ISM June 2008 Report
Economic activity in the manufacturing sector expanded in June following four months of contraction, while the overall economy grew for the 80th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
“Orders have slowed, and prices for metals are going up.”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 showed a slight improvement in June as the PMI registered above 50 percent after four months of decline. While the PMI indicates minimal change is taking place month over month that is hardly the situation. When viewed from the manufacturer’s perspective, they are experiencing higher prices for their inputs while demand for their products is slowing.”
PERFORMANCE BY INDUSTRY
The nine industries reporting growth in June — listed in order — are: Printing & Related Support Activities; Paper Products; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Chemical Products; Primary Metals; Furniture & Related Products; and Fabricated Metal Products. The industries reporting contraction in June are: Wood Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Machinery; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; and Plastics & Rubber Products.
WHAT RESPONDENTS ARE SAYING …
- “The shock waves from high crude price continue to put pressure on derivative pricing.” (Chemical Products)
- “Business appears to have bottomed out.” (Transportation Equipment)
- “Seeing renewed interest in outstanding quotes.” (Machinery)
- “Volume is normal, and we are able to recover some of the raw material (steel cost) increases.” (Fabricated Metal Products)
- “Commodity bubble is killing profitability.” (Food, Beverage & Tobacco Products)
- “Orders have slowed, and prices for metals are going up.” (Computer & Electronic Products)
| MANUFACTURING AT A GLANCEJUNE 2008 | ||||||||||||
| Index | Series Index June | Series Index May | Percentage Point Change | Direction | Rate of Change | Trend(a) (Months) | ||||||
| PMI | 50.2 | 49.6 | +0.6 | Growing | From Contracting | 1 | ||||||
| New Orders | 49.6 | 49.7 | -0.1 | Contracting | Faster | 7 | ||||||
| Production | 51.5 | 51.2 | +0.3 | Growing | Faster | 2 | ||||||
| Employment | 43.7 | 45.5 | -1.8 | Contracting | Faster | 8 | ||||||
| Supplier Deliveries | 55.1 | 53.7 | +1.4 | Slowing | Faster | 12 | ||||||
| Inventories | 51.2 | 48.0 | +3.2 | Growing | From Contracting | 1 | ||||||
| Customers’ Inventories | 55.0 | 47.0 | +8.0 | Too High | From Too Low | 1 | ||||||
| Prices | 91.5 | 87.0 | +4.5 | Increasing | Faster | 18 | ||||||
| Backlog of Orders | 47.5 | 46.0 | +1.5 | Contracting | Slower | 2 | ||||||
| Exports | 58.5 | 59.5 | -1.0 | Growing | Slower | 67 | ||||||
| Imports | 46.0 | 49.5 | -3.5 | Contracting | Faster | 5 | ||||||
| OVERALL ECONOMY Manufacturing Sector | Growing | Faster | 80 | |||||||||
| Growing | From Contracting | 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
ABS; Acrylics (2); Aluminum (5); Aluminum Extrusions (4); Caustic Soda (4); Chemicals (2); Corn (3); Corrugated Containers (2); Diesel Fuel (4); Electricity; Freight (2); Fuel Oil — #2 (2); Fuel Surcharges (4); Gasoline (3); Natural Gas (8); Petroleum Based Products (2); Plastics; Polypropylene Resins; Resins (3); Soybean Oil (3); Stainless Steel (2); Steel (6); Steel — Alloys, Cold Finished, Hot Rolled, Specialty; Sulfuric Acid (8); and Titanium Dioxide.
Commodities Down in Price
Copper is the only commodity reported down in price.
Commodities in Short Supply
Caustic Soda (4) and Steel (3) are the only commodities reported in short supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.
JUNE 2008 MANUFACTURING INDEX SUMMARIES
PMI
Manufacturing grew in June as the PMI registered 50.2 percent, 0.6 percentage point higher than the 49.6 percent reported in May. 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 and the manufacturing sector are growing at this time. Ore stated, “The past relationship between the PMI and the overall economyindicates that the average PMI for January through June (49.3 percent) corresponds to a 2.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for June (50.2 percent) is annualized, it corresponds to a 2.9 percent increase in real GDP annually.”
THE LAST 12 MONTHS
| Month | PMI | Month | PMI | ||||||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||||
| Feb 2008 | 48.3 | Aug 2007 | 51.2 | ||||||||||||||||||||||||||||||||||
| Jan 2008 | 50.7 | Jul 2007 | 52.3 | ||||||||||||||||||||||||||||||||||
| Average for 12 months – 49.9High – 52.3Low – 48.3 |
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New Orders
ISM’s New Orders Index registered 49.6 percent in June, 0.1 percentage point lower than the 49.7 percentage points registered in May. 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).
Seven industries reported increases during June: Computer & Electronic Products; Printing & Related Support Activities; Paper Products; Primary Metals; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products. The industries that are reporting contraction in New Orders are: Wood Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Machinery.
| New Orders | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Jun 2008 | 29 | 46 | 25 | +4 | 49.6 | |||||||||||||||||||||
| May 2008 | 25 | 52 | 23 | +2 | 49.7 | |||||||||||||||||||||
| Apr 2008 | 26 | 48 | 26 | 0 | 46.5 | |||||||||||||||||||||
| Mar 2008 | 25 | 50 | 25 | 0 | 46.5 |
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Production
ISM’s Production Index increased to 51.5 percent in June, an increase of 0.3 percentage point from the 51.2 percent reported in May. 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 June, seven registered growth: Printing & Related Support Activities; Computer & Electronic Products; Petroleum & Coal Products; Primary Metals; Food, Beverage & Tobacco Products; Chemical Products; and Fabricated Metal Products. The industries failing to grow in June are: Nonmetallic Mineral Products; Wood Products; Transportation Equipment; Electrical Equipment, Appliances & Components; and Machinery.
| Production | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Jun 2008 | 25 | 54 | 21 | +4 | 51.5 | |||||||||||||||||||||
| May 2008 | 24 | 59 | 17 | +7 | 51.2 | |||||||||||||||||||||
| Apr 2008 | 28 | 50 | 22 | +6 | 49.1 | |||||||||||||||||||||
| Mar 2008 | 20 | 60 | 20 | 0 | 48.7 |
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Employment
ISM’s Employment Index registered 43.7 percent in June, which is a decrease of 1.8 percentage points when compared to the 45.5 percent reported in May. 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 three industries reporting growth in employment during June are: Petroleum & Coal Products; Furniture & Related Products; and Paper Products. The industries that reported decreases in employment during June are: Wood Products; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Plastics & Rubber Products; Chemical Products; Machinery; Food, Beverage & Tobacco Products; and Transportation Equipment.
| Employment | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Jun 2008 | 11 | 69 | 20 | -9 | 43.7 | |||||||||||||||||||||
| May 2008 | 17 | 63 | 20 | -3 | 45.5 | |||||||||||||||||||||
| Apr 2008 | 12 | 72 | 16 | -4 | 45.4 | |||||||||||||||||||||
| Mar 2008 | 15 | 70 | 15 | 0 | 49.2 |
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Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations continued to slow in June, as the Supplier Deliveries Index increased 1.4 percentage points to 55.1 percent from the 53.7 percent registered in May. A reading above 50 percent indicates slower deliveries.
The eight industries reporting slower supplier deliveries in June are: Wood Products; Paper Products; Petroleum & Coal Products; Chemical Products; Primary Metals; Transportation Equipment; Plastics & Rubber Products; and Food, Beverage & Tobacco Products. The industries reporting faster deliveries in June are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; and Fabricated Metal Products.
| Supplier Deliveries | %Slower | %Same | %Faster | Net | Index | |||||||||||||||||||||
| Jun 2008 | 16 | 79 | 5 | +11 | 55.1 | |||||||||||||||||||||
| May 2008 | 14 | 81 | 5 | +9 | 53.7 | |||||||||||||||||||||
| Apr 2008 | 10 | 88 | 2 | +8 | 54.0 | |||||||||||||||||||||
| Mar 2008 | 11 | 85 | 4 | +7 | 53.6 |
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Inventories
Manufacturers’ inventories increased in June as the Inventories Index registered 51.2 percent, which is 3.2 percentage points higher than the 48 percent reported in May. This is the first month of inventory expansion following 25 consecutive months 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 June are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Chemical Products. The industries that reported decreases in June are: Petroleum & Coal Products: Machinery; Miscellaneous Manufacturing; Primary Metals; Computer & Electronic Products; Plastics & Rubber Products; Paper Products; and Transportation Equipment.
| Inventories | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Jun 2008 | 21 | 58 | 21 | 0 | 51.2 | |||||||||||||||||||||
| May 2008 | 19 | 58 | 23 | -4 | 48.0 | |||||||||||||||||||||
| Apr 2008 | 16 | 66 | 18 | -2 | 48.1 | |||||||||||||||||||||
| Mar 2008 | 15 | 63 | 22 | -7 | 44.9 |
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Customers’ Inventories(b)
The ISM Customers’ Inventories Index registered 55 percent in June, an increase of 8 percentage points when compared to May’s reading of 47 percent. The index indicates that respondents believe their customers’ inventories are too high at this time.
Eight industries reported higher customers’ inventories during June: Furniture & Related Products; Plastics & Rubber Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Chemical Products; Machinery; and Transportation Equipment. The industries that reported lower customers’ inventories during June are: Nonmetallic Mineral Products; Primary Metals; and Miscellaneous Manufacturing.
| Customers’ Inventories | % Reporting | %Too High | %About Right | %Too Low | Net | Index | ||||||||||||
| Jun 2008 | 72 | 25 | 60 | 15 | +10 | 55.0 | ||||||||||||
| May 2008 | 67 | 14 | 66 | 20 | -6 | 47.0 | ||||||||||||
| Apr 2008 | 72 | 12 | 66 | 22 | -10 | 45.0 | ||||||||||||
| Mar 2008 | 78 | 16 | 70 | 14 | +2 | 51.0 |
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Prices(b)
The ISM Prices Index registered 91.5 percent in June, indicating manufacturers are paying higher prices on average when compared to May. This is the highest reading for the index since it registered 93.2 percent in July 1979. While 84 percent of respondents reported paying higher prices and 1 percent reported paying lower prices, 15 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 June, all 18 industries reported paying higher prices: Textile Mills; Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; Petroleum & Coal Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; Paper Products; Primary Metals; Furniture & Related Products; Transportation Equipment; and Computer & Electronic Products.
| Prices | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Jun 2008 | 84 | 15 | 1 | +83 | 91.5 | |||||||||||||||||||||
| May 2008 | 78 | 18 | 4 | +74 | 87.0 | |||||||||||||||||||||
| Apr 2008 | 71 | 27 | 2 | +69 | 84.5 | |||||||||||||||||||||
| Mar 2008 | 69 | 29 | 2 | +67 | 83.5 |
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Backlog of Orders(b)
ISM’s Backlog of Orders Index registered 47.5 percent in June, 1.5 percentage points higher than the 46 percent reported in May. Of the 86 percent of respondents who reported their backlog of orders, 19 percent reported greater backlogs, 24 percent reported smaller backlogs, and 57 percent reported no change from May.
The four industries reporting an increase in order backlogs in June are: Printing & Related Support Activities; Paper Products; Primary Metals; and Computer & Electronic Products. The industries that reported decreases in order backlogs during June are: Wood Products; Apparel, Leather & Allied Products; Transportation Equipment; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Fabricated Metal Products.
| Backlog of Orders | % Reporting | %Greater | %Same | %Less | Net | Index | ||||||||||||
| Jun 2008 | 86 | 19 | 57 | 24 | -5 | 47.5 | ||||||||||||
| May 2008 | 87 | 18 | 56 | 26 | -8 | 46.0 | ||||||||||||
| Apr 2008 | 85 | 23 | 57 | 20 | +3 | 51.5 | ||||||||||||
| Mar 2008 | 85 | 18 | 59 | 23 | -5 | 47.5 |
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New Export Orders(b)
ISM’s New Export Orders Index registered 58.5 percent in June, a decrease of 1 percentage point when compared to May’s index of 59.5 percent. This is the 67th consecutive month of growth in the New Export Orders Index.
The 10 industries reporting growth in new export orders in June are: Nonmetallic Mineral Products; Paper Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Plastics & Rubber Products; Machinery; Computer & Electronic Products; Transportation Equipment; and Electrical Equipment, Appliances & Components. The only industry that reported a decrease in new export orders in June is Apparel, Leather & Allied Products.
| New Export Orders | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Jun 2008 | 79 | 22 | 73 | 5 | +17 | 58.5 | ||||||||||||
| May 2008 | 78 | 26 | 67 | 7 | +19 | 59.5 | ||||||||||||
| Apr 2008 | 79 | 23 | 69 | 8 | +15 | 57.5 | ||||||||||||
| Mar 2008 | 76 | 22 | 69 | 9 | +13 | 56.5 |
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Imports(b)
Imports of materials by manufacturers contracted during June as the Imports Index registered 46 percent, 3.5 percentage points lower than the 49.5 percent reported in May. This is the fifth consecutive month of contraction in imports.
The three industries reporting growth in import activity for June are: Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Chemical Products. The industries that reported decreases in imports during June are: Nonmetallic Mineral Products; Wood Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Machinery; Food, Beverage & Tobacco Products; and Fabricated Metal Products.
| Imports | % Reporting | %Higher | %Same | %Lower | Net | Index | ||||||||||||
| Jun 2008 | 82 | 9 | 74 | 17 | -8 | 46.0 | ||||||||||||
| May 2008 | 82 | 12 | 75 | 13 | -1 | 49.5 | ||||||||||||
| Apr 2008 | 85 | 11 | 74 | 15 | -4 | 48.0 | ||||||||||||
| Mar 2008 | 83 | 9 | 72 | 19 | -10 | 45.0 |
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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 123 days. Average lead time for Production Materials increased 3 days to 54 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 2 days to 25 days.
| Percent Reporting | |||||||||||||||||||||
| Capital Expenditures | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Jun 2008 | 23 | 7 | 11 | 20 | 25 | 14 | 123 | ||||||||||||||
| May 2008 | 22 | 12 | 10 | 19 | 25 | 12 | 116 | ||||||||||||||
| Apr 2008 | 28 | 6 | 13 | 18 | 23 | 12 | 112 | ||||||||||||||
| Mar 2008 | 24 | 6 | 13 | 19 | 26 | 12 | 118 |
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| Production Materials | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Jun 2008 | 18 | 41 | 24 | 9 | 6 | 2 | 54 | ||||||||||||||
| May 2008 | 22 | 37 | 25 | 10 | 4 | 2 | 51 | ||||||||||||||
| Apr 2008 | 21 | 38 | 27 | 9 | 3 | 2 | 49 | ||||||||||||||
| Mar 2008 | 23 | 35 | 30 | 8 | 3 | 1 | 46 |
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| MRO Supplies | Hand-to- Mouth | 30 Days | 60 Days | 90 Days | 6 Months | 1 Year+ | Average Days | ||||||||||||||
| Jun 2008 | 50 | 38 | 8 | 3 | 0 | 1 | 25 | ||||||||||||||
| May 2008 | 51 | 35 | 8 | 4 | 1 | 1 | 27 | ||||||||||||||
| Apr 2008 | 50 | 34 | 11 | 3 | 2 | 0 | 26 | ||||||||||||||
| Mar 2008 | 56 | 32 | 9 | 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 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 July 2008 data will be released at 10:00 a.m. (ET) on Friday, August 1, 2008.