ISM November 2005 Report
The 17 industries reporting growth in November — listed in order — are: Apparel; Rubber & Plastic Products; Electronic Components & Equipment; Tobacco; Textiles; Miscellaneous(b); Primary Metals; Food; Paper; Chemicals; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Furniture; Transportation & Equipment; Fabricated Metals; Glass, Stone & Aggregate; and Printing & Publishing. WHAT RESPONDENTS ARE SAYING …
— “The hurricanes along the Gulf Coast are still impacting the supply and delivery of some products and materials.” (Chemicals)
— “Our business has held strong through the third quarter and we are on track for a record sales year.” (Electronic Components & Equipment)
— “Our production is sold out for the rest of the year. Spare parts are difficult to get due to long leadtimes. (Glass, Stone & Aggregate)
— “Concerned that business will be slowing due to housing decline.” (Industrial & Commercial Equipment & Computers)
— “The hurricanes destroyed many trucks … (which resulted in) extra business.” (Transportation & Equipment)
MANUFACTURING AT A GLANCE NOVEMBER 2005 Series Series Percentage Rate Index Index Point of Trend(a) Index November October Change Direction Change (Months) PMI 58.1 59.1 -1.0 Growing Slower 30 New Orders 59.8 61.7 -1.9 Growing Slower 31 Production 60.6 62.0 -1.4 Growing Slower 31 Employment 56.6 55.0 +1.6 Growing Faster 5 Supplier Deliveries 58.3 61.7 -3.4 Slowing Slower 29 Inventories 49.3 48.1 +1.2 Contracting Slower 8 Customers' Inventories 43.5 41.0 +2.5 Too Low Slower 54 Prices 74.0 84.0 -10.0 Increasing Slower 4 Backlog of Orders 53.0 55.5 -2.5 Growing Slower 4 Exports 59.2 54.8 +4.4 Growing Faster 47 Imports 54.1 58.2 -4.1 Growing Slower 48 OVERALL ECONOMY Growing Slower 49 Manufacturing Sector Growing Slower 30
(a) Number of months moving in current direction COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY Commodities Up in Price
Aluminum (4); Caustic Soda (19); Chemicals (22); Copper (6); Corn Syrup/Sweeteners; Corrugated Containers(c); Energy (10); Fuel Surcharges (5); Gasoline(c) (5); Hydrochloric Acid; LDPE; Natural Gas(c) (40); Oil (7); Paper (2); PET; Petroleum Products; Plastic Resins (10); Plastics (16); Polyethylene (2); Resins (5); Rubber; Steel (26); and Sugar (2). Commodities Down in Price
Corrugated Containers(c); Diesel Fuel; Gasoline(c); Natural Gas(c); and Nickel (2). Commodities in Short Supply
Caustic Soda; Copper (2); Steel (2); and Sugar. (c) Reported as both up and down in price. Note: The number of consecutive months the commodity is listed is indicated after each item. NOVEMBER 2005 MANUFACTURING INDEX SUMMARIES PMI
The PMI indicates that the manufacturing economy grew in November for the 30th consecutive month. The PMI for November registered 58.1 percent, a decrease of 1 percentage point when compared to October’s reading of 59.1 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 42.7 percent, over a period of time, generally indicates an expansion of the overall economy. The November PMI indicates that both the overall economy and the manufacturing sector are growing. The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (55.7 percent) corresponds to a 4.7 percent increase in real gross domestic product (GDP) on an annual basis. In addition, if the PMI for November (58.1 percent) is annualized, it corresponds to a 5.6 percent increase in real GDP annually. THE LAST 12 MONTHS
Month PMI Month PMI Nov 2005 58.1 May 2005 51.4 Oct 2005 59.1 Apr 2005 53.3 Sep 2005 59.4 Mar 2005 55.2 Aug 2005 53.6 Feb 2005 55.3 Jul 2005 56.6 Jan 2005 56.4 Jun 2005 53.8 Dec 2004 57.3 Average for 12 months - 55.8 High - 59.4 Low - 51.4
New Orders
ISM’s New Orders Index grew in November with a reading of 59.8 percent. The index is 1.9 percentage points lower than the 61.7 percent registered in October, and November is the 31st consecutive month the index has exceeded 50 percent. A New Orders Index above 51.1 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars). Thirteen industries reported increases during November: Apparel; Rubber & Plastic Products; Textiles; Paper; Electronic Components & Equipment; Miscellaneous(b); Chemicals; Industrial & Commercial Equipment & Computers; Food; Primary Metals; Transportation & Equipment; Instruments & Photographic Equipment; and Printing & Publishing.
New Orders %Better %Same %Worse Net Index Nov 2005 30 54 16 +14 59.8 Oct 2005 30 54 16 +14 61.7 Sep 2005 35 53 12 +23 63.8 Aug 2005 29 50 21 +8 56.4
Production
ISM’s Production Index registered 60.6 percent in November, 1.4 percentage points lower than the 62 percent reported in October. November is the 31st consecutive month of growth in the index. An index above 50 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures. Of the industries reporting in November, 16 registered growth: Tobacco; Apparel; Textiles; Rubber & Plastic Products; Primary Metals; Electronic Components & Equipment; Miscellaneous(b); Food; Industrial & Commercial Equipment & Computers; Wood & Wood Products; Printing & Publishing; Paper; Chemicals; Fabricated Metals; Instruments & Photographic Equipment; and Transportation & Equipment.
Production %Better %Same %Worse Net Index Nov 2005 30 59 11 +19 60.6 Oct 2005 31 57 12 +19 62.0 Sep 2005 37 52 11 +26 63.1 Aug 2005 23 60 17 +6 55.9
Employment
ISM’s Employment Index registered growth in November for the fifth consecutive month. The index registered 56.6 percent in November compared to 55 percent in October, an increase of 1.6 percentage points. An Employment Index above 48.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The 12 industries reporting growth in employment during November are: Apparel; Electronic Components & Equipment; Miscellaneous(b); Furniture; Glass, Stone & Aggregate; Primary Metals; Rubber & Plastic Products; Fabricated Metals; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Transportation & Equipment; and Food.
Employment %Higher %Same %Lower Net Index Nov 2005 19 72 9 +10 56.6 Oct 2005 18 69 13 +5 55.0 Sep 2005 19 65 16 +3 53.1 Aug 2005 16 70 14 +2 52.6
Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower for the 29th consecutive month in November. ISM’s Supplier Deliveries Index for November registered 58.3 percent, a decrease of 3.4 percentage points when compared to October’s reading of 61.7 percent. A reading above 50 percent indicates slower deliveries. The 10 industries reporting slower supplier deliveries in November are: Apparel; Glass, Stone & Aggregate; Chemicals; Fabricated Metals; Furniture; Food; Instruments & Photographic Equipment; Wood & Wood Products; Primary Metals; and Electronic Components & Equipment.
Supplier Deliveries %Slower %Same %Faster Net Index Nov 2005 19 74 7 +12 58.3 Oct 2005 26 70 4 +22 61.7 Sep 2005 21 75 4 +17 59.3 Aug 2005 8 87 5 +3 50.5
Inventories
Manufacturers’ inventories declined in November for the eighth consecutive month as ISM’s Inventories Index registered 49.3 percent, indicating a slower rate of liquidation when compared to October’s reading of 48.1. November’s index represents a 1.2 percentage point increase over October. An Inventories Index greater than 42.3 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis’ (BEA) figures on overall manufacturing inventories (in chained 2000 dollars). The five industries reporting higher inventories in November are: Apparel; Miscellaneous(b); Furniture; Wood & Wood Products; and Paper.
Inventories %Higher %Same %Lower Net Index Nov 2005 15 64 21 -6 49.3 Oct 2005 13 67 20 -7 48.1 Sep 2005 17 65 18 -1 49.6 Aug 2005 16 62 22 -6 45.7
Customers’ Inventories(d)
The November Customers’ Inventories Index is at 43.5 percent, 2.5 percentage points higher than the 41 percent reported in October. Respondents indicate that their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 54th consecutive month that the index has registered below 50 percent. Furniture is the only industry reporting higher customers’ inventories during November.
Customers' % % Too % About % Too Inventories Reporting High Right Low Net Index Nov 2005 72 9 69 22 -13 43.5 Oct 2005 79 8 66 26 -18 41.0 Sep 2005 74 9 71 20 -11 44.5 Aug 2005 72 13 67 20 -7 46.5
Prices(d)
In November, the ISM Prices Index was 74 percent, indicating significant growth. However, it is down 10 percentage points from the 84 percent it registered in October. While 53 percent of supply executives reported paying higher prices and 5 percent reported paying lower prices, 42 percent reported that prices were unchanged from the preceding month.
A Prices Index above 47.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In November, 17 industries reported paying higher prices: Textiles; Glass, Stone & Aggregate; Rubber & Plastic Products; Miscellaneous(b); Furniture; Food; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Printing & Publishing; Primary Metals; Apparel; Paper; Chemicals; Transportation & Equipment; Electronic Components & Equipment; Fabricated Metals; and Wood & Wood Products.
Prices %Higher %Same %Lower Net Index Nov 2005 53 42 5 +48 74.0 Oct 2005 70 28 2 +68 84.0 Sep 2005 60 36 4 +56 78.0 Aug 2005 36 53 11 +25 62.5
Backlog of Orders(d)
ISM’s Backlog of Orders Index registered 53 percent, indicating manufacturers’ backlogs in November are growing when compared to October. This represents a 2.5 percentage point decrease compared to the 55.5 percent reported in October. Of the 83 percent of respondents who report their backlog of orders, 24 percent reported greater backlogs, 18 percent reported smaller backlogs, and 58 percent reported no change from October. The eight industries reporting an increase in order backlogs during the month are: Apparel; Rubber & Plastic Products; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Furniture; Food; Chemicals; and Primary Metals.
Backlog of % Orders Reporting %Greater %Same %Less Net Index Nov 2005 83 24 58 18 +6 53.0 Oct 2005 85 29 53 18 +11 55.5 Sep 2005 85 28 54 18 +10 55.0 Aug 2005 87 23 55 22 +1 50.5
New Export Orders
ISM’s New Export Orders Index for November registered 59.2 percent, an increase of 4.4 percentage points when compared to October’s index of 54.8 percent. This is the 47th consecutive month of growth in export orders. The 12 industries reporting growth in new export orders in November are: Textiles; Apparel; Miscellaneous(b); Paper; Instruments & Photographic Equipment; Printing & Publishing; Chemicals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Fabricated Metals; Rubber & Plastic Products; and Food.
New Export % Orders Reporting %Higher %Same %Lower Net Index Nov 2005 74 19 78 3 +16 59.2 Oct 2005 76 15 77 8 +7 54.8 Sep 2005 74 17 78 5 +12 56.9 Aug 2005 78 14 79 7 +7 53.3
Imports
Imports of materials by manufacturers grew during November as the Imports Index registered 54.1 percent. The index decreased 4.1 percentage points when compared to October’s index of 58.2 percent, indicating a slower rate of growth. The 10 industries reporting growth in import activity for November are: Apparel; Furniture; Transportation & Equipment; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Instruments & Photographic Equipment; Chemicals; Food; and Fabricated Metals.
% Imports Reporting %Higher %Same %Lower Net Index Nov 2005 78 15 77 8 +7 54.1 Oct 2005 78 20 72 8 +12 58.2 Sep 2005 77 16 76 8 +8 53.4 Aug 2005 77 16 75 9 +7 53.4
(b) Miscellaneous is a preponderance of jewelry, toys, sporting goods and musical instruments. (d) The Backlog of Orders, Prices and Customers’ Inventories Indexes do not meet the accepted criteria for seasonal adjustments. Buying Policy
Average commitment leadtime for Capital Expenditures decreased 2 days to 108 days. Average leadtime for Production Materials was unchanged at 50 days. Average leadtime for Maintenance, Repair and Operating (MRO) supplies decreased 2 days to 22 days. Percent Reporting
Capital Hand-to- 30 60 90 6 1 Average Expenditures Mouth Days Days Days Months Year+ Days Nov 2005 24 9 16 17 24 10 108 Oct 2005 25 8 13 18 26 10 110 Sep 2005 25 9 14 18 25 9 106 Aug 2005 22 10 10 21 24 13 119
Production Hand-to- 30 60 90 6 1 Average Materials Mouth Days Days Days Months Year+ Days Nov 2005 16 41 27 11 4 1 50 Oct 2005 22 36 25 12 3 2 50 Sep 2005 23 38 26 9 2 2 47 Aug 2005 22 38 23 11 4 2 51
MRO Hand-to- 30 60 90 6 1 Average Supplies Mouth Days Days Days Months Year+ Days Nov 2005 55 30 12 3 0 0 22 Oct 2005 51 32 13 3 1 0 24 Sep 2005 53 33 11 3 0 0 22 Aug 2005 50 37 9 4 0 0 23
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 Manufacturing ISM Report On Business(R) is based on data compiled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies. Membership of the Business Survey Committee is diversified by Standard Industrial Classification (SIC) category, based on each industry’s contribution to gross domestic product (GDP). Twenty industries from various U.S. geographical areas are represented on the committee. The 20 manufacturing Standard Industry Classification codes are: Food; Tobacco; Textiles; Apparel; Wood & Wood Products; Furniture; Paper; Printing & Publishing; Chemicals; Petroleum; Rubber & Plastic Products; Leather; Glass, Stone & Aggregate; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Transportation & Equipment; Instruments & Photographic Equipment; and Miscellaneous (a preponderance of jewelry, toys, sporting goods and musical instruments).
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 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 varying weights: New Orders – 30%; Production – 25%; Employment – 20%; Supplier Deliveries – 15%; and Inventories – 10%.
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 42.7 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.7 percent, it is generally declining. The distance from 50 percent or 42.7 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(R) is published monthly by the Institute for Supply Management(TM). The Institute for Supply Management(TM), 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 Manufacturing ISM Report On Business(R) 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 Manufacturing ISM Report On Business(R) featuring the December 2005 data will be released at 10:00 a.m. (ET) on January 3, 2006.