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October Manufacturing ISM Report: New Orders Growing, Production Contracting

Monday, November 18, 2002

Press release from the issuing company

Tempe, Arizona -- (Editor’s note: This index is released on the first of each month. We overlooked this item as a news entry on the 1st and regret the delay in posting this release.) Economic activity in the manufacturing sector declined for the second consecutive month. The overall economy grew for the 12th 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 manufacturing sector continued its recent trend as it lost momentum again in October. There has been very little month-over-month change in manufacturing activity as the PMI has averaged 49.8 percent over the last four months. The West Coast dock strike obviously had an impact as the Imports Index fell 6 percentage points." ISM's Backlog of Orders Index indicates that order backlogs declined for the fourth consecutive month. ISM's Supplier Deliveries Index reflects slower deliveries for the 10th consecutive month. Manufacturing employment continued to decline in October as the index remained below the breakeven point (an index of 50 percent) for the 25th consecutive month. ISM's Prices Index is above 50 percent as manufacturers experienced higher prices for the eighth consecutive month. New Export Orders grew in October for the 10th consecutive month. October's Imports Index declined after 10 consecutive months of growth. Comments from purchasing and supply executives express varying concerns this month. The major uneasiness surrounded the dock strike on the West Coast, with one respondent indicating significant costs incurred due to airfreight costs from Japan. Others are still concerned about possible war with Iraq. On the upside, a number of companies appear to be thriving in this environment indicating that orders are up in markets where they compete with imports. ISM's PMI is 48.5 percent in October, a decrease of 1 percentage point when compared to 49.5 in September. ISM's New Orders Index rose from 50.2 percent in September to 50.9 percent in October. ISM's Production Index declined 1.6 percentage points from 50.9 percent in September to 49.3 percent in October. The ISM Employment Index is at 45 percent for October, an increase of 0.1 percentage point when compared to the 44.9 percent reported in September. ISM's Supplier Deliveries Index registered 52.6 percent compared to 55.7 percent in September. ISM's Inventories Index declined to 40.2 percent from 43.6 percent in September. ISM's Customers' Inventories Index for October is at 42.5 percent, an increase of 2 percentage points compared to the September reading of 40.5 percent. ISM's Prices Index in October is 58.3 percent, a decrease of 4.2 percentage points from September's 62.5 percent. ISM's Backlog of Orders Index declined 1 percentage point from 44.5 percent in September to 43.5 percent in October. ISM's New Export Orders Index registered 54.4 percent, up 2.6 percentage points from September's 51.8 percent. ISM's Imports Index contracted from 54.7 percent in September to 48.7 percent in October. "Manufacturing activity declined again in October," added Ore. "The sector lacks drivers at this point. While New Orders are relatively unchanged, the uncertainty with regard to terrorism and potential military action continue to add to the stagnation. Capital spending for additional capacity and IT is very soft. It appears that manufacturing employment is significantly lagging other recoveries." Of the 20 industries in the manufacturing sector, seven industries reported growth: Apparel; Textiles; Food; Printing & Publishing; Leather; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); and Primary Metals. "There are no reports of commodities in short supply. Commodities reported up in price are: Caustic Soda, Corrugated Containers, Gasoline, Honey, Natural Gas, Oil, Paper, Plastic, Steel and Sugar. Aluminum and Copper are the commodities reported down in price," Ore stated.




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