ISM February 2009 Report
Economic activity in the manufacturing sector failed to grow in February for the 13th consecutive month, and the overall economy contracted for the fifth consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
“Business is very slow, some of which is due to seasonality, and some is due to the state of the economy.”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. “Manufacturing continues to decline at a rapid rate in February. While production has slowed its rate of decline, employment continues to fall precipitously. Prices continue to decline, but price advantages are not sufficient to overcome manufacturers’ apparent loss of demand. Survey respondents appear generally pessimistic about recovery in 2009. Some express hope that the stimulus package will help their industry.”
PERFORMANCE BY INDUSTRY
None of the 18 manufacturing industries reported growth. The industries reporting contraction in February — listed in order — are: Primary Metals; Wood Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Textile Mills; Fabricated Metal Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Chemical Products; Machinery; Transportation Equipment; Computer & Electronic Products; Petroleum & Coal Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products.
WHAT RESPONDENTS ARE SAYING …
- “Customers across the board are being very cautious about ordering any stock.” (Transportation Equipment)
- “Business is very slow, some of which is due to seasonality, and some is due to the state of the economy.” (Chemical Products)
- “Asia previously was over 50 percent of our business and is now close to zero.” (Machinery)
- “Still seeing frequent attempts at increases while everything is reacting to an economy that is retracting.” (Food, Beverage & Tobacco Products)
- “Business slightly improved in February. May be the result of inventories finally coming into balance with lower demand.” (Paper Products)
| MANUFACTURING AT A GLANCE FEBRUARY 2009 | ||||||||||||
| Index | Series Index February | Series Index January | Percentage Point Change | Direction | Rate of Change | Trend(a) (Months) | ||||||
| PMI | 35.8 | 35.6 | +0.2 | Contracting | Slower | 13 | ||||||
| New Orders | 33.1 | 33.2 | -0.1 | Contracting | Faster | 15 | ||||||
| Production | 36.3 | 32.1 | +4.2 | Contracting | Slower | 6 | ||||||
| Employment | 26.1 | 29.9 | -3.8 | Contracting | Faster | 7 | ||||||
| Supplier Deliveries | 46.7 | 45.3 | +1.4 | Faster | Slower | 5 | ||||||
| Inventories | 37.0 | 37.5 | -0.5 | Contracting | Faster | 34 | ||||||
| Customers’ Inventories | 51.0 | 55.5 | -4.5 | Too High | Slower | 7 | ||||||
| Prices | 29.0 | 29.0 | 0 | Decreasing | Same | 5 | ||||||
| Backlog of Orders | 31.0 | 29.5 | +1.5 | Contracting | Slower | 10 | ||||||
| Exports | 37.5 | 37.5 | 0 | Contracting | Same | 5 | ||||||
| Imports | 32.0 | 36.5 | -4.5 | Contracting | Faster | 13 | ||||||
| OVERALL ECONOMY Manufacturing Sector | Contracting | Slower | 5 | |||||||||
| Contracting | Slower | 13 |
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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
Caustic Soda is the only commodity reported up in price.
Commodities Down in Price
Aluminum (5); Aluminum Extrusions (2); Copper (7); Copper Products; Corrugated Containers (2); Natural Gas (7); Plastics; Plastic Products; Stainless Steel (5); Stainless Steel Products (3); Steel (6); and Steel Products.
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 2009 MANUFACTURING INDEX SUMMARIES
PMI
Manufacturing contracted in February as the PMI registered 35.8 percent, which is 0.2 percentage point higher than the 35.6 percent reported in January. This is the 13thconsecutive month of contraction in the manufacturing sector. 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 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates contraction in both the overall economy and the manufacturing sector. Ore stated, “The past relationship between the PMI and the overall economyindicates that the PMI for February (35.8 percent) corresponds to a 1.7 percent decline in real gross domestic product (GDP) on an annual basis.”
THE LAST 12 MONTHS
| Month | PMI | Month | PMI | ||||||||||||||||||||||||||||||||||||||||
| Feb 2009 | 35.8 | Aug 2008 | 49.3 | ||||||||||||||||||||||||||||||||||||||||
| Jan 2009 | 35.6 | Jul 2008 | 49.5 | ||||||||||||||||||||||||||||||||||||||||
| Dec 2008 | 32.9 | Jun 2008 | 49.5 | ||||||||||||||||||||||||||||||||||||||||
| Nov 2008 | 36.6 | May 2008 | 49.3 | ||||||||||||||||||||||||||||||||||||||||
| Oct 2008 | 38.7 | Apr 2008 | 48.6 | ||||||||||||||||||||||||||||||||||||||||
| Sep 2008 | 43.4 | Mar 2008 | 49.0 | ||||||||||||||||||||||||||||||||||||||||
| Average for 12 months – 43.2High – 49.5Low – 32.9 |
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New Orders
ISM’s New Orders Index registered 33.1 percent in February, 0.1 percentage point lower than the 33.2 percent registered in January. This is the 15th consecutive month of contraction in the New Orders Index. A New Orders Index above 48.8 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).
In February, none of the 18 manufacturing industries reported growth in new orders. The industries failing to grow in February — listed in order — are: Furniture & Related Products; Petroleum & Coal Products; Textile Mills; Primary Metals; Wood Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Transportation Equipment; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Machinery; Printing & Related Support Activities; and Food, Beverage & Tobacco Products.
| New Orders | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Feb 2009 | 13 | 43 | 44 | -31 | 33.1 | |||||||||||||||||||||
| Jan 2009 | 15 | 33 | 52 | -37 | 33.2 | |||||||||||||||||||||
| Dec 2008 | 5 | 31 | 64 | -59 | 23.1 | |||||||||||||||||||||
| Nov 2008 | 12 | 29 | 59 | -47 | 28.1 |
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Production
ISM’s Production Index registered 36.3 percent in February, which is an increase of 4.2 percentage points from January’s reading of 32.1 percent. An index above 50.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures. This is the sixth consecutive month of decline in production.
Two industries reported growth in production during the month of February: Petroleum & Coal Products; and Printing & Related Support Activities. The industries failing to grow in February — listed in order — are: Furniture & Related Products; Textile Mills; Electrical Equipment, Appliances & Components; Transportation Equipment; Plastics & Rubber Products; Machinery; Miscellaneous Manufacturing; Wood Products; Fabricated Metal Products; Nonmetallic Mineral Products; Chemical Products; Paper Products; Primary Metals; and Food, Beverage & Tobacco Products.
| Production | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Feb 2009 | 16 | 40 | 44 | -28 | 36.3 | |||||||||||||||||||||
| Jan 2009 | 13 | 33 | 54 | -41 | 32.1 | |||||||||||||||||||||
| Dec 2008 | 7 | 33 | 60 | -53 | 26.3 | |||||||||||||||||||||
| Nov 2008 | 12 | 38 | 50 | -38 | 32.0 |
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Employment
ISM’s Employment Index registered 26.1 percent in February, which is 3.8 percentage points lower than the 29.9 percent reported in January. This is the seventh consecutive month of decline in employment. An Employment Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
None of the 18 manufacturing industries reported growth in employment in February. The industries that reported decreases in employment during February are: Wood Products; Textile Mills; Machinery; Primary Metals; Printing & Related Support Activities; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Transportation Equipment; Chemical Products; Plastics & Rubber Products; Computer & Electronic Products; and Food, Beverage & Tobacco Products.
| Employment | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Feb 2009 | 6 | 40 | 54 | -48 | 26.1 | |||||||||||||||||||||
| Jan 2009 | 5 | 46 | 49 | -44 | 29.9 | |||||||||||||||||||||
| Dec 2008 | 7 | 43 | 50 | -43 | 29.9 | |||||||||||||||||||||
| Nov 2008 | 8 | 51 | 41 | -33 | 34.3 |
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Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was faster for the fifth consecutive month in February as the Supplier Deliveries Index registered 46.7 percent, which is 1.4 percentage points higher than the 45.3 percent registered in January. A reading above 50 percent indicates slower deliveries.
The three industries reporting slower supplier deliveries in February are: Furniture & Related Products; Transportation Equipment; and Electrical Equipment, Appliances & Components. The industries reporting faster deliveries in February are: Primary Metals; Nonmetallic Mineral Products; Petroleum & Coal Products; Wood Products; Plastics & Rubber Products; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; and Chemical Products.
| Supplier Deliveries | %Slower | %Same | %Faster | Net | Index | |||||||||||||||||||||
| Feb 2009 | 6 | 78 | 16 | -10 | 46.7 | |||||||||||||||||||||
| Jan 2009 | 7 | 74 | 19 | -12 | 45.3 | |||||||||||||||||||||
| Dec 2008 | 5 | 79 | 16 | -11 | 45.7 | |||||||||||||||||||||
| Nov 2008 | 6 | 84 | 10 | -4 | 48.6 |
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Inventories
Manufacturers’ inventories contracted in February as the Inventories Index registered 37 percent, which is 0.5 percentage point lower than January’s reading of 37.5 percent. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis’ (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).
Textile Mills is the only industry reporting higher inventories in February. The industries that reported decreases in February are: Paper Products; Computer & Electronic Products; Primary Metals; Miscellaneous Manufacturing; Printing & Related Support Activities; Wood Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Chemical Products; Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Machinery.
| Inventories | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Feb 2009 | 19 | 38 | 43 | -24 | 37.0 | |||||||||||||||||||||
| Jan 2009 | 18 | 40 | 42 | -24 | 37.5 | |||||||||||||||||||||
| Dec 2008 | 18 | 40 | 42 | -24 | 39.6 | |||||||||||||||||||||
| Nov 2008 | 13 | 51 | 36 | -23 | 40.1 |
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Customers’ Inventories(b)
The ISM Customers’ Inventories Index registered 51 percent in February, 4.5 percentage points lower than the 55.5 percent reported in January. The index indicates that respondents believe their customers’ inventories are too high at this time. This is the seventh consecutive month that the index has indicated that customers’ inventories are too high.
Six industries reported higher customers’ inventories during February: Textile Mills; Furniture & Related Products; Machinery; Miscellaneous Manufacturing; Chemical Products; and Transportation Equipment. The industries that reported lower customers’ inventories during February are: Wood Products; Paper Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Primary Metals.
| Customers’ Inventories | % Reporting | %Too High | %About Right | %Too Low | Net | Index | ||||||||||||
| Feb 2009 | 80 | 28 | 46 | 26 | +2 | 51.0 | ||||||||||||
| Jan 2009 | 80 | 31 | 49 | 20 | +11 | 55.5 | ||||||||||||
| Dec 2008 | 73 | 30 | 54 | 16 | +14 | 57.0 | ||||||||||||
| Nov 2008 | 70 | 31 | 48 | 21 | +10 | 55.0 |
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Prices(b)
The ISM Prices Index registered 29 percent in February, the same as reported in January, indicating manufacturers continue to pay lower prices on average when compared to January. While 7 percent of respondents reported paying higher prices and 49 percent reported paying lower prices, 44 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.
In February, none of the 18 manufacturing industries reported paying higher prices. The industries that reported paying lower prices during February — listed in order — are: Printing & Related Support Activities; Fabricated Metal Products; Transportation Equipment; Paper Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Primary Metals; Wood Products; Furniture & Related Products; and Computer & Electronic Products.
| Prices | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Feb 2009 | 7 | 44 | 49 | -42 | 29.0 | |||||||||||||||||||||
| Jan 2009 | 12 | 34 | 54 | -42 | 29.0 | |||||||||||||||||||||
| Dec 2008 | 2 | 32 | 66 | -64 | 18.0 | |||||||||||||||||||||
| Nov 2008 | 8 | 35 | 57 | -49 | 25.5 |
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Backlog of Orders(b)
ISM’s Backlog of Orders Index registered 31 percent in February, 1.5 percentage points higher than the 29.5 percent reported in January. Of the 86 percent of respondents who reported their backlog of orders, 8 percent reported greater backlogs, 46 percent reported smaller backlogs, and 46 percent reported no change from January.
There were no industries reporting increased order backlogs in February. The industries that reported decreases in order backlogs during February — listed in order — are: Furniture & Related Products; Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Chemical Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; Primary Metals; Machinery; Computer & Electronic Products; Paper Products; and Printing & Related Support Activities.
| Backlog of Orders | % Reporting | %Greater | %Same | %Less | Net | Index | ||||||||||||
| Feb 2009 | 86 | 8 | 46 | 46 | -38 | 31.0 | ||||||||||||
| Jan 2009 | 84 | 6 | 47 | 47 | -41 | 29.5 | ||||||||||||
| Dec 2008 | 86 | 5 | 36 | 59 | -54 | 23.0 | ||||||||||||
| Nov 2008 | 89 | 6 | 42 | 52 | -46 | 27.0 |
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New Export Orders(b)
ISM’s New Export Orders Index registered 37.5 percent in February, the same as reported in January. This is the fifth month of contraction in the New Export Orders Index.
The two industries reporting growth in new export orders in February are: Apparel, Leather & Allied Products; and Nonmetallic Mineral Products. The industries that reported decreases in new export orders in February — listed in order — are: Furniture & Related Products; Paper Products; Transportation Equipment; Miscellaneous Manufacturing; Fabricated Metal Products; Computer & Electronic Products; Chemical Products; Machinery; and Electrical Equipment, Appliances & Components.
| New Export Orders | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Feb 2009 | 79 | 7 | 61 | 32 | -25 | 37.5 | ||||||||||||
| Jan 2009 | 77 | 6 | 63 | 31 | -25 | 37.5 | ||||||||||||
| Dec 2008 | 75 | 7 | 57 | 36 | -29 | 35.5 | ||||||||||||
| Nov 2008 | 75 | 7 | 68 | 25 | -18 | 41.0 |
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Imports(b)
Imports of materials by manufacturers contracted during February as the Imports Index registered 32 percent, 4.5 percentage points lower than the 36.5 percent reported in January. This is the 13th consecutive month of contraction in imports.
None of the 18 manufacturing industries reported growth in imports during the month of February. The industries that reported decreases in imports — listed in order — are: Furniture & Related Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Printing & Related Support Activities; Paper Products; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; and Food, Beverage & Tobacco Products.
| Imports | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Feb 2009 | 80 | 7 | 50 | 43 | -36 | 32.0 | ||||||||||||
| Jan 2009 | 84 | 10 | 53 | 37 | -27 | 36.5 | ||||||||||||
| Dec 2008 | 84 | 11 | 56 | 33 | -22 | 39.0 | ||||||||||||
| Nov 2008 | 83 | 8 | 59 | 33 | -25 | 37.5 |
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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 increased 7 days to 105 days. Average lead time for Production Materials increased 3 days to 45 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 24 days.
| Percent Reporting | |||||||||||||||||||||
| Capital Expenditures | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Feb 2009 | 36 | 6 | 12 | 11 | 23 | 12 | 105 | ||||||||||||||
| Jan 2009 | 29 | 11 | 13 | 19 | 18 | 10 | 98 | ||||||||||||||
| Dec 2008 | 33 | 6 | 11 | 17 | 24 | 9 | 101 | ||||||||||||||
| Nov 2008 | 28 | 8 | 11 | 20 | 23 | 10 | 106 |
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| Production Materials | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Feb 2009 | 30 | 44 | 15 | 4 | 4 | 3 | 45 | ||||||||||||||
| Jan 2009 | 28 | 43 | 21 | 3 | 3 | 2 | 42 | ||||||||||||||
| Dec 2008 | 31 | 37 | 22 | 5 | 1 | 4 | 47 | ||||||||||||||
| Nov 2008 | 24 | 40 | 23 | 7 | 4 | 2 | 48 |
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| MRO Supplies | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Feb 2009 | 58 | 30 | 8 | 2 | 1 | 1 | 24 | ||||||||||||||
| Jan 2009 | 51 | 34 | 11 | 2 | 2 | 0 | 25 | ||||||||||||||
| Dec 2008 | 57 | 31 | 9 | 2 | 0 | 1 | 23 | ||||||||||||||
| Nov 2008 | 62 | 26 | 8 | 2 | 2 | 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 41.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.2 percent, it is generally declining. The distance from 50 percent or 41.2 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 March 2009 data will be released at 10:00 a.m. (ET) on Wednesday, April 1, 2009.