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Manufacturing in February expands for 19th straight month; PMI at 61.4%

Wednesday, March 02, 2011

Press release from the issuing company

Tempe, Arizona - Economic activity in the manufacturing sector expanded in February for the 19th consecutive month, and the overall economy grew for the 21st 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. "February's report from the manufacturing sector indicates continuing strong performance as the PMI registered 61.4 percent, a level last achieved in May 2004. New orders and production, driven by strength in exports in particular, continue to drive the composite index (PMI). New orders are growing significantly faster than inventories, and the Customers' Inventories Index indicates supply chain inventories will require continuing replenishment. The Employment Index is above 60 percent for only the third time in the last decade. While there are many positive indicators, there is also concern as industries related to housing continue to struggle and the Prices Index indicates significant inflation of raw material costs across many commodities."

PERFORMANCE BY INDUSTRY

Of the 18 manufacturing industries, 14 are reporting growth in February, in the following order: Apparel, Leather & Allied Products; Petroleum & Coal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; Textile Mills; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Paper Products; Wood Products; and Miscellaneous Manufacturing. The four industries reporting contraction in February are: Plastics & Rubber Products; Primary Metals; Nonmetallic Mineral Products; and Furniture & Related Products.

WHAT RESPONDENTS ARE SAYING ...

- "A continued weak dollar is increasing the cost of components purchased overseas. It is going to force us to increase our selling prices to our customers." (Transportation Equipment)
- "We continue to see significant inflation across nearly every type of chemical raw material we purchase." (Chemical Products)
- "Our plants are working 24/7 to meet production demands." (Fabricated Metal Products)
- "Prices continue to rise, while business limps along at last year's pace." (Nonmetallic Mineral Products)
- "Overall demand is off 10 percent." (Plastics & Rubber Products)

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY
Commodities Up in Price

Aluminum (6); Aluminum Products (2); Brass (3); Brass Products (2); Cocoa; Copper (7); Copper Based Products (4); Corn (6); Diesel (3); Fuel Oils (2); Gasoline; Nickel; Plastics (2); Plastic Products (2); Plastic Resins (4); Polyethylene; Polyethylene Resin (2); Polypropylene (2); Rubber Products; Soybean Oil (4); Stainless Steel (4); Stainless Steel Products (2); Steel (6); Steel - Hot Rolled; Steel Products (3); Steel Surcharges (2); Sugar (2); Sulfuric Acid; and Wheat.
Commodities Down in Price

No commodities are reported down in price.
Commodities in Short Supply

Capacitors; Cocoa Powder; and Electric Components (2).

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

FEBRUARY 2011 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing continued its rapid growth in February as the PMI registered 61.4 percent, an increase of 0.6 percentage point when compared to January's reading of 60.8 percent. This is also the highest PMI reading since May 2004 when the index also registered 61.4 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 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 21st consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 19th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January and February (61.1 percent) corresponds to a 6.5 percent increase in real gross domestic product (GDP). In addition, if the PMI for February (61.4 percent) is annualized, it corresponds to a 6.6 percent increase in real GDP annually."

New Orders

ISM's New Orders Index registered 68 percent in February, which is an increase of 0.2 percentage point when compared to the 67.8 percent reported in January. This is the 20th consecutive month of growth in the New Orders Index. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 13 industries reporting growth in new orders in February - listed in order - are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Wood Products; Printing & Related Support Activities; Machinery; Transportation Equipment; Chemical Products; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Miscellaneous Manufacturing. The four industries reporting decreases in new orders in February are: Primary Metals; Nonmetallic Mineral Products; Furniture & Related Products; and Plastics & Rubber Products.

Production

ISM's Production Index registered 66.3 percent in February, which is an increase of 2.8 percentage points from the January reading of 63.5 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 21st consecutive month the Production Index has registered above 50 percent.

The 12 industries reporting growth in production during the month of February - listed in order - are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Machinery; Transportation Equipment; Paper Products; Electrical Equipment, Appliances & Components; Chemical Products; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Printing & Related Support Activities; and Computer & Electronic Products. The three industries reporting a decrease in production in February are: Plastics & Rubber Products; Nonmetallic Mineral Products; and Furniture & Related Products.

Employment

ISM's Employment Index registered 64.5 percent in February, which is 2.8 percentage points higher than the 61.7 percent reported in January. This is the 17th consecutive month of growth in manufacturing employment. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, 14 reported growth in employment in February in the following order: Textile Mills; Petroleum & Coal Products; Transportation Equipment; Apparel, Leather & Allied Products; Computer & Electronic Products; Machinery; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Nonmetallic Mineral Products; Paper Products; Fabricated Metal Products; Chemical Products; and Miscellaneous Manufacturing. The two industries reporting a decrease in employment during February are: Plastics & Rubber Products; and Furniture & Related Products.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in February as the Supplier Deliveries Index registered 59.4 percent, which is 0.8 percentage point higher than the 58.6 percent registered in January. This is the 21st consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The seven industries reporting slower supplier deliveries in February - listed in order - are: Machinery; Chemical Products; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The four industries reporting faster deliveries in February are: Primary Metals; Miscellaneous Manufacturing; Paper Products; and Plastics & Rubber Products.

Inventories

Manufacturers' inventories declined in February following seven consecutive months of growth. The Inventories Index registered 48.8 percent, 3.6 percentage points less than the 52.4 percent recorded for January. An Inventories Index greater than 42.7 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 February are: Apparel, Leather & Allied Products; Chemical Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products. The seven industries reporting decreases in inventories in February - listed in order - are: Plastics & Rubber Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Machinery; Food, Beverage & Tobacco Products; and Paper Products.

Customers' Inventories

The ISM Customers' Inventories Index registered 40 percent in February, 5.5 percentage points lower than in January when the index registered 45.5 percent. This is the 23rd 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 two manufacturing industries reporting customers' inventories as being too high during February are: Primary Metals; and Food, Beverage & Tobacco Products. The 11 industries reporting customers' inventories as too low during February - listed in order - are: Textile Mills; Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Transportation Equipment; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Machinery; Paper Products; Fabricated Metal Products; and Chemical Products.

Prices

The ISM Prices Index registered 82 percent in February, 0.5 percentage point higher than the 81.5 percent reported in January and the highest reading since July 2008. This is the 20th consecutive month the Prices Index has registered above 50 percent. While 66 percent of respondents reported paying higher prices and 2 percent reported paying lower prices, 32 percent of supply executives reported paying the same prices as in January. A Prices Index above 49.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

The 13 industries reporting paying increased prices during the month of February - listed in order - are: Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; Chemical Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Paper Products; Transportation Equipment; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Computer & Electronic Products; and Miscellaneous Manufacturing. Furniture & Related Products is the only manufacturing industry reporting paying lower prices on average during February.

Backlog of Orders

ISM's Backlog of Orders Index registered 59 percent in February, which is 1 percentage point higher than the 58 percent reported in January. Of the 82 percent of respondents who reported their backlog of orders, 31 percent reported greater backlogs, 13 percent reported smaller backlogs, and 56 percent reported no change from January.

The 10 industries reporting increased order backlogs in February - listed in order - are: Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Paper Products; Printing & Related Support Activities; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; Transportation Equipment; Chemical Products; and Computer & Electronic Products. The two industries reporting decreases in order backlogs during February are: Furniture & Related Products; and Plastics & Rubber Products.

New Export Orders

ISM's New Export Orders Index registered 62.5 percent in February, which is 0.5 percentage point higher than the 62 percent reported in January. This is the 20th consecutive month of growth in the New Export Orders Index.

The 12 industries reporting growth in new export orders in February - listed in order - are: Petroleum & Coal Products; Furniture & Related Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Machinery; Chemical Products; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Paper Products; Computer & Electronic Products; and Food, Beverage & Tobacco Products. The two manufacturing industries reporting a decrease in export orders during February are: Primary Metals; and Plastics & Rubber Products.

Imports

Imports of materials by manufacturers continued to expand in February as the Imports Index registered 55 percent, the same as reported in January. This is the 18th consecutive month of growth in imports.

The nine industries reporting growth in imports during the month of February - listed in order - are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; Printing & Related Support Activities; Transportation Equipment; Machinery; Chemical Products; and Electrical Equipment, Appliances & Components. The three industries reporting a decrease in imports during February are: Plastics & Rubber Products; Fabricated Metal Products; and Computer & Electronic Products.

Buying Policy

Average commitment lead time for Capital Expenditures increased 3 days to 108 days. Average lead time for Production Materials decreased 1 day to 56 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 4 days to 23 days.

 

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