TEMPE, Ariz., Dec 01, 2008 -- Economic activity in the manufacturing sector failed to grow in November for the fourth consecutive month, and the overall economy contracted for the second consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business(R).

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management(TM) Manufacturing Business Survey Committee. "When comparing November to October, the PMI indicates a continuing rapid rate of contraction in manufacturing. New orders have contracted for 12 consecutive months, and are at the lowest level since June 1980 when the index registered 24.2 percent. Order backlogs have fallen to the lowest level since ISM began tracking the Backlog of Orders Index in January 1993. The Prices Index at 25.5 percent indicates that commodity prices continue to decline at a rapid rate. This is the lowest reading for the index since May 1949 when it registered 20.1 percent."

PERFORMANCE BY INDUSTRY

The two industries reporting growth in November -- listed in order -- are: Apparel, Leather & Allied Products; and Paper Products. The industries reporting contraction in November are: Nonmetallic Mineral Products; Fabricated Metal Products; Textile Mills; Printing & Related Support Activities; Machinery; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Furniture & Related Products; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Wood Products.

WHAT RESPONDENTS ARE SAYING ...

-- "The only positive thing of late is that the U.S. dollar has strengthened significantly against other currencies. We import the majority of our materials so this will have the effect of lowering our COGS." (Transportation Equipment)

-- "Steel industry is our main customer, and they have had a real slowdown." (Computer & Electronic Products)

-- "Criteria for projects is significantly higher with very short ROI periods." (Food, Beverage & Tobacco Products)

-- "We have revised downward our top-line sales estimates for CY2009 by 8 percent due to the continued softness we see in the housing sector." (Machinery)

-- "Suppliers are trying to hold onto pricing, but petrochemical and commodity prices are dropping like a rock." (Plastics & Rubber Products)

 COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Caustic Soda (9); Copper (2)(b); and Natural Gas(b).

Commodities Down in Price

Aluminum (2); Aluminum Based Products; Copper(b) (4); Diesel Fuel (4); #2 Fuel Oil; Gasoline; Natural Gas(b) (4); Nickel (2); Polyethylene; Polypropylene (2); Resin Based Products; Scrap Steel; Stainless Steel (2); Steel (3); Steel -- Cold Rolled (2); Steel Products; Steel Scrap Surcharges; and Sulfuric Acid.

Commodities in Short Supply

Caustic Soda (9) is the only commodity reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.

(b) Reported as both up and down in price

NOVEMBER 2008 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing contracted in November as the PMI registered 36.2 percent, 2.7 percentage points lower than the 38.9 percent reported in October. This is the lowest reading since May 1982 when the PMI registered 35.5 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 contraction in both the overall economy and the manufacturing sector. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (46.8 percent) corresponds to a 1.8 percent increase in real gross domestic product (GDP). In addition, if the PMI for November (36.2 percent) is annualized, it corresponds to a 1.5 percent decrease in real GDP annually."

 New Orders

ISM's New Orders Index registered 27.9 percent in November, 4.3 percentage points lower than the 32.2 percent registered in October. This is the lowest reading for this index since June 1980 when the index was at 24.2 percent. 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).

Petroleum & Coal Products is the only industry reporting increased new orders during November. The industries failing to grow in November are: Nonmetallic Mineral Products; Printing & Related Support Activities; Textile Mills; Primary Metals; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Transportation Equipment; Electrical Equipment, Appliances & Components; Paper Products; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Computer & Electronic Products.

 Production

ISM's Production Index decreased to 31.5 percent in November, a decrease of 2.6 percentage points from the 34.1 percent reported in October. 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 November, only one registered growth: Paper Products. The industries failing to grow in November are: Nonmetallic Mineral Products; Textile Mills; Furniture & Related Products; Primary Metals; Printing & Related Support Activities; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Wood Products.

 Employment

ISM's Employment Index registered 34.2 percent in November, which is a decrease of 0.4 percentage point when compared to the 34.6 percent reported in October. This is the lowest reading for the Employment Index since March 1991 when the index registered 33.6 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 two industries reporting growth in employment during November are: Apparel, Leather & Allied Products; and Miscellaneous Manufacturing. The industries that reported decreases in employment during November are: Nonmetallic Mineral Products; Printing & Related Support Activities; Fabricated Metal Products; Furniture & Related Products; Computer & Electronic Products; Textile Mills; Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Wood Products; Chemical Products; Primary Metals; Transportation Equipment; and Food, Beverage & Tobacco Products.

 Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was faster for the second consecutive month in November as the Supplier Deliveries Index registered 48.4 percent, which is 0.8 percentage point lower than the 49.2 percent registered in October. A reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in November are: Wood Products; Plastics & Rubber Products; Primary Metals; Chemical Products; and Machinery. The industries reporting faster deliveries in November are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Transportation Equipment.

Inventories

Manufacturers' inventories contracted in November as the Inventories Index registered 39.1 percent, which is 5.2 percentage points lower than the 44.3 percent reported in October. 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 four industries reporting higher inventories in November are: Plastics & Rubber Products; Paper Products; Furniture & Related Products; and Food, Beverage & Tobacco Products. The industries that reported decreases in November are: Petroleum & Coal Products: Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; Primary Metals; Machinery; and Transportation Equipment.

 Customers' Inventories(c)

The ISM Customers' Inventories Index registered 55 percent in November, the same as reported in October. The index indicates that respondents believe their customers' inventories are too high at this time.

Eight industries reported higher customers' inventories during November: Textile Mills; Furniture & Related Products; Machinery; Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Chemical Products. The industries that reported lower customers' inventories during November are: Wood Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Printing & Related Support Activities; and Transportation Equipment.

 Prices(c)

The ISM Prices Index registered 25.5 percent in November compared to 37 percent in October, indicating manufacturers are paying lower prices on average when compared to October. This is the lowest reading for the index since May 1949 when it registered 20.1 percent. While 8 percent of respondents reported paying higher prices and 57 percent reported paying lower prices, 35 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 November, Apparel, Leather & Allied Products is the only industry reporting paying higher prices. The industries that reported paying lower prices during November are: Nonmetallic Mineral Products; Wood Products; Fabricated Metal Products; Machinery; Food, Beverage & Tobacco Products; Paper Products; Plastics & Rubber Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Chemical Products; Miscellaneous Manufacturing; and Computer & Electronic Products.

 Backlog of Orders(c)

ISM's Backlog of Orders Index registered 27 percent in November, 2.5 percentage points lower than the 29.5 percent reported in October. Of the 89 percent of respondents who reported their backlog of orders, 6 percent reported greater backlogs, 52 percent reported smaller backlogs, and 42 percent reported no change from October.

The only industry reporting an increase in order backlogs in November is Apparel, Leather & Allied Products. The industries that reported decreases in order backlogs during November are: Nonmetallic Mineral Products; Paper Products; Textile Mills; Printing & Related Support Activities; Machinery; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Primary Metals; Plastics & Rubber Products; Chemical Products; Food, Beverage & Tobacco Products; Wood Products; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing.

 New Export Orders(c)

ISM's New Export Orders Index registered 41 percent in November, the same rate of contraction reported in October. This is the second month of contraction following 70 consecutive months of growth in the New Export Orders Index.

The two industries reporting growth in new export orders in November are: Apparel, Leather & Allied Products; and Plastics & Rubber Products. The industries that reported decreases in new export orders in November are: Nonmetallic Mineral Products; Printing & Related Support Activities; Paper Products; Machinery; Primary Metals; Miscellaneous Manufacturing; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Chemical Products.

 Imports(c)

Imports of materials by manufacturers contracted during November as the Imports Index registered 37.5 percent, 3.5 percentage points lower than the 41 percent reported in October. This is the 10th consecutive month of contraction in imports.

The only industry reporting growth in import activity for November is Apparel, Leather & Allied Products. The industries that reported decreases in imports during November are: Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Fabricated Metal Products; Computer & Electronic Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; Primary Metals; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Miscellaneous Manufacturing.

 (c) 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 8 days to 106 days. Average lead time for Production Materials is unchanged at 48 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 4 days to 21 days.

 About this Report

The data presented herein is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.