Tempe, Arizona - Economic activity in the manufacturing sector expanded in October for the 15th consecutive month, and the overall economy grew for the 18th 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 October, with both new orders and production making significant gains. Since hitting a peak in April, the trend for manufacturing has been toward slower growth. However, this month's report signals a continuation of the recovery that began 15 months ago, and its strength raises expectations for growth in the balance of the quarter. Survey respondents note the recovery in autos, computers and exports as key drivers of this growth. Concerns about inventory growth are lessened by the improvement in new orders during October. With 14 of 18 industries reporting growth in October, manufacturing continues to outperform the other sectors of the economy."
PERFORMANCE BY INDUSTRY

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

What Respondents Are Saying ...

- "The dollar is weakening again, which is resulting in higher costs for our materials we purchase overseas. It is hurting our profit margins." (Transportation Equipment)
- "Business slowing down but still double digit over last year." (Chemical Products)
- "Currency continues to wreak havoc with commodity pricing." (Food, Beverage & Tobacco Products)
- "Customers remain cautious, placing orders at the last minute, making supply planning a challenge." (Machinery)
- "Our customer base - auto manufacturers - is expanding capacity and making major capital investments." (Fabricated Metal Products)

Manufacturing At A Glance
October 2010

Commodities Reported Up/Down In Price And In Short Supply

Commodities Up in Price

Aluminum (2); Aluminum Extrusions; Caustic Soda (3); Chemicals; Copper (3); Corn (2); Corrugated Containers (8); Lubricants (2); Polyethylene (2); Polypropylene (2); Silver; Stainless Steel Sheets (2); Steel (2); Sulfuric Acid; and Transportation.

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

Cocoa Powder (2); and Electronic Components (2).

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

October 2010 Manufacturing Index Summaries

PMI

Manufacturing continued to grow in October, and at an accelerated rate as the PMI registered 56.9 percent, an increase of 2.5 percentage points when compared to September's reading of 54.4 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 18th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 15th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (57.4 percent) corresponds to a 5.2 percent increase in real gross domestic product (GDP). In addition, if the PMI for October (56.9 percent) is annualized, it corresponds to a 5 percent increase in real GDP annually."

New Orders

ISM's New Orders Index registered 58.9 percent in October, which is an increase of 7.8 percentage points when compared to the 51.1 percent reported in September. This is the 16th consecutive month of growth in the New Orders Index and the largest month-over-month improvement since January 2009. 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 11 industries reporting growth in new orders in October - listed in order - are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Primary Metals; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Machinery; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Transportation Equipment. The five industries reporting contraction in October are: Nonmetallic Mineral Products; Printing & Related Support Activities; Wood Products; Chemical Products; and Furniture & Related Products.

Production

ISM's Production Index registered 62.7 percent in October, which is an increase of 6.2 percentage points from the September reading of 56.5 percent. This is the largest month-over-month improvement since January 2010. 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 17th consecutive month the Production Index has registered above 50 percent.

The 11 industries reporting growth in production during the month of October - listed in order - are: Apparel, Leather & Allied Products; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products. The two industries reporting contraction in October are: Nonmetallic Mineral Products; and Furniture & Related Products.

Employment

ISM's Employment Index registered 57.7 percent in October, which is 1.2 percentage points higher than the 56.5 percent reported in September. This is the 11th 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.

Ten of the 18 manufacturing industries reported growth in employment in October in the following order: Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; Paper Products; Machinery; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Chemical Products. The four industries reporting lower employment in October are: Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in October as the Supplier Deliveries Index registered 51.2 percent, which is 1.1 percentage points lower than the 52.3 percent registered in September. This is the 17th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The six industries reporting slower supplier deliveries in October - listed in order - are: Primary Metals; Miscellaneous Manufacturing; Plastics & Rubber Products; Machinery; Electrical Equipment, Appliances & Components; and Chemical Products. The two industries reporting faster deliveries in October are: Computer & Electronic Products; and Transportation Equipment.

Inventories

Manufacturers' inventories grew in October as the Inventories Index registered 53.9 percent. The index is 1.7 percentage points lower than the 55.6 percent reported in September. 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 October - listed in order - are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Primary Metals; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Chemical Products; and Transportation Equipment. The six industries reporting decreases in inventories in October - listed in order - are: Furniture & Related Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing.

Customers' Inventories*

The ISM Customers' Inventories Index registered 44 percent in October, 1.5 percentage points higher than in September when the index registered 42.5 percent. This is the 19th consecutive month the Customers' Inventories Index has been below 50 percent, indicating that respondents believe their customers' inventories are too low at this time.

Fabricated Metal Products is the only manufacturing industry reporting customers' inventories as being too high during October. The nine industries reporting customers' inventories as too low during October - listed in order - are: Printing & Related Support Activities; Computer & Electronic Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Chemical Products; and Machinery.

Prices*

The ISM Prices Index registered 71 percent in October, 0.5 percentage point higher than the 70.5 percent reported in September. This is the 16th consecutive month the Prices Index has registered above 50 percent. While 49 percent of respondents reported paying higher prices and 7 percent reported paying lower prices, 44 percent of supply executives reported paying the same prices as in September. 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 October - listed in order - are: Petroleum & Coal Products; Primary Metals; Paper Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; Printing & Related Support Activities; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Machinery; Electrical Equipment, Appliances & Components; and Computer & Electronic Products. Fabricated Metal Products is the only industry reporting paying lower prices on average during October.

Backlog of Orders*

ISM's Backlog of Orders Index registered 46 percent in October, 0.5 percentage point lower than the 46.5 percent reported in September. Of the 89 percent of respondents who reported their backlog of orders, 23 percent reported greater backlogs, 31 percent reported smaller backlogs, and 46 percent reported no change from September.

The six industries reporting increased order backlogs in October - listed in order - are: Apparel, Leather & Allied Products; Furniture & Related Products; Plastics & Rubber Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The seven industries reporting decreases in order backlogs during October - listed in order - are: Nonmetallic Mineral Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Chemical Products; Machinery; Transportation Equipment; and Computer & Electronic Products.

New Export Orders*

ISM's New Export Orders Index registered 60.5 percent in October, which is 6 percentage points higher than the 54.5 percent reported in September. This is the 16th consecutive month of growth in the New Export Orders Index.

The 11 industries reporting growth in new export orders in October - listed in order - are: Apparel, Leather & Allied Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; Paper Products; Machinery; Food, Beverage & Tobacco Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Chemical Products. Nonmetallic Mineral Products is the only manufacturing industry reporting a decrease in export orders during October.

Imports*

Imports of materials by manufacturers continued to expand in October as the Imports Index registered 51.5 percent, which is 5 percentage points lower than the 56.5 percentage points reported in September. This is the 14th consecutive month of growth in imports.

The five industries reporting growth in imports during the month of October are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Machinery; Fabricated Metal Products; and Electrical Equipment, Appliances & Components. The six industries reporting a decrease in imports during October - listed in order - are: Furniture & Related Products; Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; and Transportation Equipment.

* 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 2 days to 105 days. Average lead time for Production Materials increased 7 days to 57 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 3 days to 21 days.

About this Report

The data presented herein is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.