EconoIndicators / ISM Manufacturing Report on Business

Manufacturing Report At a Glance

Purchasing Managers Index (PMI): 48.3
50+ represents growing economic conditions
Monthly Change: Down 2.4
Inventories: 45.4
Monthly Change: Down 3.7
New Orders: 49.1
Monthly Change: Down 0.4

Technorati Tags: Purchasing Managers Index, PMI, ISM, manufacturing

February 2008 Manufacturing ISM Report On Business
PMI at 48.3%
Production Growing
New Orders, Employment and Inventories Contracting
Supplier Deliveries Slowing

(Tempe, Arizona) — 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®.

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 GLANCE FEBRUARY 2008
Index	Series Index February	Series Index January	Percentage Point Change	Direction	Rate of Change	Trend* (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

*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 economy indicates 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 — 51.0 High — 53.4 Low — 48.3

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

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

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

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

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

Customers’ Inventories*

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

Prices*

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

Backlog of Orders*

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

New Export Orders*

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

Imports*

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

* 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

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

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