ISM February 2008 Report
Economic activity in the manufacturing sector failed to grow in February, while the overall economy grew for the 76th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
“Every year the Chinese New Year break has a bigger impact on January and February.”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 during the month as the PMI fell below 50 percent, which indicates weaker performance in February when compared to January. Manufacturers’ order backlogs continue to erode as the New Orders Index remained below 50 percent for the third consecutive month. With the Inventories and Customer Inventories Indexes indicating that manufacturing inventories are at reasonable levels, the major concern is rising prices and falling volume.”
TOP PERFORMING INDUSTRIES
The seven industries reporting growth in February — listed in order — are: Apparel, Leather & Allied Products; Wood Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Primary Metals; Food, Beverage & Tobacco Products; and Transportation Equipment. The industries reporting contraction in February are: Furniture & Related Products; Textile Mills; Nonmetallic Mineral Products; Fabricated Mineral Products; Printing & Related Support Activities; Machinery; and Chemical Products.
WHAT RESPONDENTS ARE SAYING …
- “Every year the Chinese New Year break has a bigger impact on January and February.” (Machinery)
- “Business is good, but there is continued pressure on margins.” (Primary Metals)
- “Industry appears to be recovering.” (Transportation Equipment)
- “Plastic prices still on the rise.” (Food, Beverage & Tobacco Products)
- “Business continues to be sluggish.” (Furniture & Related Products)
| MANUFACTURING AT A GLANCEFEBRUARY 2008 | ||||||||||||
| Index | Series Index Feb. | Series Index Jan. | Percentage Point Change | Direction | Rate of Change | Trend(a) (Months) | ||||||
| PMI | 48.3 | 50.7 | -2.4 | Contracting | From Growing | 1 | ||||||
| New Orders | 49.1 | 49.5 | -0.4 | Contracting | Faster | 3 | ||||||
| Production | 50.7 | 55.2 | -4.5 | Growing | Slower | 2 | ||||||
| Employment | 46.0 | 47.1 | -1.1 | Contracting | Faster | 4 | ||||||
| Supplier Deliveries | 50.1 | 52.8 | -2.7 | Slowing | Slower | 8 | ||||||
| Inventories | 45.4 | 49.1 | -3.7 | Contracting | Faster | 22 | ||||||
| Customers’ Inventories | 49.0 | 49.5 | -0.5 | Too Low | Faster | 2 | ||||||
| Prices | 75.5 | 76.0 | -0.5 | Increasing | Slower | 14 | ||||||
| Backlog of Orders | 45.0 | 44.0 | +1.0 | Contracting | Slower | 5 | ||||||
| Exports | 56.0 | 58.5 | -2.5 | Growing | Slower | 63 | ||||||
| Imports | 47.5 | 52.5 | -5.0 | Contracting | From Growing | 1 | ||||||
| OVERALL ECONOMY | Growing | Slower | 76 | |||||||||
| Manufacturing Sector | Contracting | From Growing | 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
Aluminum; Chemicals (2); Copper; Corn (2); Natural Gas (4); Plastic Resins (2); Polyethylene; Polypropylene; Steel (2); Structural Steel; Sulfur; and Sulfuric Acid (4).
Commodities Down in Price
Methanol is the only commodity reported down in price.
Commodities in Short Supply
No commodities are reported in short supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.
FEBRUARY 2008 MANUFACTURING INDEX SUMMARIES
PMI
Manufacturing failed to grow in February as the PMI registered 48.3 percent, a decrease of 2.4 percentage points when compared to January’s seasonally adjusted reading of 50.7 percent. 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 and February (49.5 percent) corresponds to a 2.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for February (48.3 percent) is annualized, it corresponds to a 2.3 percent increase in real GDP annually.”
THE LAST 12 MONTHS
| Month | PMI | Month | PMI | ||||||||||||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||||||||||
| Oct 2007 | 50.4 | Apr 2007 | 52.8 | ||||||||||||||||||||||||||||||||||||||||
| Sep 2007 | 50.5 | Mar 2007 | 50.7 | ||||||||||||||||||||||||||||||||||||||||
| Average for 12 months – 51.0High – 53.4Low – 48.3 |
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New Orders
ISM’s New Orders Index registered 49.1 percent in February. The index is 0.4 percentage point lower than the seasonally adjusted 49.5 percent reported in January. 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).
Eight industries reported increases during February: Apparel, Leather & Allied Products; Printing & Related Support Activities; Primary Metals; Computer & Electronic Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products. The industries that reported decreases during February are: Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Paper Products; Fabricated Metal Products; Transportation Equipment; and Machinery.
| New Orders | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Feb 2008 | 27 | 48 | 25 | +2 | 49.1 | |||||||||||||||||||||
| Jan 2008 | 25 | 43 | 32 | -7 | 49.5 | |||||||||||||||||||||
| Dec 2007 | 15 | 55 | 30 | -15 | 46.9 | |||||||||||||||||||||
| Nov 2007 | 27 | 46 | 27 | 0 | 52.5 |
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Production
ISM’s Production Index declined to 50.7 percent in February, a decrease of 4.5 percentage points when compared to January’s seasonally adjusted reading of 55.2 percent. 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 February, nine registered growth: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Primary Metals; Wood Products; Paper Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The industries reporting contraction in February are: Nonmetallic Mineral Products; Furniture & Related Products; Textile Mills; Printing & Related Support Activities; Fabricated Metal Products; Machinery; and Chemical Products.
| Production | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Feb 2008 | 25 | 52 | 23 | +2 | 50.7 | |||||||||||||||||||||
| Jan 2008 | 26 | 51 | 23 | +3 | 55.2 | |||||||||||||||||||||
| Dec 2007 | 16 | 58 | 26 | -10 | 48.6 | |||||||||||||||||||||
| Nov 2007 | 23 | 55 | 22 | +1 | 51.3 |
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Employment
ISM’s Employment Index registered 46 percent in February, which is a decrease of 1.1 percentage points when compared to January’s seasonally adjusted reading of 47.1 percent. 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 February are: Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Wood Products; Chemical Products; and Plastics & Rubber Products. The industries reporting contraction in employment in February are: Furniture & Related Products; Textile Mills; Fabricated Metal Products; Printing & Related Support Activities; Transportation Equipment; Machinery; and Nonmetallic Mineral Products.
| Employment | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Feb 2008 | 10 | 74 | 16 | -6 | 46.0 | |||||||||||||||||||||
| Jan 2008 | 11 | 68 | 21 | -10 | 47.1 | |||||||||||||||||||||
| Dec 2007 | 11 | 71 | 18 | -7 | 48.7 | |||||||||||||||||||||
| Nov 2007 | 14 | 67 | 19 | -5 | 48.4 |
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Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations continued to slow in February as the Supplier Deliveries Index decreased 2.7 percentage points to 50.1 percent from the seasonally adjusted 52.8 percent registered in January. A reading above 50 percent indicates slower deliveries.
The two industries reporting slower supplier deliveries in February are: Transportation Equipment and Fabricated Metal Products. The industries reporting faster supplier deliveries in February are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Computer & Electronic Products; Primary Metals; Machinery; Chemical Products; and Food, Beverage & Tobacco Products.
| Supplier Deliveries | %Slower | %Same | %Faster | Net | Index | |||||||||||||||||||||
| Feb 2008 | 6 | 87 | 7 | -1 | 50.1 | |||||||||||||||||||||
| Jan 2008 | 6 | 91 | 3 | +3 | 52.8 | |||||||||||||||||||||
| Dec 2007 | 8 | 88 | 4 | +4 | 52.6 | |||||||||||||||||||||
| Nov 2007 | 5 | 92 | 3 | +2 | 51.5 |
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Inventories
Manufacturers’ inventories contracted in February as the Inventories Index registered 45.4 percent, which is 3.7 percentage points lower than January’s seasonally adjusted reading of 49.1 percent. This is the 22nd 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 six industries reporting higher inventories in February are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Transportation Equipment; Fabricated Metal Products; Machinery; and Food, Beverage & Tobacco Products. The industries reporting lower inventories in February are: Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Chemical Products; Furniture & Related Products; Plastics & Rubber Products; Computer & Electronic Products; and Primary Metals.
| Inventories | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Feb 2008 | 13 | 68 | 19 | -6 | 45.4 | |||||||||||||||||||||
| Jan 2008 | 17 | 64 | 19 | -2 | 49.1 | |||||||||||||||||||||
| Dec 2007 | 16 | 57 | 27 | -11 | 45.4 | |||||||||||||||||||||
| Nov 2007 | 18 | 55 | 27 | -9 | 46.4 |
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Customers’ Inventories(b)
The ISM Customers’ Inventories Index registered 49 percent in February, a decrease of 0.5 percentage point when compared to January’s reading of 49.5 percent. The index indicates that respondents believe their customers’ inventories are too low at this time.
Six industries reported higher customers’ inventories during February: Wood Products; Plastics & Rubber Products; Furniture & Related Products; Fabricated Metal Products; Computer & Electronic Products; and Transportation Equipment. The industries reporting lower customers’ inventories in February are: Primary Metals; Printing & Related Support Activities; Miscellaneous Manufacturing; Textile Mills; and Machinery.
| Customers’ Inventories | % Reporting | %Too High | %About Right | %Too Low | Net | Index | ||||||||||||
| Feb 2008 | 70 | 13 | 72 | 15 | -2 | 49.0 | ||||||||||||
| Jan 2008 | 70 | 13 | 73 | 14 | -1 | 49.5 | ||||||||||||
| Dec 2007 | 75 | 20 | 63 | 17 | +3 | 51.5 | ||||||||||||
| Nov 2007 | 79 | 13 | 72 | 15 | -2 | 49.0 |
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Prices(b)
The ISM Prices Index registered 75.5 percent in February, indicating manufacturers are paying higher prices on average, though at a slightly slower rate, when compared to January. While 55 percent of respondents reported paying higher prices and 4 percent reported paying lower prices, 41 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 February, 15 industries reported paying higher prices: Plastics & Rubber Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Machinery; Miscellaneous Manufacturing; Chemical Products; Apparel, Leather & Allied Products; Fabricated Metal Products; Furniture & Related Products; Transportation Equipment; Computer & Electronic Products; Wood Products; Printing & Related Support Activities; Nonmetallic Mineral Products; and Primary Metals. No industries reported paying lower prices in February.
| Prices | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Feb 2008 | 55 | 41 | 4 | +51 | 75.5 | |||||||||||||||||||||
| Jan 2008 | 55 | 42 | 3 | +52 | 76.0 | |||||||||||||||||||||
| Dec 2007 | 43 | 50 | 7 | +36 | 68.0 | |||||||||||||||||||||
| Nov 2007 | 42 | 51 | 7 | +35 | 67.5 |
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Backlog of Orders(b)
ISM’s Backlog of Orders Index registered 45 percent in February, 1 percentage point higher than the 44 percent reported in January. This is the fifth consecutive month of contraction in the Backlog of Orders Index. Of the 87 percent of respondents who reported their backlog of orders, 22 percent reported greater backlogs, 32 percent reported smaller backlogs, and 46 percent reported no change from January.
The eight industries reporting an increase in order backlogs in February are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Primary Metals; Wood Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The industries reporting a decrease in order backlogs in February are: Nonmetallic Mineral Products; Printing & Related Support Activities; Furniture & Related Products; Fabricated Metal Products; Chemical Products; Machinery; and Transportation Equipment.
| Backlog of Orders | % Reporting | %Greater | %Same | %Less | Net | Index | ||||||||||||
| Feb 2008 | 87 | 22 | 46 | 32 | -10 | 45.0 | ||||||||||||
| Jan 2008 | 85 | 19 | 50 | 31 | -12 | 44.0 | ||||||||||||
| Dec 2007 | 85 | 14 | 58 | 28 | -14 | 43.0 | ||||||||||||
| Nov 2007 | 88 | 13 | 57 | 30 | -17 | 41.5 |
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New Export Orders(b)
ISM’s New Export Orders Index registered 56 percent in February, a decrease of 2.5 percentage points when compared to January’s index of 58.5 percent. This is the 63rd consecutive month of growth in export orders.
The 11 industries reporting growth in new export orders in February are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Paper Products; Plastics & Rubber Products; Primary Metals; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Machinery. The industries reporting a decrease in new export orders are: Furniture & Related Products; and Electrical Equipment, Appliances & Components.
| New Export Orders | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Feb 2008 | 75 | 22 | 68 | 10 | +12 | 56.0 | ||||||||||||
| Jan 2008 | 78 | 24 | 69 | 7 | +17 | 58.5 | ||||||||||||
| Dec 2007 | 75 | 17 | 71 | 12 | +5 | 52.5 | ||||||||||||
| Nov 2007 | 77 | 19 | 79 | 2 | +17 | 58.5 |
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Imports(b)
Imports of materials by manufacturers contracted during February as the Imports Index registered 47.5 percent, 5 percentage points lower than the 52.5 percent reported in January.
The four industries reporting growth in import activity for February are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The industries reporting contraction in import activity in February are: Nonmetallic Mineral Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; and Petroleum & Coal Products.
| Imports | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Feb 2008 | 83 | 13 | 69 | 18 | -5 | 47.5 | ||||||||||||
| Jan 2008 | 82 | 16 | 73 | 11 | +5 | 52.5 | ||||||||||||
| Dec 2007 | 80 | 13 | 70 | 17 | -4 | 48.0 | ||||||||||||
| Nov 2007 | 83 | 10 | 75 | 15 | -5 | 47.5 |
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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 3 days to 119 days. Average lead-time for Production Materials decreased 3 days to 47 days. Average lead-time for Maintenance, Repair and Operating (MRO) Supplies decreased 3 days to 22 days.
| Percent Reporting | |||||||||||||||||||||
| Capital Expenditures | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Feb 2008 | 21 | 10 | 10 | 21 | 26 | 12 | 119 | ||||||||||||||
| Jan 2008 | 22 | 9 | 12 | 17 | 27 | 13 | 122 | ||||||||||||||
| Dec 2007 | 22 | 9 | 12 | 18 | 25 | 14 | 123 | ||||||||||||||
| Nov 2007 | 21 | 9 | 13 | 19 | 25 | 13 | 120 |
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| Production Materials | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Feb 2008 | 20 | 40 | 28 | 7 | 4 | 1 | 47 | ||||||||||||||
| Jan 2008 | 23 | 36 | 27 | 8 | 4 | 2 | 50 | ||||||||||||||
| Dec 2007 | 19 | 37 | 28 | 10 | 5 | 1 | 50 | ||||||||||||||
| Nov 2007 | 20 | 39 | 28 | 8 | 4 | 1 | 48 |
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| MRO Supplies | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Feb 2008 | 55 | 31 | 10 | 4 | 0 | 0 | 22 | ||||||||||||||
| Jan 2008 | 50 | 34 | 10 | 5 | 1 | 0 | 25 | ||||||||||||||
| Dec 2007 | 53 | 35 | 9 | 3 | 0 | 0 | 21 | ||||||||||||||
| Nov 2007 | 56 | 31 | 10 | 3 | 0 | 0 | 21 |
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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 March 2008 data will be released at 10:00 a.m. (ET) on Tuesday, April 1, 2008.