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November ISM report has PMI at 56.6%; second highest in past six months

Thursday, December 02, 2010

Press release from the issuing company

Tempe, Arizona - Economic activity in the manufacturing sector expanded in November for the 16th consecutive month, and the overall economy grew for the 19th 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. "The manufacturing sector grew during November, with both new orders and production continuing to expand. With the PMI at 56.6 percent, November's rate of growth is the second fastest in the last six months. Exports and imports continue to support expansion in the sector. Prices moderated slightly during the month, but comments from the respondents express concerns with regard to pricing pressures. The list of commodities in short supply increased, though short supply items are not yet posing significant problems. Manufacturing continues to benefit from the recovery in autos, but those industries reliant upon housing continue to struggle."

Performance by industry

Of the 18 manufacturing industries, 10 are reporting growth in November, in the following order: Computer & Electronic Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Machinery; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Chemical Products; and Primary Metals. The six industries reporting contraction in November - listed in order - are: Printing & Related Support Activities; Furniture & Related Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Paper Products; and Miscellaneous Manufacturing.

What respondents are saying...

- "Business continues to improve; however, rising material prices are eroding margin. Increases to the consumer are inevitable in early Q1 2011." (Paper Products)
- "International markets expanding rapidly. Domestic market is slowly rebounding." (Transportation Equipment)
- "We're starting to see capacity at suppliers become an issue." (Machinery)
- "Capital projects are being released, which is improving our sales." (Computer & Electronic Products)
- "We are seeing increases in chemical prices that seem to be driven by supply/demand imbalance." (Chemical Products)

Commodities reported up/down in price and in short supply
Commodities Up in Price

Aluminum (3); Caustic Soda (4); Chemicals (2); Copper (4); Copper Based Products; Corn (3); Corrugated Containers (9); Nickel; Plastic Resins; Polyethylene (3); Resins; Soybean Oil; Stainless Steel; Steel* (3); Titanium; and Titanium Dioxide.
Commodities Down in Price

Natural Gas; and Steel*.
Commodities in Short Supply

Cocoa Powder (3); Electrical/Electronic Components (3); IGBT - Integrated Gate Bipolar Transistors; and Polyethylene - Low Density.

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

NOVEMBER 2010 MANUFACTURING INDEX SUMMARIES
PMI

Manufacturing continued to grow in November as the PMI registered 56.6 percent, a decrease of 0.3 percentage point when compared to October's reading of 56.9 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 19th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 16th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (57.3 percent) corresponds to a 5.1 percent increase in real gross domestic product (GDP). In addition, if the PMI for November (56.6 percent) is annualized, it corresponds to a 4.9 percent increase in real GDP annually."

New Orders

ISM's New Orders Index registered 56.6 percent in November, which is a decrease of 2.3 percentage points when compared to the 58.9 percent reported in October. This is the 17th 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 nine industries reporting growth in new orders in November - listed in order - are: Petroleum & Coal Products; Transportation Equipment; Primary Metals; Computer & Electronic Products; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Chemical Products; and Electrical Equipment, Appliances & Components. The six industries reporting decreases in new orders in November - listed in order - are: Printing & Related Support Activities; Food, Beverage & Tobacco Products; Furniture & Related Products; Miscellaneous Manufacturing; Paper Products; and Nonmetallic Mineral Products.

Production

ISM's Production Index registered 55 percent in November, which is a decrease of 7.7 percentage points from the October reading of 62.7 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 18th consecutive month the Production Index has registered above 50 percent.

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

Employment

ISM's Employment Index registered 57.5 percent in November, which is 0.2 percentage point lower than the 57.7 percent reported in October. This is the 12th 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.

Eleven of the 18 manufacturing industries reported growth in employment in November in the following order: Apparel, Leather & Allied Products; Petroleum & Coal Products; Primary Metals; Paper Products; Fabricated Metal Products; Computer & Electronic Products; Machinery; Transportation Equipment; Chemical Products; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing. The four industries reporting a decrease in employment during November are: Furniture & Related Products; Plastics & Rubber Products; Printing & Related Support Activities; and Food, Beverage & Tobacco Products.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in November as the Supplier Deliveries Index registered 57.2 percent, which is 6 percentage points higher than the 51.2 percent registered in October. This is the 18th 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 November - listed in order - are: Petroleum & Coal Products; Computer & Electronic Products; Machinery; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Fabricated Metal Products. Nonmetallic Mineral Products is the only industry reporting faster deliveries in November.

Inventories

Manufacturers' inventories grew in November as the Inventories Index registered 56.7 percent. The index is 2.8 percentage points higher than the 53.9 percent reported in October. 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 nine industries reporting higher inventories in November - listed in order - are: Apparel, Leather & Allied Products; Computer & Electronic Products; Machinery; Plastics & Rubber Products; Chemical Products; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The three industries reporting decreases in inventories in November are: Primary Metals; Transportation Equipment; and Electrical Equipment, Appliances & Components.

Customers' Inventories*

The ISM Customers' Inventories Index registered 45.5 percent in November, 1.5 percentage points higher than in October when the index registered 44 percent. This is the 20th consecutive month the Customers' Inventories Index has been below 50 percent, indicating that respondents believe their customers' inventories are too low at this time.

The three manufacturing industries reporting customers' inventories as being too high during November are: Plastics & Rubber Products; Paper Products; and Fabricated Metal Products. The seven industries reporting customers' inventories as too low during November - listed in order - are: Printing & Related Support Activities; Nonmetallic Mineral Products; Petroleum & Coal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; and Computer & Electronic Products.

Prices*

The ISM Prices Index registered 69.5 percent in November, 1.5 percentage points lower than the 71 percent reported in October. This is the 17th consecutive month the Prices Index has registered above 50 percent. While 48 percent of respondents reported paying higher prices and 9 percent reported paying lower prices, 43 percent of supply executives reported paying the same prices as in October. 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 14 industries reporting paying increased prices during the month of November - listed in order - are: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Chemical Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Primary Metals; Miscellaneous Manufacturing; Printing & Related Support Activities; and Transportation Equipment. None of the 18 manufacturing industries reported paying lower prices on average during November.

Backlog of Orders*

ISM's Backlog of Orders Index registered 46 percent in November, which is the same rate of contraction as reported in October. Of the 89 percent of respondents who reported their backlog of orders, 18 percent reported greater backlogs, 26 percent reported smaller backlogs, and 56 percent reported no change from October.

The four industries reporting increased order backlogs in November are: Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Transportation Equipment. The nine industries reporting decreases in order backlogs during November - listed in order - are: Printing & Related Support Activities; Paper Products; Furniture & Related Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing; Machinery; and Fabricated Metal Products.

New Export Orders*

ISM's New Export Orders Index registered 57 percent in November, which is 3.5 percentage points lower than the 60.5 percent reported in October. This is the 17th consecutive month of growth in the New Export Orders Index.

The nine industries reporting growth in new export orders in November - listed in order - are: Fabricated Metal Products; Apparel, Leather & Allied Products; Primary Metals; Paper Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Computer & Electronic Products; Transportation Equipment; and Chemical Products. The three manufacturing industries reporting a decrease in export orders during November are: Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Machinery.

Imports*

Imports of materials by manufacturers continued to expand in November as the Imports Index registered 53 percent, which is 1.5 percentage points higher than the 51.5 percentage points reported in October. This is the 15th consecutive month of growth in imports.

The six industries reporting growth in imports during the month of November - listed in order - are: Apparel, Leather & Allied Products; Machinery; Electrical Equipment, Appliances & Components; Chemical Products; Transportation Equipment; and Miscellaneous Manufacturing. The four industries reporting a decrease in imports during November are: Printing & Related Support Activities; Paper Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products.

* 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 4 days to 101 days. Average lead time for Production Materials decreased 4 days to 53 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 1 day to 22 days.

 

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