--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---




September 2008 Manufacturing ISM Report On Business®

FOR RELEASE: October 1, 2008


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


PMI at 43.5%

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 September 2008.


Exports Growing
Production, New Orders, Employment and Inventories Contracting
Supplier Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in September, while the overall economy grew for the 83rd 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. "The PMI indicates a significantly faster rate of decline in manufacturing during September, marking a departure from the 2008 trend toward negligible growth or contraction each month. This is the lowest level for the PMI since October 2001. This month's report is showing prices rising at a much slower rate, as the Prices Index fell to the lowest level in 21 months. Export orders continued to increase, but at a slower rate than in August."

PERFORMANCE BY INDUSTRY

The six industries reporting growth in September — listed in order — are: Petroleum & Coal Products; Paper Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The industries reporting contraction in September are: Nonmetallic Mineral Products; Textile Mills; Wood Products; Furniture & Related Products; Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Primary Metals; Fabricated Metal Products; Printing & Related Support Activities; Plastics & Rubber Products; and Electrical Equipment, Appliances, & Components.

WHAT RESPONDENTS ARE SAYING ...
  • "We have experienced a larger-than-expected slowdown in orders during the last month." (Electrical Equipment, Appliances & Components)
  • "Steel, a main raw good for our business, has finally started showing some signs of softening a bit." (Machinery)
  • "Business continues to slow down. Fourth quarter 2008 is going to be down 15 percent from third quarter." (Fabricated Metal Products)
  • "Customers waiting for material price reductions in the face of falling oil prices." (Plastics & Rubber Products)
  • "Continued strong export demand across several product lines." (Chemical Products)
MANUFACTURING AT A GLANCE
SEPTEMBER 2008


Index
Series
Index
September
Series
Index
August
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 43.5 49.9 -6.4 Contracting Faster 2
New Orders 38.8 48.3 -9.5 Contracting Faster 10
Production 40.8 52.1 -11.3 Contracting From Growing 1
Employment 41.8 49.7 -7.9 Contracting Faster 2
Supplier Deliveries 52.5 50.3 +2.2 Slowing Faster 15
Inventories 43.4 49.3 -5.9 Contracting Faster 3
Customers' Inventories 53.5 54.5 -1.0 Too High Slower 2
Prices 53.5 77.0 -23.5 Increasing Slower 21
Backlog of Orders 35.0 43.5 -8.5 Contracting Faster 5
Exports 52.0 57.0 -5.0 Growing Slower 70
Imports 44.0 48.5 -4.5 Contracting Faster 8
             
OVERALL ECONOMY Growing Slower 83
Manufacturing Sector Contracting Faster 2

*Number of months moving in current direction


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Adhesives; Caustic Soda (7); Cold Finished Steel Products; Copper Products*; Corrugated Containers (5); Electrical Products; Natural Gas*; Paper Products; Plastics (4); Plastic Resins (2); and Steel* (9).

Commodities Down in Price

Aluminum Products; Copper (2); Copper Products*; Corn (2); Diesel Fuel* (2); Fuel Oil (2); Gasoline; Machined Parts; Natural Gas* (2); Stainless Steel Products; Steel*; Steel Products; Wheat; and Zinc.

Commodities in Short Supply

Caustic Soda (7) is the only commodity 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.



SEPTEMBER 2008 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing contracted in September as the PMI registered 43.5 percent, 6.4 percentage points lower than the 49.9 percent reported in August. This is the lowest reading since October 2001 when the PMI registered 40.8 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 41.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates the overall economy is growing and the manufacturing sector is contracting. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (48.8 percent) corresponds to a 2.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for September (43.5 percent) is annualized, it corresponds to a 0.8 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Sep 2008 43.5   Mar 2008 48.6
Aug 2008 49.9   Feb 2008 48.3
Jul 2008 50.0   Jan 2008 50.7
Jun 2008 50.2   Dec 2007 48.4
May 2008 49.6   Nov 2007 50.0
Apr 2008 48.6   Oct 2007 50.4
Average for 12 months — 49.0
High — 50.7
Low — 43.5

New Orders

ISM's New Orders Index registered 38.8 percent in September, 9.5 percentage points lower than the 48.3 percent registered in August. A New Orders Index above 51.6 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

Four industries reported increases during September: Paper Products; Petroleum & Coal Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The industries failing to grow in September are: Textile Mills; Furniture & Related Products; Primary Metals; Nonmetallic Mineral Products; Wood Products; Machinery; Apparel, Leather & Allied Products; Fabricated Metal Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Chemical Products.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Sep 2008 18 43 39 -21 38.8
Aug 2008 23 48 29 -6 48.3
Jul 2008 18 54 28 -10 45.0
Jun 2008 29 46 25 +4 49.6

Production

ISM's Production Index decreased to 40.8 percent in September, a decrease of 11.3 percentage points from the 52.1 percent reported in August. An index above 49.9 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

Of the industries reporting in September, five registered growth: Petroleum & Coal Products; Food, Beverage & Tobacco Products; Paper Products; Chemical Products; and Miscellaneous Manufacturing. The industries failing to grow in September are: Textile Mills; Nonmetallic Mineral Products; Wood Products; Primary Metals; Printing & Related Support Activities; Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Furniture & Related Products; Plastics & Rubber Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components.


Production
%
Better
%
Same
%
Worse

Net

Index
Sep 2008 20 47 33 -13 40.8
Aug 2008 21 61 18 +3 52.1
Jul 2008 21 62 17 +4 52.9
Jun 2008 25 54 21 +4 51.5

Employment

ISM's Employment Index registered 41.8 percent in September, which is a decrease of 7.9 percentage points when compared to the 49.7 percent reported in August. An Employment Index above 49.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The three industries reporting growth in employment during September are: Petroleum & Coal Products; Chemical Products; and Computer & Electronic Products. The industries that reported decreases in employment during September are: Nonmetallic Mineral Products; Transportation Equipment; Wood Products; Machinery; Fabricated Metal Products; Furniture & Related Products; Plastics & Rubber Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Sep 2008 8 65 27 -19 41.8
Aug 2008 17 63 20 -3 49.7
Jul 2008 19 65 16 +3 51.9
Jun 2008 11 69 20 -9 43.7

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations continued to slow, and at a faster rate in September, as the Supplier Deliveries Index registered 52.5 percent, which is 2.2 percentage points higher than the 50.3 percent registered in August. A reading above 50 percent indicates slower deliveries.

The eight industries reporting slower supplier deliveries in September are: Plastics & Rubber Products; Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Chemical Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Food, Beverage & Tobacco Products. The industries reporting faster deliveries in September are: Transportation Equipment; Fabricated Metal Products; and Machinery.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Sep 2008 11 84 5 +6 52.5
Aug 2008 9 84 7 +2 50.3
Jul 2008 15 82 3 +12 55.1
Jun 2008 16 79 5 +11 55.1

Inventories

Manufacturers' inventories contracted in September as the Inventories Index registered 43.4 percent, which is 5.9 percentage points lower than the 49.3 percent reported in August. 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 two industries reporting higher inventories in September are: Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components. The industries that reported decreases in September are: Furniture & Related Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Transportation Equipment; Machinery; and Miscellaneous Manufacturing.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Sep 2008 13 60 27 -14 43.4
Aug 2008 18 65 17 +1 49.3
Jul 2008 12 64 24 -12 45.0
Jun 2008 21 58 21 0 51.2

Customers' Inventories*

The ISM Customers' Inventories Index registered 53.5 percent in September, a decrease of 1 percentage point when compared to August's reading of 54.5 percent. The index indicates that respondents believe their customers' inventories are too high at this time.

Seven industries reported higher customers' inventories during September: Textile Mills; Electrical Equipment, Appliances & Components; Furniture & Related Products; Primary Metals; Machinery; Chemical Products; and Fabricated Metal Products. The industries that reported lower customers' inventories during September are: Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Nonmetallic Mineral Products.

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

Net

Index
Sep 2008 77 23 61 16 +7 53.5
Aug 2008 66 22 65 13 +9 54.5
Jul 2008 74 17 60 23 -6 47.0
Jun 2008 72 25 60 15 +10 55.0

Prices*

The ISM Prices Index registered 53.5 percent in September compared to 77 percent in August, indicating manufacturers are paying higher prices on average when compared to August, but that prices are increasing at a much slower rate. While 30 percent of respondents reported paying higher prices and 23 percent reported paying lower prices, 47 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In September, 11 industries reported paying higher prices: Apparel, Leather & Allied Products; Plastics & Rubber Products; Textile Mills; Printing & Related Support Activities; Wood Products; Nonmetallic Mineral Products; Paper Products; Furniture & Related Products; Transportation Equipment; Chemical Products; and Computer & Electronic Products. The industries that reported paying lower prices during September are: Primary Metals; Machinery; Fabricated Metal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Sep 2008 30 47 23 +7 53.5
Aug 2008 60 34 6 +54 77.0
Jul 2008 80 17 3 +77 88.5
Jun 2008 84 15 1 +83 91.5

Backlog of Orders*

ISM's Backlog of Orders Index registered 35 percent in September, 8.5 percentage points lower than the 43.5 percent reported in August. Of the 83 percent of respondents who reported their backlog of orders, 10 percent reported greater backlogs, 40 percent reported smaller backlogs, and 50 percent reported no change from August.

The three industries reporting an increase in order backlogs in September are: Plastics & Rubber Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The industries that reported decreases in order backlogs during September are: Furniture & Related Products; Machinery; Primary Metals; Nonmetallic Mineral Products; Wood Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Computer & Electronic Products; and Chemical Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Sep 2008 83 10 50 40 -30 35.0
Aug 2008 87 15 57 28 -13 43.5
Jul 2008 85 15 56 29 -14 43.0
Jun 2008 86 19 57 24 -5 47.5

New Export Orders*

ISM's New Export Orders Index registered 52 percent in September, a decrease of 5 percentage points when compared to August's index of 57 percent. This is the 70th consecutive month of growth in the New Export Orders Index.

The six industries reporting growth in new export orders in September are: Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Transportation Equipment. The industries that reported decreases in new export orders in September are: Furniture & Related Products; Primary Metals; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; and Machinery.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Sep 2008 77 16 72 12 +4 52.0
Aug 2008 79 23 68 9 +14 57.0
Jul 2008 75 17 74 9 +8 54.0
Jun 2008 79 22 73 5 +17 58.5

Imports*

Imports of materials by manufacturers contracted during September as the Imports Index registered 44 percent, 4.5 percentage points lower than the 48.5 percent reported in August. This is the eighth consecutive month of contraction in imports.

The three industries reporting growth in import activity for September are: Transportation Equipment; Computer & Electronic Products; and Electrical Equipment, Appliances & Components. The industries that reported decreases in imports during September are: Furniture & Related Products; Plastics & Rubber Products; Wood Products; Paper Products; Machinery; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Chemical Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Sep 2008 81 5 78 17 -12 44.0
Aug 2008 82 9 79 12 -3 48.5
Jul 2008 80 8 77 15 -7 46.5
Jun 2008 82 9 74 17 -8 46.0

* 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 4 days to 113 days. Average lead time for Production Materials decreased 4 days to 51 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies remained unchanged at 22 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Sep 2008 28 5 14 15 27 11 113
Aug 2008 25 6 16 16 24 13 117
Jul 2008 27 6 9 19 27 12 117
Jun 2008 23 7 11 20 25 14 123
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Sep 2008 26 39 18 10 4 3 51
Aug 2008 23 35 27 6 6 3 55
Jul 2008 21 42 25 6 4 2 48
Jun 2008 18 41 24 9 6 2 54
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Sep 2008 53 37 7 2 1 0 22
Aug 2008 53 34 9 4 0 0 22
Jul 2008 56 32 10 2 0 0 20
Jun 2008 50 38 8 3 0 1 25

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 equal weights: New Orders, Production, Employment, Supplier Deliveries and Inventories.

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 41.1 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.1 percent, it is generally declining. The distance from 50 percent or 41.1 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 lead time, 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 October 2008 data will be released at 10:00 a.m. (ET) on Monday, November 3, 2008.


Back to Top





Rate and Review this item

Rate this item:



Log in to rate or review this item.