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June 2007 Manufacturing ISM Report On Business®

FOR RELEASE: July 2, 2007


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

PMI at 56%

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 June 2007.


New Orders, Production and Employment Growing
Inventories Contracting
Deliveries Faster

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in June for the fifth consecutive month, while the overall economy grew for the 68th 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. "Following a weak first quarter, the manufacturing sector rebounded in a strong fashion during the second quarter. In June, manufacturing expanded at its fastest pace since April 2006 when the PMI Index registered 56.9. This performance appears sustainable in the third quarter due to the current strength in New Orders and Production."

TOP PERFORMING INDUSTRIES

The 12 industries reporting growth in June — listed in order — are: Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Computer & Electronic Products; Paper Products; Fabricated Metal Products; Primary Metals; Miscellaneous Manufacturing; Textile Mills; and Machinery.

WHAT RESPONDENTS ARE SAYING ...
  • "Business remains brisk with isolated areas of softness." (Nonmetallic Mineral Products)
  • "Things are picking up." (Primary Metals)
  • "Busy now but still down approximately 13 percent from this time last year." (Fabricated Metal Products)
  • "Exchange rate and some raw material increases have had a negative impact on our purchased components." (Transportation Equipment)
  • "Petroleum-based material prices have begun to escalate at a faster pace." (Paper Products)
MANUFACTURING AT A GLANCE
JUNE 2007


Index
Series
Index
June
Series
Index
May
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 56.0 55.0 +1.0 Growing Faster 5
New Orders 60.3 59.6 +0.7 Growing Faster 7
Production 62.9 58.3 +4.6 Growing Faster 5
Employment 51.1 51.9 -0.8 Growing Slower 3
Supplier Deliveries 49.7 50.3 -0.6 Faster From Slowing 1
Inventories 45.3 46.1 -0.8 Contracting Faster 11
Customers' Inventories 47.0 48.0 -1.0 Too Low Faster 4
Prices 68.0 71.0 -3.0 Increasing Slower 6
Backlog of Orders 53.5 52.5 +1.0 Growing Faster 3
Exports 56.0 59.0 -3.0 Growing Slower 55
Imports 54.5 57.5 -3.0 Growing Slower 66
             
OVERALL ECONOMY Growing Faster 68
Manufacturing Sector Growing Faster 5

*Number of months moving in current direction


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum* (7); Chemicals (3); Copper Based Products (3); Gasoline (3); Natural Gas (5); Polypropylene Resins; Soybean Oil; Stainless Sheet Steel; Stainless Steel (6); and Steel (4).

Commodities Down in Price

Aluminum* is the only commodity reported down in price.

Commodities in Short Supply

No commodities are reported in short supply.

* Reported as both up and down in price.

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



JUNE 2007 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing growth accelerated in June as the PMI registered 56 percent, an increase of 1 percentage point when compared to May's reading of 55 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 June (53 percent) corresponds to a 3.4 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for June (56 percent) is annualized, it corresponds to a 4.4 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Jun 2007 56.0   Dec 2006 51.4
May 2007 55.0   Nov 2006 49.9
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
Average for 12 months – 52.7
High – 56.0
Low – 49.3

New Orders

ISM's New Orders Index rose to 60.3 percent in June. The index is 0.7 percentage point higher than the 59.6 percent reported in May. 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 June: Petroleum & Coal Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Chemical Products; Food, Beverage & Tobacco Products; Primary Metals; Fabricated Metal Products; Miscellaneous Manufacturing; Computer & Electronic Products; Paper Products; and Machinery.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Jun 2007 37 48 15 +22 60.3
May 2007 33 54 13 +20 59.6
Apr 2007 40 45 15 +25 58.5
Mar 2007 30 51 19 +11 51.6

Production

ISM's Production Index registered 62.9 percent in June, which is 4.6 percentage points higher than the 58.3 percent reported in May. June is the fifth 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 June, 12 registered growth: Nonmetallic Mineral Products; Chemical Products; Food, Beverage & Tobacco Products; Paper Products; Plastics & Rubber Products; Computer & Electronic Products; Fabricated Metal Products; Primary Metals; Machinery; Transportation Equipment; Miscellaneous Manufacturing; and Furniture & Related Products.


Production
%
Better
%
Same
%
Worse

Net

Index
Jun 2007 35 55 10 +25 62.9
May 2007 30 59 11 +19 58.3
Apr 2007 35 52 13 +22 57.3
Mar 2007 29 53 18 +11 53.0

Employment

ISM's Employment Index registered 51.1 percent in June, which is a decrease of 0.8 percentage point when compared to May's reading of 51.9 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 five industries reporting growth in employment during June are: Petroleum & Coal Products; Chemical Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Primary Metals.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Jun 2007 20 66 14 +6 51.1
May 2007 22 66 12 +10 51.9
Apr 2007 23 64 13 +10 53.1
Mar 2007 14 72 14 0 48.7

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was faster in June ending 47 consecutive months of slower deliveries. ISM's Supplier Deliveries Index registered 49.7 percent in June, a 0.6 percentage point decrease when compared to May's reading of 50.3 percent. A reading above 50 percent indicates slower deliveries. The five industries reporting slower supplier deliveries in June are: Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; and Primary Metals.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Jun 2007 7 87 6 +1 49.7
May 2007 5 93 2 +3 50.3
Apr 2007 7 87 6 +1 50.2
Mar 2007 5 93 2 +3 51.3

Inventories

Manufacturers' inventories registered 45.3 percent in June, a 0.8 percentage point decrease when compared to May's reading of 46.1 percent. This is the 11th 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 four industries reporting higher inventories in June are: Plastics & Rubber Products; Textile Mills; Transportation Equipment; and Furniture & Related Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Jun 2007 13 64 23 -10 45.3
May 2007 15 62 23 -8 46.1
Apr 2007 16 62 22 -6 46.3
Mar 2007 17 64 19 -2 47.5

Customers' Inventories*

The ISM Customers' Inventories Index registered 47 percent in June, which is 1 percentage point lower than the 48 percent reported in May. 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 fourth consecutive month in which manufacturers have reported their customers' inventories to be too low. Four industries reported higher customers' inventories during June: Furniture & Related Products; Textile Mills; Plastics & Rubber Products; and Fabricated Metal Products.

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

Net

Index
Jun 2007 67 12 70 18 -6 47.0
May 2007 76 9 78 13 -4 48.0
Apr 2007 77 13 68 19 -6 47.0
Mar 2007 75 11 74 15 -4 48.0

Prices*

In June, the ISM Prices Index registered 68 percent, indicating manufacturers are paying higher prices on average when compared to May. While 42 percent of respondents reported paying higher prices and 6 percent reported paying lower prices, 52 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 June, 14 industries reported paying higher prices: Plastics & Rubber Products; Miscellaneous Manufacturing; Paper Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Textile Mills; Wood Products; Fabricated Metal Products; Machinery; Chemical Products; Furniture & Related Products; and Computer & Electronic Products.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Jun 2007 42 52 6 +36 68.0
May 2007 45 52 3 +42 71.0
Apr 2007 50 46 4 +46 73.0
Mar 2007 36 59 5 +31 65.5

Backlog of Orders*

ISM's Backlog of Orders Index registered 53.5 percent in June, 1 percentage point higher than the 52.5 percent reported in May. Of the 86 percent of respondents who reported their backlog of orders, 23 percent reported greater backlogs, 16 percent reported smaller backlogs, and 61 percent reported no change from May. The eight industries reporting an increase in order backlogs in June are: Food, Beverage & Tobacco Products; Paper Products; Chemical Products; Plastics & Rubber Products; Fabricated Metal Products; Primary Metals; Machinery; and Miscellaneous Manufacturing.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Jun 2007 86 23 61 16 +7 53.5
May 2007 87 22 61 17 +5 52.5
Apr 2007 85 26 57 17 +9 54.5
Mar 2007 89 20 54 26 -6 47.0

New Export Orders*

ISM's New Export Orders Index registered 56 percent in June, a decrease of 3 percentage points when compared to May's index of 59 percent. This is the 55th consecutive month of growth in export orders. The seven industries reporting growth in new export orders in June are: Furniture & Related Products; Machinery; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; and Transportation Equipment.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jun 2007 78 18 76 6 +12 56.0
May 2007 78 24 70 6 +18 59.0
Apr 2007 82 20 74 6 +14 57.0
Mar 2007 77 18 75 7 +11 55.5

Imports*

Imports of materials by manufacturers grew during June as the Imports Index registered 54.5 percent, a decrease of 3 percentage points when compared to May. This is the 66th consecutive month of growth in import orders. The 10 industries reporting growth in import activity for June are: Nonmetallic Mineral Products; Wood Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Computer & Electronic Products; Machinery; Miscellaneous Manufacturing; Transportation Equipment; and Chemical Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jun 2007 85 17 75 8 +9 54.5
May 2007 82 20 75 5 +15 57.5
Apr 2007 84 23 70 7 +16 58.0
Mar 2007 82 24 67 9 +15 57.5

* 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 decreased 4 days to 115 days. Average leadtime for Production Materials decreased 1 day to 45 days. Average leadtime for Maintenance, Repair and Operating (MRO) Supplies increased 1 day to 23 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2007 26 8 12 18 23 13 115
May 2007 20 9 12 20 28 11 119
Apr 2007 21 9 12 24 22 12 115
Mar 2007 19 10 17 22 22 10 110
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2007 19 43 26 7 5 0 45
May 2007 20 41 24 12 2 1 46
Apr 2007 18 45 25 8 3 1 46
Mar 2007 21 35 29 12 3 0 45
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2007 50 36 9 5 0 0 23
May 2007 51 37 9 3 0 0 22
Apr 2007 52 33 11 3 0 1 25
Mar 2007 52 34 10 4 0 0 22

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 July 2007 data will be released at 10:00 a.m. (ET) on Wednesday, August 1, 2007.


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