September Manufacturing: New Orders Growing, Supplier Deliveries Slowing
Wednesday, October 02, 2002
(Tempe, Arizona) - Economic activity in the manufacturing sector declined in September after seven consecutive months of growth. The overall economy grew for the 11th 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 and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "The PMI has averaged 50.2 percent over the last three months. After a strong first quarter, the manufacturing sector has softened significantly. Stagnant and sluggish are apt descriptions for manufacturing at this time. Much of this month's data, as might be expected when the indexes are at or near the breakeven point, is mixed and lacks a clear trend. For instance, we see an obvious dichotomy with the Supplier Deliveries Index slowing at a rapid pace while the Backlog of Orders Index is declining." ISM's Backlog of Orders Index indicates that order backlogs declined for the third consecutive month. ISM's Supplier Deliveries Index reflects slower deliveries for the ninth consecutive month. Manufacturing employment continued to decline in September as the index remained below the breakeven point (an index of 50 percent) for the 24th consecutive month. ISM's Prices Index is above 50 percent as manufacturers experienced higher prices for the seventh consecutive month. New Export Orders grew in September for the ninth consecutive month. September's Imports Index grew for the 10th consecutive month. Comments from purchasing and supply executives express concern about energy prices and particularly the possible impact of a war with Iraq. Others indicate recovery is ongoing in their industry, but the rate is slow. Many worry about demand in the short term. ISM's PMI is 49.5 percent in September, a decrease of 1 percentage point when compared to 50.5 in August. ISM's New Orders Index rose from 49.7 percent in August to 50.2 percent in September. ISM's Production Index declined 4.7 percentage points from 55.6 percent in August to 50.9 percent in September. The ISM Employment Index is at 44.9 percent for September, a decrease of 0.9 percentage point when compared to the 45.8 percent reported in August. ISM's Supplier Deliveries Index registered 55.7 percent compared to 53.4 percent in August. ISM's Inventories Index declined to 43.6 percent. ISM's Customers' Inventories Index for September is at 40.5 percent, a decrease of 2 percentage points compared to the August reading of 42.5 percent. ISM's Prices Index in September is 62.5 percent, an increase of 1 percentage point from August's 61.5 percent. ISM's Backlog of Orders Index declined 0.5 percentage point from 45 percent in August to 44.5 percent in September. ISM's New Export Orders Index registered 51.8 percent, down 0.9 percentage point from August's 52.7 percent. The rate of growth in imports increased as the Imports Index rose from 51.9 percent in August to 54.7 percent in September. "Manufacturing activity declined slightly during September based on the decline in the PMI," added Ore. "Seasonal factors played a very significant role in determining several of the indexes this month – New Orders and Production were particularly impacted by strong seasonal influence. At this level of activity, manufacturing is struggling while the overall economy is seeing modest growth." Of the 20 industries in the manufacturing sector, 13 industries reported growth: Petroleum; Rubber & Plastic Products; Wood & Wood Products; Textiles; Instruments & Photographic Equipment; Apparel; Transportation & Equipment; Paper; Tobacco; Printing & Publishing; Primary Metals; Fabricated Metals; and Electronic Components & Equipment. "Steel and Sulfuric Acid are the only commodities reported in short supply. Commodities reported up in price are: Butadiene, Caustic Soda, Corrugated Containers, Natural Gas, Plastic Film, Plastic Resins, Polyethylene – High Density, Polyethylene – Low Density, Polypropylene, Resins, and Steel. No reports of commodities down in price," Ore stated.