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August Manufacturing Activity: New Orders Decline, Production Growing

Press release from the issuing company

Supplier Deliveries Slowing Employment, Inventories Decline Exports, Imports Growing (Tempe, Arizona) -- September 4, 2002 -- Economic activity in the manufacturing sector grew for the seventh consecutive month in August. The overall economy grew for the 10th 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 and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "Putting the year in perspective, we now have seven consecutive months of modest growth. August's PMI, at 50.5 percent, indicates that manufacturing improved when compared to July. New Orders softened, and are a cause for concern as we look at the balance of the year. At the current level of growth in the overall economy, many manufacturers find themselves anxious about second-half sales." ISM's Backlog of Orders Index indicates that order backlogs declined for the second consecutive month. ISM's Supplier Deliveries Index reflects slower deliveries for the eighth consecutive month. Manufacturing employment continued to decline in August as the index remained below the breakeven point (an index of 50 percent) for the 23rd consecutive month. ISM's Prices Index is above 50 percent as manufacturers experienced higher prices for the sixth consecutive month. New Export Orders grew in August for the eighth consecutive month. August's Imports Index decelerated, while still registering growth for the ninth consecutive month. Comments from purchasing and supply executives reflect soft demand and very competitive markets. While some indicate that business is improving, they lack confidence when forecasting the months ahead. Declines in consumer and business confidence are major themes. ISM's PMI is 50.5 percent in August, the same as reported in July. ISM's New Orders Index declined from 50.4 percent in July to 49.7 percent in August. ISM's Production Index declined 0.1 percentage point from 55.7 percent in July to 55.6 percent in August. The ISM Employment Index is at 45.8 percent for August, an increase of 0.8 percentage point when compared to the 45 percent reported in July. ISM's Supplier Deliveries Index registered 53.4 percent, compared to 54.9 percent in July. ISM's Inventories Index rose to 45.2 percent. ISM's Customers' Inventories Index for August is at 42.5 percent, the same as reported in July. ISM's Prices Index in August is 61.5 percent, a decrease of 6.8 percentage points from July's 68.3 percent. ISM's Backlog of Orders Index declined 0.5 percentage point from 45.5 percent in July to 45 percent in August. ISM's New Export Orders Index registered 52.7 percent, up 0.5 percentage point from July's 52.5 percent. The rate of growth in imports decreased as the Imports Index declined from 54.2 percent in July to 51.9 percent in August. "Manufacturing activity improved slightly during August," added Ore. "Steel price concerns are less than they were last month. The decline of the U.S. Dollar seems to have helped exports while slowing imports." Of the 20 industries in the manufacturing sector, eight industries reported growth: Printing & Publishing; Leather; Transportation & Equipment; Apparel; Chemicals; Food; Industrial & Commercial Equipment & Computers; and Paper. "Steel and Steel – Coated are the commodities reported in short supply. Commodities reported up in price are: Caustic Soda, Chemicals, Corrugated Containers, Flour, Methanol, Natural Gas, Fuel Oil, Phenol, Plastics, Polyethylene – High Density, Resins, Soybean Oil, Steel, Steel – Coated, Steel – Galvanized, and Wheat. Aluminum, Corrugated Containers, and Natural Gas are the commodities reported down in price," Ore stated.