallic Mineral Products; Fabricated Metal Products; Machinery; and Chemical Products.
| Backlog of Orders | % Reporting | %Greater | %Same | %Less | Net | Index | ||||||||||||
| Apr 2008 | 85 | 23 | 57 | 20 | +3 | 51.5 | ||||||||||||
| Mar 2008 | 85 | 18 | 59 | 23 | -5 | 47.5 | ||||||||||||
| Feb 2008 | 87 | 22 | 46 | 32 | -10 | 45.0 | ||||||||||||
| Jan 2008 | 85 | 19 | 50 | 31 | -12 | 44.0 |
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New Export Orders(b)
ISM’s New Export Orders Index registered 57.5 percent in April, an increase of 1 percentage point when compared to March’s index of 56.5 percent. This is the 65th consecutive month of growth in export orders.
The 11 industries reporting growth in new export orders in April are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Transportation Equipment; and Fabricated Metal Products. The industries that reported decreases in new export orders during April are: Furniture & Related Products and Chemical Products.
| New Export Orders | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Apr 2008 | 79 | 23 | 69 | 8 | +15 | 57.5 | ||||||||||||
| Mar 2008 | 76 | 22 | 69 | 9 | +13 | 56.5 | ||||||||||||
| Feb 2008 | 75 | 22 | 68 | 10 | +12 | 56.0 | ||||||||||||
| Jan 2008 | 78 | 24 | 69 | 7 | +17 | 58.5 |
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Imports(b)
Imports of materials by manufacturers contracted during April as the Imports Index registered 48 percent, 3 percentage points higher than the 45 percent reported in March.
The five industries reporting growth in import activity for April are: Printing & Related Support Activities; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Transportation Equipment; and Machinery. The industries that reported decreases in imports during April are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Petroleum & Coal Products; Paper Products; Plastics & Rubber Products; Computer & Electronic Products; and Chemical Products.
| Imports | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Apr 2008 | 85 | 11 | 74 | 15 | -4 | 48.0 | ||||||||||||
| Mar 2008 | 83 | 9 | 72 | 19 | -10 | 45.0 | ||||||||||||
| Feb 2008 | 83 | 13 | 69 | 18 | -5 | 47.5 | ||||||||||||
| Jan 2008 | 82 | 16 | 73 | 11 | +5 | 52.5 |
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(b) 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 6 days to 112 days. Average lead-time for Production Materials increased 3 day to 49 days. Average lead-time for Maintenance, Repair and Operating (MRO) Supplies increased 5 days to 26 days.
| Percent Reporting | |||||||||||||||||||||
| Capital Expenditures | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Apr 2008 | 28 | 6 | 13 | 18 | 23 | 12 | 112 | ||||||||||||||
| Mar 2008 | 24 | 6 | 13 | 19 | 26 | 12 | 118 | ||||||||||||||
| Feb 2008 | 21 | 10 | 10 | 21 | 26 | 12 | 119 | ||||||||||||||
| Jan 2008 | 22 | 9 | 12 | 17 | 27 | 13 | 122 |
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| Production Materials | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Apr 2008 | 21 | 38 | 27 | 9 | 3 | 2 | 49 | ||||||||||||||
| Mar 2008 | 23 | 35 | 30 | 8 | 3 | 1 | 46 | ||||||||||||||
| Feb 2008 | 20 | 40 | 28 | 7 | 4 | 1 | 47 | ||||||||||||||
| Jan 2008 | 23 | 36 | 27 | 8 | 4 | 2 | 50 |
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| MRO Supplies | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Apr 2008 | 50 | 34 | 11 | 3 | 2 | 0 | 26 | ||||||||||||||
| Mar 2008 | 56 | 32 | 9 | 3 | 0 | 0 | 21 | ||||||||||||||
| Feb 2008 | 55 | 31 | 10 | 4 | 0 | 0 | 22 | ||||||||||||||
| Jan 2008 | 50 | 34 | 10 | 5 | 1 | 0 | 25 |
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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 ManufacturingISM 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 41.1 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.1 percent, it is generally declining. The distance from 50 percent or 41.1 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 leadtime, 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™. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM’s 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 full text version of the ManufacturingISM Report On Business®is posted on ISM’s Web site at www.ism.ws on the first business day of every month after 10:10 a.m. (ET).
The next ManufacturingISM Report On Business® featuring the May 2008 data will be released at 10:00 a.m. (ET) on Monday, June 2, 2008.