April 2007 Manufacturing ISM Report On Business®

FOR RELEASE: May 1, 2007


Contact: Rose Marie Goupil
  ISM, Media Relations
  Tempe, Arizona
  800/888-6276, Ext. 3015
  E-mail: rgoupil@ism.ws

PMI at 54.7%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire United States, while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of April 2007.


New Orders, Production and Employment Growing
Inventories Contracting
Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in April for the third consecutive month, while the overall economy grew for the 66th 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. "Manufacturing activity increased in April as the PMI reflects accelerating growth for the month. New Orders and Production improved significantly as did Employment. Manufacturers are now in their ninth month of inventory reduction, so supply chains are generally in balance. On the negative side, prices continue to rise at a rapid rate with metals and energy being the areas of greatest concern to buyers."

TOP PERFORMING INDUSTRIES

The 11 industries reporting growth in April — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Machinery; Chemical Products; Transportation Equipment; Computer & Electronic Products; Plastics & Rubber Products; Fabricated Metal Products; and Furniture & Related Products.

WHAT RESPONDENTS ARE SAYING ...
  • "The economy seems strong, business is good here." (Fabricated Metal Products)
  • "Detecting contractor manpower shortages." (Chemical Products)
  • "High corn prices could have long-term impact on soft drink industry." (Food, Beverage & Tobacco Products)
  • "First quarter business was strong despite gloomy 2006 forecasts for the 2007 diesel engine industry." (Machinery)
  • "Business remains at or above budget in all markets." (Primary Metals)
MANUFACTURING AT A GLANCE
APRIL 2007


Index
Series
Index
April
Series
Index
March
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 54.7 50.9 +3.8 Growing Faster 3
New Orders 58.5 51.6 +6.9 Growing Faster 5
Production 57.3 53.0 +4.3 Growing Faster 3
Employment 53.1 48.7 +4.4 Growing From Contracting 1
Supplier Deliveries 50.2 51.3 -1.1 Slowing Slower 46
Inventories 46.3 47.5 -1.2 Contracting Faster 9
Customers' Inventories 47.0 48.0 -1.0 Too Low Faster 2
Prices 73.0 65.5 +7.5 Increasing Faster 4
Backlog of Orders 54.5 47.0 +7.5 Growing From Contracting 1
Exports 57.0 55.5 +1.5 Growing Faster 53
Imports 58.0 57.5 +0.5 Growing Faster 64
             
OVERALL ECONOMY Growing Faster 66
Manufacturing Sector Growing Faster 3

*Number of months moving in current direction


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (5); Caustic Soda; Chemicals; Cobalt; Copper (2); Copper Based Products; Corn (2); Corn Based Products; Corrugated Containers (2); Diesel Fuel (2); Fuel (2); Gasoline; Natural Gas (3); Natural Rubber; Nickel (6); Soybean Oil; Stainless Steel (4); Steel (2); Steel — Structural; and Titanium — Plate.

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.



APRIL 2007 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing growth accelerated in April as the PMI registered 54.7 percent, an increase of 3.8 percentage points when compared to March's reading of 50.9 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 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that both the overall economy and the manufacturing sector are growing. "The past relationship between the PMI and the overall economy indicates that the PMI average for January through April (51.8 percent) corresponds to a 3.1 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for April (54.7) is annualized, it corresponds to a 4 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Apr 2007 54.7   Oct 2006 51.5
Mar 2007 50.9   Sep 2006 52.7
Feb 2007 52.3   Aug 2006 54.3
Jan 2007 49.3   Jul 2006 54.4
Dec 2006 51.4   Jun 2006 54.0
Nov 2006 49.9   May 2006 54.7
Average for 12 months – 52.5
High – 54.7
Low – 49.3

New Orders

ISM's New Orders Index surged to 58.5 percent in April. The index is 6.9 percentage points higher than the 51.6 percent reported in March. A New Orders Index above 49.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). Eleven industries reported increases during April: Wood Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Machinery; Plastics & Rubber Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; and Paper Products.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Apr 2007 40 45 15 +25 58.5
Mar 2007 30 51 19 +11 51.6
Feb 2007 36 43 21 +15 54.9
Jan 2007 27 45 28 -1 50.3

Production

ISM's Production Index registered 57.3 percent in April, 4.3 percentage points higher than the 53 percent reported in March. April is the third consecutive month of production growth for manufacturers. An index above 49.8 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in April, 11 registered growth: Wood Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Chemical Products; Transportation Equipment; Machinery; Fabricated Metal Products; Furniture & Related Products; and Computer & Electronic Products.


Production
%
Better
%
Same
%
Worse

Net

Index
Apr 2007 35 52 13 +22 57.3
Mar 2007 29 53 18 +11 53.0
Feb 2007 28 54 18 +10 54.1
Jan 2007 22 53 25 -3 49.6

Employment

ISM's Employment Index registered 53.1 percent in April, which is an increase of 4.4 percentage points when compared to March's reading of 48.7 percent. An Employment Index above 49.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The eight industries reporting growth in employment during April are: Wood Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Chemical Products; Plastics & Rubber Products; Machinery; and Transportation Equipment.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Apr 2007 23 64 13 +10 53.1
Mar 2007 14 72 14 0 48.7
Feb 2007 21 62 17 +4 51.1
Jan 2007 14 68 18 -4 49.5

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower for the 46th consecutive month in April. ISM's Supplier Deliveries Index registered 50.2 percent in April, a decrease of 1.1 percentage points when compared to March's reading of 51.3 percent. A reading above 50 percent indicates slower deliveries. The four industries reporting slower supplier deliveries in April are: Primary Metals; Computer & Electronic Products; Transportation Equipment; and Chemical Products.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Apr 2007 7 87 6 +1 50.2
Mar 2007 5 93 2 +3 51.3
Feb 2007 7 87 6 +1 50.8
Jan 2007 7 88 5 +2 52.7

Inventories

Manufacturers' inventories registered 46.3 percent in April, a 1.2 percentage point decrease when compared to March's reading of 47.5 percent. This is the ninth consecutive month of inventory liquidation. An Inventories Index greater than 42.4 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 April are: Apparel, Leather & Allied Products; Computer & Electronic Products; Printing & Related Support Activities; Primary Metals; Paper Products; and Fabricated Metal Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Apr 2007 16 62 22 -6 46.3
Mar 2007 17 64 19 -2 47.5
Feb 2007 16 62 22 -6 44.6
Jan 2007 12 57 31 -19 39.9

Customers' Inventories*

The ISM Customers' Inventories Index registered 47 percent in April, 1 percentage point lower than the 48 percent reported in March. The index indicates that respondents believe their customers have less than sufficient inventories on hand (inventories are too low) at this time. This is the second consecutive month in which manufacturers have reported their customers' inventories to be too low, following five consecutive months that the index registered above 50 percent. Three industries reported higher customers' inventories during April: Plastics & Rubber Products; Fabricated Metal Products; and Machinery.

Customers'
Inventories
%
Reporting
%Too
High
%About
Right
%Too
Low

Net

Index
Apr 2007 77 13 68 19 -6 47.0
Mar 2007 75 11 74 15 -4 48.0
Feb 2007 74 17 72 11 +6 53.0
Jan 2007 75 19 66 15 +4 52.0

Prices*

In April, the ISM Prices Index registered 73 percent, indicating manufacturers are paying higher prices on average when compared to March. While 50 percent of respondents reported paying higher prices and 4 percent reported paying lower prices, 46 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In April, 13 industries reported paying higher prices: Plastics & Rubber Products; Fabricated Metal Products; Wood Products; Paper Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Machinery; Textile Mills; Primary Metals; and Computer & Electronic Products.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Apr 2007 50 46 4 +46 73.0
Mar 2007 36 59 5 +31 65.5
Feb 2007 32 54 14 +18 59.0
Jan 2007 24 58 18 +6 53.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 54.5 percent in April, 7.5 percentage points higher than the 47 percent reported in March. Of the 85 percent of respondents who reported their backlog of orders, 26 percent reported greater backlogs, 17 percent reported smaller backlogs, and 57 percent reported no change from March. The nine industries reporting an increase in order backlogs in April are: Wood Products; Apparel, Leather & Allied Products; Paper Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; Transportation Equipment; and Machinery.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Apr 2007 85 26 57 17 +9 54.5
Mar 2007 89 20 54 26 -6 47.0
Feb 2007 85 26 51 23 +3 51.5
Jan 2007 87 17 53 30 -13 43.5

New Export Orders*

ISM's New Export Orders Index registered 57 percent in April, an increase of 1.5 percentage points when compared to March's index of 55.5 percent. This is the 53rd consecutive month of growth in export orders. The seven industries reporting growth in new export orders in April are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Computer & Electronic Products; Miscellaneous Manufacturing; Chemical Products; Machinery; and Transportation Equipment.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Apr 2007 82 20 74 6 +14 57.0
Mar 2007 77 18 75 7 +11 55.5
Feb 2007 78 19 70 11 +8 54.0
Jan 2007 79 15 75 10 +5 52.5

Imports*

Imports of materials by manufacturers grew during April as the Imports Index registered 58 percent, an increase of 0.5 percentage point when compared to March. This is the 64th consecutive month of growth in import orders. The eight industries reporting growth in import activity for April are: Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Chemical Products; Furniture & Related Products; Fabricated Metal Products; Plastics & Rubber Products; Machinery; and Miscellaneous Manufacturing.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Apr 2007 84 23 70 7 +16 58.0
Mar 2007 82 24 67 9 +15 57.5
Feb 2007 78 29 65 6 +23 61.5
Jan 2007 84 18 73 9 +9 54.5

* 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 leadtime for Capital Expenditures increased 5 days to 115 days. Average leadtime for Production Materials increased 1 day to 46 days. Average leadtime for Maintenance, Repair and Operating (MRO) Supplies increased 3 days to 25 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Apr 2007 21 9 12 24 22 12 115
Mar 2007 19 10 17 22 22 10 110
Feb 2007 15 11 17 22 25 10 115
Jan 2007 21 10 16 21 22 10 108
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Apr 2007 18 45 25 8 3 1 46
Mar 2007 21 35 29 12 3 0 45
Feb 2007 21 36 29 9 4 1 48
Jan 2007 19 39 26 10 5 1 50
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Apr 2007 52 33 11 3 0 1 25
Mar 2007 52 34 10 4 0 0 22
Feb 2007 49 34 13 4 0 0 24
Jan 2007 49 36 12 3 0 0 23

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.

Data and Method of Presentation

The Manufacturing ISM Report On Business® is based on data compiled from purchasing and supply executives nationwide. Membership of the Manufacturing Business Survey Committee is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers' Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).

The resulting single index number for those meeting the criteria for seasonal adjustments (PMI, New Orders, Production, Employment, Supplier Deliveries and Inventories) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The PMI is a composite index based on the seasonally adjusted diffusion indexes for five of the indicators with varying weights: New Orders — 30%; Production — 25%; Employment — 20%; Supplier Deliveries — 15%; and Inventories — 10%.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI in excess of 41.9 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.9 percent, it is generally declining. The distance from 50 percent or 41.9 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.

Responses to Buying Policy reflect the percent reporting the current month's leadtime, the approximate weighted number of days ahead for which commitments are made for Production Materials; Capital Expenditures; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.

The Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM Report On Business® is posted on ISM's Web site at www.ism.ws on the first business day of every month after 10:10 a.m. (ET).

The next Manufacturing ISM Report On Business® featuring the May 2007 data will be released at 10:00 a.m. (ET) on Friday, June 1, 2007.


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