(Tempe, Arizona) — Economic activity in the manufacturing sector grew in July for the 26th consecutive month, while the overall economy grew for the 45th 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 grew for the 26th consecutive month in July based on the ISM data. An improved rate of growth in New Orders and Production continues to drive improvement in the sector. It appears that the sector hit a low point in May, and has rebounded nicely in June and July. The Prices Index apparently reached the end of its run in June, as the July index indicates that pricing power, at least for the short term, is now once again favoring buyers." TOP PERFORMING INDUSTRIES The 12 industries reporting growth in July — listed in order — are: Instruments & Photographic Equipment; Food; Wood & Wood Products; Electronic Components & Equipment; Leather; Miscellaneous*; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Furniture; Chemicals; Fabricated Metals; and Textiles. The industries reporting decreased activity in July are: Printing & Publishing; Glass, Stone & Aggregate; Primary Metals; Apparel; Rubber & Plastic Products; and Paper. The only industry reporting activity unchanged from June is Petroleum. WHAT RESPONDENTS ARE SAYING … "High oil prices continue to play havoc on business projections." (Chemicals) "Pricing pressure from offshore producers is having increasing pressure on our ability to sell our product." (Electronic Components & Equipment) "Ninety percent capacity, record ship volume for June, and we look to surpass in July." (Fabricated Metals) "Steel prices continue to fall and incoming order rates are highest of the year." (Furniture) "Business remains strong due to high truck and trailer build schedule." (Primary Metals) COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY Commodities Up in Price Caustic Soda (15); Chemicals (18); Copper (2); Corrugated Containers*; Diesel Fuel (11); Energy (6); Freight; Fuel Oils; Fuel Surcharges; Gasoline; Natural Gas (36); Natural Rubber; Oil (3); Plastic Resins (6); Plastics (12); Resins; and Steel* (22). Commodities Down in Price Aluminum Products (3); Corrugated Containers* (2); High Density Polyethylene; Low Density Polyethylene; Polypropylene; and Steel* (5). Commodities in Short Supply Bearings. *Reported as both up and down in price. Note: The number of consecutive months the commodity is listed is indicated after each item. JULY 2005 MANUFACTURING INDEX SUMMARIES PMI The PMI indicates that the manufacturing economy grew in July for the 26th consecutive month. The PMI for July registered 56.6 percent, an increase of 2.8 percentage points when compared to June's reading of 53.8 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 July 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 July (54.6 percent) corresponds to a 4.3 percent increase in gross domestic product (GDP) on an annual basis. In addition, if the PMI for July (56.6 percent) is annualized, it corresponds to a 5 percent increase in GDP annually. New Orders ISM's New Orders Index grew in July with a reading of 60.6 percent. The index is 3.4 percentage points higher than the 57.2 percent registered in June, and July is the 27th 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). Fourteen industries reported increases during July: Leather; Instruments & Photographic Equipment; Wood & Wood Products; Food; Electronic Components & Equipment; Miscellaneous*; Furniture; Chemicals; Rubber & Plastic Products; Transportation & Equipment; Paper; Fabricated Metals; Industrial & Commercial Equipment & Computers; and Textiles. Production ISM's Production Index is 61.2 percent in July, 5.6 percentage points higher than the 55.6 percent reported in June. July is the 27th 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 July, nine registered growth: Instruments & Photographic Equipment; Food; Miscellaneous*; Wood & Wood Products; Electronic Components & Equipment; Chemicals; Industrial & Commercial Equipment & Computers; Textiles; and Transportation & Equipment. Employment ISM's Employment Index registered growth in July following two consecutive months of contraction. The index registered 53.2 percent in July compared to 49.9 percent in June, an increase of 3.3 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 10 industries reporting growth in employment during July are: Furniture; Instruments & Photographic Equipment; Electronic Components & Equipment; Food; Miscellaneous*; Industrial & Commercial Equipment & Computers; Wood & Wood Products; Transportation & Equipment; Paper; and Chemicals. Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower for the 25th consecutive month in July. ISM's Supplier Deliveries Index for July registered 51.8 percent, a decrease of 1.3 percentage points when compared to June's reading of 53.1 percent. A reading above 50 percent indicates slower deliveries. The nine industries reporting slower supplier deliveries in July are: Glass, Stone & Aggregate; Electronic Components & Equipment; Primary Metals; Instruments & Photographic Equipment; Textiles; Fabricated Metals; Rubber & Plastic Products; Transportation & Equipment; and Food. Inventories Manufacturers' inventories declined in July for the fourth consecutive month as ISM's Inventories Index registered 47.5 percent, indicating a slightly faster rate of liquidation when compared to June. 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 six industries reporting higher inventories in July are: Apparel; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Food; Transportation & Equipment; and Furniture. Customers' Inventories** The July Customers' Inventories Index is at 44.5 percent, 0.5 percentage point higher than the 44 percent reported in June. Respondents indicate that their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 50th consecutive month that the index has registered below 50 percent. Three industries reported higher customers' inventories during July and they are: Furniture; Miscellaneous*; and Chemicals. Prices** ISM's Prices Index indicates manufacturers finally saw some price relief in July as the Prices Index fell to 48.5 percent. This brings an end to 40 consecutive months of higher prices as the index is 2 percentage points lower than June's 50.5 percent. In July, 24 percent of supply executives reported paying higher prices and 27 percent reported paying lower prices, while 49 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 July, nine industries reported paying higher prices: Glass, Stone & Aggregate; Printing & Publishing; Paper; Chemicals; Instruments & Photographic Equipment; Food; Rubber & Plastic Products; Electronic Components & Equipment; and Transportation & Equipment. Backlog of Orders** ISM's Backlog of Orders Index registered 49 percent, indicating manufacturers' backlogs in July are contracting when compared to June. This ends a period of seven consecutive months of growth in this index. Of the 86 percent of respondents who report their backlog of orders, 21 percent reported greater backlogs, 23 percent reported smaller backlogs, and 56 percent reported no change from June. The five industries reporting an increase in order backlogs during the month are: Wood & Wood Products; Furniture; Electronic Components & Equipment; Fabricated Metals; and Paper. New Export Orders ISM's New Export Orders Index for July registered 55.9 percent, an increase of 5.5 percentage points when compared to June's index of 50.4 percent. This is the 43rd consecutive month of growth in export orders. The 10 industries reporting growth in new export orders in July are: Miscellaneous*; Instruments & Photographic Equipment; Food; Textiles; Electronic Components & Equipment; Transportation & Equipment; Paper; Industrial & Commercial Equipment & Computers; Furniture; and Chemicals. Imports Imports of materials by manufacturers grew during July as the Imports Index registered 54.7 percent. The index increased 0.5 percentage point when compared to June's index of 54.2 percent, indicating a slightly faster rate of growth. The nine industries reporting growth in import activity for July are: Furniture; Wood & Wood Products; Apparel; Miscellaneous*; Electronic Components & Equipment; Transportation & Equipment; Chemicals; Instruments & Photographic Equipment; and Industrial & Commercial Equipment & Computers. *Miscellaneous is a preponderance of jewelry, toys, sporting goods and musical instruments. **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 4 days to 109 days. Average leadtime for Production Materials remained unchanged at 48 days. Average leadtime for Maintenance, Repair and Operating (MRO) supplies increased 1 day to 22 days.