Tempe, Arizona - Economic activity in the manufacturing sector expanded in January for the sixth consecutive month, and the overall economy grew for the ninth 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 for the sixth consecutive month in January as the PMI rose to 58.4 percent, its highest reading since August 2004 when it registered 58.5 percent. This month's report provides significant assurance that the manufacturing sector is in recovery. Both the New Orders and Production Indexes are above 60 percent, indicating strong current and future performance for manufacturing. This month, 13 of 18 industries reported growth, up from nine industries last month, and this is a good indication that the impact of the recovery is expanding."

Performance by industry

The 13 manufacturing industries reporting growth in January - listed in order - are: Apparel, Leather & Allied Products; Textile Mills; Machinery; Miscellaneous Manufacturing; Transportation Equipment; Paper Products; Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Wood Products; Fabricated Metal Products; and Plastics & Rubber Products. Furniture & Related Products is the only industry reporting contraction in January.

What respondents are saying

- "Commodity prices are moving up again." (Printing & Related Support Activities)
- "We now believe that we will not have a good upturn until the 3rd quarter of 2010." (Primary Metals)
- "Overall activity is significantly higher than we typically see this time of year." (Machinery)
- "Orders from automotive very strong." (Electrical Equipment, Appliances & Components)
- "Lead times continue to be a problem for electronic components." (Computer & Electronic Products)

Commodities reported up/down in price and in short supply

Commodities up in price
Aluminum (7); Aluminum Products (2); Brass; Copper (8); Copper Based Products (7); Corrugated Containers; Diesel Fuel; Natural Gas; Nickel; Plastics; Plastic Resins; Polypropylene (2); Stainless Steel; Stainless Steel Products; Steel (7); Steel Products; and Zinc.

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

Commodities in short supply
No commodities are reported in short supply.

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

January 2010 manufacturing index summaries

PMI
Manufacturing growth accelerated in January as the PMI registered 58.4 percent, an increase of 3.5 percentage points when compared to December's seasonally adjusted reading of 54.9 percent. This is the sixth consecutive month of growth in the manufacturing sector, and the highest reading for the Index since August 2004 when it registered 58.5 percent. Prior to this recent growth trend, the PMI declined for 13 consecutive months. 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 ninth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the sixth consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the PMI for January (58.4 percent) corresponds to a 5.5 percent increase in real gross domestic product (GDP) on an annual basis."

New orders
ISM's New Orders Index registered 65.9 percent in January, 1.1 percentage points higher than the seasonally adjusted 64.8 percent registered in December. This is the seventh 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 14 industries reporting growth in new orders in January - listed in order - are: Textile Mills; Apparel, Leather & Allied Products; Machinery; Wood Products; Paper Products; Food, Beverage & Tobacco Products; Primary Metals; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Transportation Equipment; Fabricated Metal Products; Computer & Electronic Products; and Chemical Products. The four industries reporting decreases in new orders in January are: Furniture & Related Products; Petroleum & Coal Products; Plastics & Rubber Products; and Printing & Related Support Activities.

Production
ISM's Production Index registered 66.2 percent in January, which is an increase of 6.5 percentage points from the December reading of 59.7 percent (seasonally adjusted). 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 eighth consecutive month the Production Index has registered above 50 percent.

The 15 industries reporting growth in production during the month of January - listed in order - are: Textile Mills; Apparel, Leather & Allied Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Fabricated Metal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Paper Products; Machinery; Primary Metals; Computer & Electronic Products; and Chemical Products. The only industry reporting a decrease in production in January is Furniture & Related Products.

Employment
ISM's Employment Index registered 53.3 percent in January, which is 3.1 percentage points higher than the seasonally adjusted 50.2 percent reported in December. This is the second month of growth in manufacturing employment, and the highest reading since April 2006 (54.9 percent). 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.

Seven of the 18 manufacturing industries reported growth in employment in January in the following order: Textile Mills; Apparel, Leather & Allied Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Machinery; Transportation Equipment; and Fabricated Metal Products. The six industries that reported decreases in employment during January - listed in order - are: Plastics & Rubber Products; Primary Metals; Furniture & Related Products; Chemical Products; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products.

Supplier deliveries
The delivery performance of suppliers to manufacturing organizations was slower in January as the Supplier Deliveries Index registered 60.1 percent, which is 3.3 percentage points higher than the 56.8 percent registered in December (seasonally adjusted). This is the eighth consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The eight industries reporting slower supplier deliveries in January - listed in order - are: Machinery; Plastics & Rubber Products; Nonmetallic Mineral Products; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; Chemical Products; and Electrical Equipment, Appliances & Components. The two industries reporting faster deliveries in January are: Petroleum & Coal Products; and Primary Metals.

Inventories
Manufacturers' inventories contracted at a slower rate in January as the Inventories Index registered 46.5 percent. The index is 3.5 percentage points higher than the seasonally adjusted December reading of 43 percent. 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 two industries reporting higher inventories in January are: Apparel, Leather & Allied Products; and Miscellaneous Manufacturing. The nine industries that reported decreases in inventories in January - listed in order - are: Nonmetallic Mineral Products; Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Chemical Products; and Plastics & Rubber Products.

Customers' inventories*
The ISM Customers' Inventories Index registered 32 percent in January, 3 percentage points lower than in December when the index registered 35 percent, and the lowest reading in the history of the index. The index indicates that respondents believe their customers' inventories are too low at this time. This is the 10th consecutive month the Customers' Inventories Index has been below 50 percent.

There were no reports of higher customers' inventories during January. The 13 industries that reported lower customers' inventories during January - listed in order - are: Electrical Equipment, Appliances & Components; Wood Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Transportation Equipment; Paper Products; Textile Mills; Machinery; Primary Metals; Computer & Electronic Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products.

Prices*
The ISM Prices Index registered 70 percent in January, 8.5 percentage points higher than the 61.5 percent reported in December. This is the seventh consecutive month that the Prices Index has registered above 50 percent. While 44 percent of respondents reported paying higher prices and 4 percent reported paying lower prices, 52 percent of supply executives reported paying the same prices as in December. 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 13 industries reporting paying increased prices during the month of January - listed in order - are: Miscellaneous Manufacturing; Paper Products; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Transportation Equipment; Textile Mills; Chemical Products; Machinery; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Computer & Electronic Products. There were no reports of industries paying lower prices during January.

Backlog of orders*
ISM's Backlog of Orders Index registered 56 percent in January, 6 percentage points higher than the 50 percent reported in December. Of the 84 percent of respondents who reported their backlog of orders, 26 percent reported greater backlogs, 14 percent reported smaller backlogs, and 60 percent reported no change from December.

The 11 industries reporting increased order backlogs in January - listed in order - are: Apparel, Leather & Allied Products; Paper Products; Plastics & Rubber Products; Primary Metals; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; and Fabricated Metal Products. The three industries that reported decreases in order backlogs during January are: Petroleum & Coal Products; Furniture & Related Products; and Printing & Related Support Activities.

New export orders*
ISM's New Export Orders Index registered 58.5 percent in January, 4 percentage points higher than the 54.5 percent reported in December. This is the seventh consecutive month of growth in the New Export Orders Index, following nine consecutive months of contraction.

The eight industries reporting growth in new export orders in January - listed in order - are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; and Machinery. There were no industries reporting decreases in new export orders.

Imports*
Imports of materials by manufacturers expanded in January as the Imports Index registered 56.5 percent, 1.5 percentage points higher than the 55 percent reported in December. This is the fifth consecutive month of growth in imports.

The eight industries reporting growth in imports during the month of January - listed in order - are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; and Fabricated Metal Products. There were no industries reporting decreases in imports during January.

* 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 increased 8 days to 118 days. Average lead time for Production Materials increased 2 days to 53 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies was unchanged at 21 days.