ISM August 2008 Report
Economic activity in the manufacturing sector failed to grow in August, while the overall economy grew for the 82nd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
“The lower oil prices and stronger dollar are good news.”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 PMI indicates a slight decline in manufacturing during August. This continues the 2008 trend toward negligible growth or contraction each month, but ultimately results in very little overall change in the sector. 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.”
PERFORMANCE BY INDUSTRY
The five industries reporting growth in August — listed in order — are: Paper Products; Computer & Electronic Products; Miscellaneous Manufacturing; Apparel, Leather & Allied Products; and Chemical Products. The industries reporting contraction in August are: Wood Products; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Furniture & Related Products; Machinery; and Primary Metals.
WHAT RESPONDENTS ARE SAYING …
- “Business is picking up and continues to improve for projects to be constructed in third and fourth quarters 2008.” (Electrical Equipment, Appliances & Components)
- “The lower oil prices and stronger dollar are good news.” (Fabricated Metal Products)
- “We are contracting our manufacturing skills to companies involved in wind power, coal mining and other energy fields in order to ride the recessionary wave in the rust belt.” (Machinery)
- “Material prices continue to rise; however, selling prices of our products have risen as well.” (Paper Products)
- “Prices remain predictable … they keep going up.” (Food, Beverage & Tobacco Products)
| MANUFACTURING AT A GLANCEAUGUST 2008 | ||||||||||||
| Index | Series Index Aug. | Series Index July | Percentage Point Change | Direction | Rate of Change | Trend(a) (Months) | ||||||
| PMI | 49.9 | 50.0 | -0.1 | Contracting | From Unchanged | 1 | ||||||
| New Orders | 48.3 | 45.0 | +3.3 | Contracting | Slower | 9 | ||||||
| Production | 52.1 | 52.9 | -0.8 | Growing | Slower | 4 | ||||||
| Employment | 49.7 | 51.9 | -2.2 | Contracting | From Growing | 1 | ||||||
| Supplier Deliveries | 50.3 | 55.1 | -4.8 | Slowing | Slower | 14 | ||||||
| Inventories | 49.3 | 45.0 | +4.3 | Contracting | Slower | 2 | ||||||
| Customers’ Inventories | 54.5 | 47.0 | +7.5 | Too High | From Too Low | 1 | ||||||
| Prices | 77.0 | 88.5 | -11.5 | Increasing | Slower | 20 | ||||||
| Backlog of Orders | 43.5 | 43.0 | +0.5 | Contracting | Slower | 4 | ||||||
| Exports | 57.0 | 54.0 | +3.0 | Growing | Faster | 69 | ||||||
| Imports | 48.5 | 46.5 | +2.0 | Contracting | Slower | 7 | ||||||
| OVERALL ECONOMY Manufacturing Sector | Growing | Slower | 82 | |||||||||
| Contracting | From Unchanged | 1 |
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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
Acrylics; Aluminum (7); Aluminum Extrusions (6); Caustic Soda (6); Chemicals (4); Corrugated Containers (4); Diesel Fuel(b) (6); Freight (4); Fuel Surcharges (6); Petroleum Based Products (4); Petrochemicals; Plastics (3); Plastic Resins; Polyethylene; Polyethylene — High Density; Polypropylene Resins; PVC; Steel (8); and Sulfuric Acid (2).
Commodities Down in Price
Copper; Corn; Diesel Fuel(b); Fuel Oil; Natural Gas; and Soybean Oil.
Commodities in Short Supply
Caustic Soda (6) is the only commodity reported in short supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.
(b) Reported as both up and down in price
AUGUST 2008 MANUFACTURING INDEX SUMMARIES
PMI
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 economyindicates 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.”
THE LAST 12 MONTHS
| Month | PMI | Month | PMI | ||||||||||||||||||||||||||||||||||||||||
| Aug 2008 | 49.9 | Feb 2008 | 48.3 | ||||||||||||||||||||||||||||||||||||||||
| Jul 2008 | 50.0 | Jan 2008 | 50.7 | ||||||||||||||||||||||||||||||||||||||||
| Jun 2008 | 50.2 | Dec 2007 | 48.4 | ||||||||||||||||||||||||||||||||||||||||
| May 2008 | 49.6 | Nov 2007 | 50.0 | ||||||||||||||||||||||||||||||||||||||||
| Apr 2008 | 48.6 | Oct 2007 | 50.4 | ||||||||||||||||||||||||||||||||||||||||
| Mar 2008 | 48.6 | Sep 2007 | 50.5 | ||||||||||||||||||||||||||||||||||||||||
| Average for 12 months – 49.6High – 50.7Low – 48.3 |
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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.
| New Orders | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Aug 2008 | 23 | 48 | 29 | -6 | 48.3 | |||||||||||||||||||||
| Jul 2008 | 18 | 54 | 28 | -10 | 45.0 | |||||||||||||||||||||
| Jun 2008 | 29 | 46 | 25 | +4 | 49.6 | |||||||||||||||||||||
| May 2008 | 25 | 52 | 23 | +2 | 49.7 |
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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.
| Production | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Aug 2008 | 21 | 61 | 18 | +3 | 52.1 | |||||||||||||||||||||
| Jul 2008 | 21 | 62 | 17 | +4 | 52.9 | |||||||||||||||||||||
| Jun 2008 | 25 | 54 | 21 | +4 | 51.5 | |||||||||||||||||||||
| May 2008 | 24 | 59 | 17 | +7 | 51.2 |
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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.
| Employment | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Aug 2008 | 17 | 63 | 20 | -3 | 49.7 | |||||||||||||||||||||
| Jul 2008 | 19 | 65 | 16 | +3 | 51.9 | |||||||||||||||||||||
| Jun 2008 | 11 | 69 | 20 | -9 | 43.7 | |||||||||||||||||||||
| May 2008 | 17 | 63 | 20 | -3 | 45.5 |
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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.
| Supplier Deliveries | %Slower | %Same | %Faster | Net | Index | |||||||||||||||||||||
| Aug 2008 | 9 | 84 | 7 | +2 | 50.3 | |||||||||||||||||||||
| Jul 2008 | 15 | 82 | 3 | +12 | 55.1 | |||||||||||||||||||||
| Jun 2008 | 16 | 79 | 5 | +11 | 55.1 | |||||||||||||||||||||
| May 2008 | 14 | 81 | 5 | +9 | 53.7 |
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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.
| Inventories | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Aug 2008 | 18 | 65 | 17 | +1 | 49.3 | |||||||||||||||||||||
| Jul 2008 | 12 | 64 | 24 | -12 | 45.0 | |||||||||||||||||||||
| Jun 2008 | 21 | 58 | 21 | 0 | 51.2 | |||||||||||||||||||||
| May 2008 | 19 | 58 | 23 | -4 | 48.0 |
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Customers’ Inventories(c)
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.
| Customers’ Inventories | % Reporting | %Too High | %About Right | %Too Low | Net | Index | ||||||||||||
| Aug 2008 | 66 | 22 | 65 | 13 | +9 | 54.5 | ||||||||||||
| Jul 2008 | 74 | 17 | 60 | 23 | -6 | 47.0 | ||||||||||||
| Jun 2008 | 72 | 25 | 60 | 15 | +10 | 55.0 | ||||||||||||
| May 2008 | 67 | 14 | 66 | 20 | -6 | 47.0 |
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Prices(c)
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.
| Prices | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Aug 2008 | 60 | 34 | 6 | +54 | 77.0 | |||||||||||||||||||||
| Jul 2008 | 80 | 17 | 3 | +77 | 88.5 | |||||||||||||||||||||
| Jun 2008 | 84 | 15 | 1 | +83 | 91.5 | |||||||||||||||||||||
| May 2008 | 78 | 18 | 4 | +74 | 87.0 |
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Backlog of Orders(c)
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.
| Backlog of Orders | % Reporting | %Greater | %Same | %Less | Net | Index | ||||||||||||
| Aug 2008 | 87 | 15 | 57 | 28 | -13 | 43.5 | ||||||||||||
| Jul 2008 | 85 | 15 | 56 | 29 | -14 | 43.0 | ||||||||||||
| Jun 2008 | 86 | 19 | 57 | 24 | -5 | 47.5 | ||||||||||||
| May 2008 | 87 | 18 | 56 | 26 | -8 | 46.0 |
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New Export Orders(c)
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 10 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.
| New Export Orders | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Aug 2008 | 79 | 23 | 68 | 9 | +14 | 57.0 | ||||||||||||
| Jul 2008 | 75 | 17 | 74 | 9 | +8 | 54.0 | ||||||||||||
| Jun 2008 | 79 | 22 | 73 | 5 | +17 | 58.5 | ||||||||||||
| May 2008 | 78 | 26 | 67 | 7 | +19 | 59.5 |
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Imports(c)
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.
| Imports | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Aug 2008 | 82 | 9 | 79 | 12 | -3 | 48.5 | ||||||||||||
| Jul 2008 | 80 | 8 | 77 | 15 | -7 | 46.5 | ||||||||||||
| Jun 2008 | 82 | 9 | 74 | 17 | -8 | 46.0 | ||||||||||||
| May 2008 | 82 | 12 | 75 | 13 | -1 | 49.5 |
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(c) 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 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.
| Percent Reporting | |||||||||||||||||||||
| Capital Expenditures | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Aug 2008 | 25 | 6 | 16 | 16 | 24 | 13 | 117 | ||||||||||||||
| Jul 2008 | 27 | 6 | 9 | 19 | 27 | 12 | 117 | ||||||||||||||
| Jun 2008 | 23 | 7 | 11 | 20 | 25 | 14 | 123 | ||||||||||||||
| May 2008 | 22 | 12 | 10 | 19 | 25 | 12 | 116 |
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| Production Materials | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Aug 2008 | 23 | 35 | 27 | 6 | 6 | 3 | 55 | ||||||||||||||
| Jul 2008 | 21 | 42 | 25 | 6 | 4 | 2 | 48 | ||||||||||||||
| Jun 2008 | 18 | 41 | 24 | 9 | 6 | 2 | 54 | ||||||||||||||
| May 2008 | 22 | 37 | 25 | 10 | 4 | 2 | 51 |
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| MRO Supplies | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Aug 2008 | 53 | 34 | 9 | 4 | 0 | 0 | 22 | ||||||||||||||
| Jul 2008 | 56 | 32 | 10 | 2 | 0 | 0 | 20 | ||||||||||||||
| Jun 2008 | 50 | 38 | 8 | 3 | 0 | 1 | 25 | ||||||||||||||
| May 2008 | 51 | 35 | 8 | 4 | 1 | 1 | 27 |
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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 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™. 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 September 2008 data will be released at 10:00 a.m. (ET) on Wednesday, October 1, 2008.