Tempe, Arizona - Economic activity in the manufacturing sector expanded in May for the 10th consecutive month, and the overall economy grew for the 13th 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 10th consecutive month during May. The rate of growth as indicated by the PMI is driven by continued strength in new orders and production. Employment continues to grow as manufacturers have added to payrolls for six consecutive months. The recovery continues to broaden as 16 of 18 industries report growth. There are a number of reports, particularly in the tech sector, of shortages of components; this is the result of excessive inventory de-stocking during the downturn."

PERFORMANCE BY INDUSTRY
Sixteen of the 18 manufacturing industries are reporting growth in May, in the following order: Paper Products; Wood Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Primary Metals; Printing & Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Machinery; Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products. The only industry reporting contraction in May is Petroleum & Coal Products.

WHAT RESPONDENTS ARE SAYING ...
- "Tight supply conditions exist for electronic components." (Computer & Electronic Products)
- "No signs of the ramp-up abating anytime soon." (Machinery)
- "Volatility of steel and steel-making components is forcing us to raise prices on our shipped goods to automotive customers." (Fabricated Metal Products)
- "Aftermarket sales increased 25 percent during the past quarter." (Transportation Equipment)
- "Sales exceeded budget for the fourth consecutive month." (Food, Beverage & Tobacco Products)

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price
Aluminum (11); Butadiene Products; Caustic Soda (3); Copper* (3); Corrugated Containers (3); Galvanized Coils; Nylon Products; Paper; Paper Products; Plastics (5); Plastic Resins (5); Polypropylene (6); Pulp (2); Stainless Steel (2); Stainless Steel Products (2); Steel (11); Steel Products (5); and Sulfuric Acid (3).

Commodities Down in Price
Aluminum Products; and Copper*.

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.
*Reported as both up and down in price.

MAY 2010 MANUFACTURING INDEX SUMMARIES

PMI
Manufacturing continued to grow in May as the PMI registered 59.7 percent, a decrease of 0.7 percentage point when compared to April's reading of 60.4 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 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 13th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 10th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (58.9 percent) corresponds to a 5.7 percent increase in real gross domestic product (GDP). In addition, if the PMI for May (59.7 percent) is annualized, it corresponds to a 6 percent increase in real GDP annually."

New Orders
ISM's New Orders Index registered 65.7 percent in May, which is the same rate of growth reported for the preceding month. This is the 11th 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 15 industries reporting growth in new orders in May- listed in order - are: Wood Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; Miscellaneous Manufacturing; Paper Products; Primary Metals; Furniture & Related Products; Transportation Equipment; Computer & Electronic Products; Printing & Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Machinery; and Food, Beverage & Tobacco Products. The only industry reporting a decrease in new orders in May is Petroleum & Coal Products.

Production
ISM's Production Index registered 66.6 percent in May, which is a decrease of 0.3 percentage point from the April reading of 66.9 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 12th consecutive month the Production Index has registered above 50 percent.

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

Employment
ISM's Employment Index registered 59.8 percent in May, which is 1.3 percentage points higher than the 58.5 percent reported in April. This is the sixth 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.

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

Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in May as the Supplier Deliveries Index registered 61 percent, which is 0.3 percentage point lower than the 61.3 percent registered in April. This is the 12th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The 12 industries reporting slower supplier deliveries in May - listed in order - are: Plastics & Rubber Products; Paper Products; Chemical Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Transportation Equipment; Miscellaneous Manufacturing; Machinery; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; and Computer & Electronic Products. The three industries reporting faster deliveries in May are: Petroleum & Coal Products; Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products.

Inventories
Manufacturers' inventories contracted in May for the second consecutive month as the Inventories Index registered 45.6 percent. The index is 3.8 percentage points lower than the April reading of 49.4 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 six industries reporting higher inventories in May - listed in order - are: Apparel, Leather & Allied Products; Furniture & Related Products; Computer & Electronic Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Paper Products. The eight industries reporting decreases in inventories in May - listed in order - are: Plastics & Rubber Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Machinery.

Customers' Inventories
The ISM Customers' Inventories Index registered 32 percent in May, 1 percentage point lower than in April when the index registered 33 percent, and the 14th 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.

Food, Beverage & Tobacco Products is the only industry reporting customers' inventories as being too high during May. The 14 industries reporting customers' inventories as too low during May - listed in order - are: Nonmetallic Mineral Products; Petroleum & Coal Products; Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Apparel, Leather & Allied Products; Paper Products; Machinery; Printing & Related Support Activities; Transportation Equipment; Chemical Products; Primary Metals; and Computer & Electronic Products.

Prices*
The ISM Prices Index registered 77.5 percent in May, 0.5 percentage point lower than the 78 percent reported in April. This is the 11th consecutive month in which the Prices Index has registered above 50 percent. While 60 percent of respondents reported paying higher prices and 5 percent reported paying lower prices, 35 percent of supply executives reported paying the same prices as in April. 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 17 industries reporting paying increased prices during the month of May - listed in order - are: Wood Products; Plastics & Rubber Products; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Chemical Products; Printing & Related Support Activities; Fabricated Metal Products; Transportation Equipment; Textile Mills; Apparel, Leather & Allied Products; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; Nonmetallic Mineral Products; and Computer & Electronic Products. There were no industry reports of paying lower prices on average during May.

Backlog of Orders
ISM's Backlog of Orders Index registered 59.5 percent in May, 2 percentage points higher than the 57.5 percent reported in April. Of the 85 percent of respondents who reported their backlog of orders, 30 percent reported greater backlogs, 11 percent reported smaller backlogs, and 59 percent reported no change from April.

The seven industries reporting increased order backlogs in May - listed in order - are: Electrical Equipment, Appliances & Components; Fabricated Metal Products; Paper Products; Transportation Equipment; Printing & Related Support Activities; Plastics & Rubber Products; and Food, Beverage & Tobacco Products. The five industries reporting decreases in order backlogs during May are: Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; Primary Metals; and Nonmetallic Mineral Products.

New Export Orders
ISM's New Export Orders Index registered 62 percent in May, 1 percentage point higher than the 61 percent reported in April. This is the 11th consecutive month of growth in the New Export Orders Index.

The nine industries reporting growth in new export orders in May - listed in order - are: Apparel, Leather & Allied Products; Machinery; Fabricated Metal Products; Chemical Products; Electrical Equipment, Appliances & Components; Paper Products; Transportation Equipment; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The only industry reporting a decrease in export orders during May is Plastics & Rubber Products.

Imports
Imports of materials by manufacturers expanded in May as the Imports Index registered 56.5 percent, 1.5 percentage points lower than the 58 percent reported in April. This is the ninth consecutive month of growth in imports.

The seven industries reporting growth in imports during the month of May - listed in order - are: Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Machinery; Chemical Products; and Miscellaneous Manufacturing. The only industry reporting a decrease in imports during May is Computer & Electronic Products.

Buying Policy
Average commitment lead time for Capital Expenditures decreased 1 day to 106 days. Average lead time for Production Materials decreased 2 days to 48 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 1 day to 23 days.