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ISM releases manufacturing report for business in July; PMI at 55.5%

Tuesday, August 03, 2010

Press release from the issuing company

Tempe, Arizona - Economic activity in the manufacturing sector expanded in July for the 12th consecutive month, and the overall economy grew for the 15th 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, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee. "Manufacturing continued to grow during July, but at a slightly slower rate than in June. Employment, supplier deliveries and inventories improved during the month and reduced the impact of a month-over-month deceleration in new orders and production. July marks 12 consecutive months of growth in manufacturing, and indications are that demand is still quite strong in 10 of 18 industries. The prices that manufacturers paid for their inputs were slightly higher but stable, with only a few items on the short supply list."

PERFORMANCE BY INDUSTRY

Ten of the 18 manufacturing industries are reporting growth in July, in the following order: Plastics & Rubber Products; Miscellaneous Manufacturing; Paper Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Primary Metals; Textile Mills; Computer & Electronic Products; Fabricated Metal Products; and Chemical Products. The four industries reporting contraction in July are: Nonmetallic Mineral Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Machinery.

WHAT RESPONDENTS ARE SAYING...

- "Business in July was strong, the best month since October 2008." (Fabricated Metal Products)
- "Slow economy has killed sales for new equipment orders." (Machinery)
- "Quoting activity and sales are slow, and backlog is dropping." (Computer & Electronic Products)
- "Business continues to be sluggish and has fallen slightly as the economic ills continue." (Nonmetallic Mineral Products)
- "Retailers are still unwilling to gamble on inventory." (Printing & Related Support Activities)

Commodities Reported Up/Down In Price And In Short Supply

Commodities Up in Price
Capacitors; Corrugated Containers (5); Paper; Pulp; Steel* (13); and Titanium.

Commodities Down in Price
Machined Steel Parts; Polyethylene, Polypropylene Resins (2); and Steel*.

Commodities in Short Supply
Capacitors; Electrical Components; and Titanium Dioxide.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.

JULY 2010 MANUFACTURING INDEX SUMMARIES

PMI
Manufacturing continued to grow in July as the PMI registered 55.5 percent, a decrease of 0.7 percentage point when compared to June's reading of 56.2 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 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 15th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 12th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (58 percent) corresponds to a 5.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for July (55.5 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually."

The Last 12 Months
Month         PMI           Month         PMI
Jul 2010     55.5           Jan 2010     58.4
Jun 2010     56.2           Dec 2009     54.9
May 2010     59.7           Nov 2009     53.7
Apr 2010     60.4           Oct 2009     55.2
Mar 2010     59.6           Sep 2009     52.4
Feb 2010     56.5           Aug 2009     52.8
Average for 12 months – 56.3
High – 60.4
Low –52.4

New Orders
ISM's New Orders Index registered 53.5 percent in July, which is a decrease of 5 percentage points when compared to the 58.5 percent reported in June. This is the 13th consecutive month of growth in the New Orders Index. A New Orders Index above 50.2 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The eight industries reporting growth in new orders in July - listed in order - are: Plastics & Rubber Products; Paper Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Primary Metals; Transportation Equipment; Food, Beverage & Tobacco Products; and Fabricated Metal Products. Five industries reported decreases in new orders in July: Nonmetallic Mineral Products; Printing & Related Support Activities; Machinery; Chemical Products; and Furniture & Related Products.


Production
ISM's Production Index registered 57 percent in July, which is a decrease of 4.4 percentage points from the June reading of 61.4 percent. An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the 14th consecutive month the Production Index has registered above 50 percent.

The eight industries reporting growth in production during the month of July - listed in order - are: Paper Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Primary Metals; Transportation Equipment; and Computer & Electronic Products. The six industries reporting a decrease in production in July - listed in order - are: Nonmetallic Mineral Products; Furniture & Related Products; Printing & Related Support Activities; Machinery; Chemical Products; and Food, Beverage & Tobacco Products.

Employment
ISM's Employment Index registered 58.6 percent in July, which is 0.8 percentage point higher than the 57.8 percent reported in June. This is the eighth consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Ten of the 18 manufacturing industries reported growth in employment in July in the following order: Textile Mills; Paper Products; Computer & Electronic Products; Miscellaneous Manufacturing; Transportation Equipment; Fabricated Metal Products; Primary Metals; Machinery; Electrical Equipment, Appliances & Components; and Chemical Products. The two industries reporting a decrease in employment during July are: Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.


Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in July as the Supplier Deliveries Index registered 58.3 percent, which is 1 percentage point higher than the 57.3 percent registered in June. This is the 14th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The 11 industries reporting slower supplier deliveries in July - listed in order - are: Plastics & Rubber Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Computer & Electronic Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Primary Metals; Food, Beverage & Tobacco Products; and Fabricated Metal Products. The only two industries reporting faster deliveries in July are: Nonmetallic Mineral Products and Paper Products.

Inventories
Manufacturers' inventories grew for the first time following three consecutive months of contraction. The Inventories Index registered 50.2 percent in July, indicating a slight increase when compared to June. The index is 4.4 percentage points higher than the 45.8 percent reported in June. An Inventories Index greater than 42.6 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 - listed in order - are: Primary Metals; Plastics & Rubber Products; Transportation Equipment; Paper Products; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing. The five industries reporting decreases in inventories in July are: Machinery; Fabricated Metal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; and Chemical Products.

Customers' Inventories*
The ISM Customers' Inventories Index registered 39 percent in July, 1 percentage point higher than in June when the index registered 38 percent, and the 16th consecutive month the Customers' Inventories Index has been below 50 percent. The index indicates that respondents believe their customers' inventories are too low at this time.

None of the 18 manufacturing industries reported customers' inventories as being too high during July. The 11 industries reporting customers' inventories as too low during July - listed in order - are: Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Printing & Related Support Activities; Computer & Electronic Products; Primary Metals; Chemical Products; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Nonmetallic Mineral Products.

Prices*
The ISM Prices Index registered 57.5 percent in July, 0.5 percentage point higher than the 57 percent reported in June. This is the 13th consecutive month in which the Prices Index has registered above 50 percent. While 33 percent of respondents reported paying higher prices and 18 percent reported paying lower prices, 49 percent of supply executives reported paying the same prices as in June. A Prices Index above 49.3 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

The 10 industries reporting paying increased prices during the month of July - listed in order - are: Paper Products; Printing & Related Support Activities; Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Chemical Products; and Transportation Equipment. The three industries reporting paying lower prices on average during July are: Petroleum & Coal Products; Nonmetallic Mineral Products; and Fabricated Metal Products.

Backlog of Orders*
ISM's Backlog of Orders Index registered 54.5 percent in July, 2.5 percentage points lower than the 57 percent reported in June. Of the 86 percent of respondents who reported their backlog of orders, 28 percent reported greater backlogs, 19 percent reported smaller backlogs, and 53 percent reported no change from June.

The six industries reporting increased order backlogs in July - listed in order - are: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; and Chemical Products. The five industries reporting decreases in order backlogs during July are: Nonmetallic Mineral Products; Printing & Related Support Activities; Fabricated Metal Products; Furniture & Related Products; and Machinery.

New Export Orders*
ISM's New Export Orders Index registered 56.5 percent in July, which is 0.5 percentage point higher than the 56 percent reported in June. This is the 13th consecutive month of growth in the New Export Orders Index.

The seven industries reporting growth in new export orders in July - listed in order - are: Furniture & Related Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Paper Products; Chemical Products; Fabricated Metal Products; and Transportation Equipment. Two industries reported a decrease in export orders during July: Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.

Imports*
Imports of materials by manufacturers expanded in July as the Imports Index registered 52.5 percent, 4 percentage points lower than the 56.5 reported in June. This is the 11th consecutive month of growth in imports.

The five industries reporting growth in imports during the month of July are: Transportation Equipment; Computer & Electronic Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Fabricated Metal Products. The two industries reporting a decrease in imports during July are: Nonmetallic Mineral Products and Primary Metals.

* 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 in unchanged at 112 days. Average lead time for Production Materials increased 2 days to 52 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies is unchanged at 23 days.

 

 

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