EconoIndicators

Manufacturing Report At a Glance

• Purchasing Managers Index (PMI): 50.8
• 50+ represents growing economic conditions
• Monthly Change: Down 0.1
• Inventories: 46.9
• Monthly Change: Down 0.3
• New Orders: 52.6
• Monthly Change: Up 0.1

Technorati Tags: Purchasing Managers Index, ISM, manufacturing

November 2007 Manufacturing ISM Report On Business®
PMI at 50.8%
New Orders, Production Growing
Inventories Contracting
Supplier Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in November for the 10th consecutive month, while the overall economy grew for the 73rd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “Manufacturing continued to grow during November, a trend that is now in its 10th month. The rate of growth in the sector was down slightly compared to October. While other segments of the economy are struggling, manufacturing continues to grow due to continuing strength in new orders, and a recovery in production from last month. Prices, driven higher by energy prices, are once again the major concern.”
TOP PERFORMING INDUSTRIES

The seven industries reporting growth in November — listed in order — are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Paper Products; Chemical Products; Machinery; Electrical Equipment, Appliances & Components; and Computer & Electronic Products.
WHAT RESPONDENTS ARE SAYING …

* “Continued concerns regarding high oil prices, weak dollar and weak housing sector.” (Chemical Products)
* “Erratic market causing more difficulty in forecasting customer demand.” (Computer & Electronic Products)
* “Heavy truck market has not started recovering yet.” (Fabricated Metal Products)
* “Business is off by almost 50 percent over last year in the building products industry.” (Nonmetallic Mineral Products)
* “More inquiries from international customers than domestic.” (Machinery)

*Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Caustic Soda (2); Corrugated Containers (3); Gasoline; LDPE Resins; Methanol (2); Natural Gas; Oil — #2 & #6; Packaging; Plastic Products; Polypropylene Resin; Resins; Soybean Oil; and Sulfuric Acid.

Commodities Down in Price

No commodities are 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.

NOVEMBER 2007 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing grew at a slightly slower rate in November as the PMI registered 50.8 percent, a decrease of 0.1 percentage point when compared to October’s reading of 50.9 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 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the 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 PMI average for January through November (52.6 percent) corresponds to a 3.3 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for November (50.8 percent) is annualized, it corresponds to a 2.8 percent increase in real GDP annually."

THE LAST 12 MONTHS

New Orders

ISM’s New Orders Index registered 52.6 percent in November. The index is 0.1 percentage point higher than the 52.5 percent reported in October. A New Orders Index above 49.1 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 November: Apparel, Leather & Allied Products; Paper Products; Food, Beverage & Tobacco Products; Machinery; Chemical Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products.

Production

ISM’s Production Index rebounded to 51.9 percent in November, an increase of 2.3 percentage points, following a slight downturn in October when the index registered 49.6 percent. An index above 49.8 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

Of the industries reporting in November, seven registered growth: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; Primary Metals; and Machinery.

Employment

ISM’s Employment Index registered 47.8 percent in November, which is a decrease of 4.2 percentage points when compared to October’s reading of 52 percent. An Employment Index above 49.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The eight industries reporting growth in employment during November are: Textile Mills; Petroleum & Coal Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Primary Metals; Machinery; Computer & Electronic Products; and Miscellaneous Manufacturing.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations continued to slow in November. The Supplier Deliveries Index increased 1.1 percentage points to 51.7 percent. A reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in November are: Printing & Related Support Activities; Chemical Products; Computer & Electronic Products; Transportation Equipment; and Machinery.

Inventories

Manufacturers’ inventories contracted again in November as the Inventories Index registered 46.9 percent, 0.3 percentage point lower than October’s reading of 47.2 percent. This is the 16th 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 two industries reporting higher inventories in November are: Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products.

Customers’ Inventories*

The ISM Customers’ Inventories Index registered 49 percent in November, a decrease of 5 percentage points when compared to October. The index indicates that respondents believe their customers’ inventories are too low at this time.

Five industries reported higher customers’ inventories during November: Furniture & Related Products; Chemical Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Fabricated Metal Products.

Prices*

In November, the ISM Prices Index registered 67.5 percent, indicating manufacturers are paying higher prices on average when compared to October. While 42 percent of respondents reported paying higher prices and 7 percent reported paying lower prices, 51 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In November, 15 industries reported paying higher prices: Textile Mills; Petroleum & Coal Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; Apparel, Leather & Allied Products; Paper Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Furniture & Related Products; Primary Metals; Fabricated Metal Products; and Computer & Electronic Products.

Backlog of Orders*

ISM’s Backlog of Orders Index registered 41.5 percent in November, 4.5 percentage points lower than the 46 percent reported in October. This marks the second month that the index has declined following six consecutive months of growth. Of the 88 percent of respondents who reported their backlog of orders, 13 percent reported greater backlogs, 30 percent reported smaller backlogs, and 57 percent reported no change from October.

The three industries reporting an increase in order backlogs in November are: Paper Products; Machinery; and Food, Beverage & Tobacco Products.

New Export Orders*

ISM’s New Export Orders Index registered 58.5 percent in November, an increase of 1.5 percentage points when compared to October’s index of 57 percent. This is the 60th consecutive month of growth in export orders.

The nine industries reporting growth in new export orders in November are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing; Primary Metals; Electrical Equipment, Appliances & Components; Machinery; and Computer & Electronic Products.

Imports*

Imports of materials by manufacturers failed to grow again during November as the Imports Index registered 47.5 percent, the same rate of contraction as reported in October. This is the second month of contraction in the Index following 69 consecutive months of growth.

The three industries reporting growth in import activity for November are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; and Chemical Products.

* 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 leadtime for Capital Expenditures decreased 3 days to 120 days. Average leadtime for Production Materials is unchanged at 48 days. Average leadtime for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 21 days.

Source: Institute for Supply Management