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June 2009 Manufacturing ISM Report On Business®

FOR RELEASE: July 1, 2009


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


PMI at 44.8%

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 2009.


Production Growing
New Orders, Employment and Inventories Contracting
Prices Unchanged
Supplier Deliveries Slower

(Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in June for the 17th consecutive month, while the overall economy grew for the second consecutive month following seven months of decline, 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. "Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June. Most encouraging is the gain in the Production Index, which is up 12.1 percentage points in the last two months to 52.5 percent. Aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries, as the Customers' Inventories Index remained below 50 percent for the third consecutive month. The Prices Index was unchanged from May, indicating that the supply/demand balance is improving. Overall, a slow recovery for manufacturing is forming based on the current trends in the ISM data."

PERFORMANCE BY INDUSTRY

Seven of the 18 manufacturing industries reported growth in June. These industries — listed in order — are: Petroleum & Coal Products; Printing & Related Support Activities; Wood Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; and Primary Metals. The industries reporting contraction in June — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Textile Mills; Transportation Equipment; Food, Beverage & Tobacco Products; and Fabricated Metal Products.

WHAT RESPONDENTS ARE SAYING ...
  • "Customer inventory burn is complete and real demand has reappeared." (Machinery)
  • "... a lot of people are requoting old business and using favorable pricing to negotiate with their current suppliers." (Computer & Electronic Products)
  • "Banks are reluctant to lend to businesses, and until this changes the economy will continue to be weak." (Fabricated Metal Products)
  • "Slow June, but firm large orders in July, August and September." (Food, Beverage & Tobacco Products)
  • "Market appears to have bottomed out as aftermarket has picked up slightly over the past month." (Transportation Equipment)
MANUFACTURING AT A GLANCE
JUNE 2009


Index
Series
Index
June
Series
Index
May
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 44.8 42.8 +2.0 Contracting Slower 17
New Orders 49.2 51.1 -1.9 Contracting From Growing 1
Production 52.5 46.0 +6.5 Growing From Contracting 1
Employment 40.7 34.3 +6.4 Contracting Slower 11
Supplier Deliveries 50.6 49.8 +0.8 Slower From Faster 1
Inventories 30.8 32.9 -2.1 Contracting Faster 38
Customers' Inventories 43.5 46.0 -2.5 Too Low Faster 3
Prices 50.0 43.5 +6.5 Unchanged From Decreasing 1
Backlog of Orders 47.5 48.0 -0.5 Contracting Faster 14
Exports 49.5 48.0 +1.5 Contracting Slower 9
Imports 46.0 42.5 +3.5 Contracting Slower 17
             
OVERALL ECONOMY Growing Faster 2
Manufacturing Sector Contracting Slower 17

*Number of months moving in current direction.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum Based Products; Copper; Corn; Diesel Fuel; Oil; and Plastics.

Commodities Down in Price

Caustic Soda (4); Corrugated Containers (6); Steel (10); and Steel Products (5).

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.



JUNE 2009 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing contracted at a slower rate in June as the PMI registered 44.8 percent, which is 2 percentage points higher than the 42.8 percent reported in May. This is the 17th consecutive month of contraction in the manufacturing sector. 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 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the second consecutive month in the overall economy, and continuing contraction in the manufacturing sector. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through June (39.2 percent) corresponds to a 0.6 percent decrease in real gross domestic product (GDP). However, if the PMI for June (44.8 percent) is annualized, it corresponds to a 1.1 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Jun 2009 44.8   Dec 2008 32.9
May 2009 42.8   Nov 2008 36.6
Apr 2009 40.1   Oct 2008 38.7
Mar 2009 36.3   Sep 2008 43.4
Feb 2009 35.8   Aug 2008 49.3
Jan 2009 35.6   Jul 2008 49.5
Average for 12 months – 40.5
High – 49.5
Low – 32.9

New Orders

ISM's New Orders Index registered 49.2 percent in June, 1.9 percentage points lower than the 51.1 percent registered in May. May represented the first month of growth in new orders, following 17 consecutive months of contraction. A New Orders Index above 48.8 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 10 industries reporting growth in new orders in June — listed in order — are: Printing & Related Support Activities; Primary Metals; Wood Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Electrical Equipment, Appliances & Components; and Chemical Products. The five industries contracting in June — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Jun 2009 28 48 24 +4 49.2
May 2009 27 54 19 +8 51.1
Apr 2009 31 40 29 +2 47.2
Mar 2009 28 31 41 -13 41.2

Production

ISM's Production Index registered 52.5 percent in June, which is an increase of 6.5 percentage points from May's reading of 46 percent. An index above 50.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the first month the Production Index has moved above 50 percent, following nine months of contraction.

The 11 industries reporting growth in production during the month of June — listed in order — are: Petroleum & Coal Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Wood Products; Paper Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Chemical Products; Miscellaneous Manufacturing; Fabricated Metal Products; and Computer & Electronic Products. The five industries reporting decreases in production in June — listed in order — are: Furniture & Related Products; Apparel, Leather & Allied Products; Textile Mills; Transportation Equipment; and Machinery.


Production
%
Better
%
Same
%
Worse

Net

Index
Jun 2009 32 46 22 +10 52.5
May 2009 23 52 25 -2 46.0
Apr 2009 21 45 34 -13 40.4
Mar 2009 17 39 44 -27 36.4

Employment

ISM's Employment Index registered 40.7 percent in June, which is 6.4 percentage points higher than the 34.3 percent reported in May. This is the 11th consecutive month of decline in employment. An Employment Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Three of the 18 manufacturing industries reported growth in employment in June: Petroleum & Coal Products; Nonmetallic Mineral Products; and Miscellaneous Manufacturing. The 13 industries that reported decreases in employment during June — listed in order — are: Furniture & Related Products; Apparel, Leather & Allied Products; Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Fabricated Metal Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; and Plastics & Rubber Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Jun 2009 9 66 25 -16 40.7
May 2009 8 56 36 -28 34.3
Apr 2009 7 58 35 -28 34.4
Mar 2009 8 41 51 -43 28.1

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in June as the Supplier Deliveries Index registered 50.6 percent, which is 0.8 percentage point higher than the 49.8 percent registered in May. This is the first month that the Supplier Deliveries Index has been above 50 percent, following eight months of faster delivery performance. A reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in June are: Printing & Related Support Activities; Furniture & Related Products; Fabricated Metal Products; Transportation Equipment; and Chemical Products. The three industries reporting faster deliveries in June are: Primary Metals; Plastics & Rubber Products; and Computer & Electronic Products.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Jun 2009 8 87 5 +3 50.6
May 2009 8 86 6 +2 49.8
Apr 2009 5 80 15 -10 44.9
Mar 2009 7 73 20 -13 43.6

Inventories

Manufacturers' inventories contracted in June as the Inventories Index registered 30.8 percent, which is 2.1 percentage points lower than May's reading of 32.9 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).

Textile Mills is the only one of the 18 manufacturing industries reporting higher inventories in June. The 13 industries that reported decreases in June — listed in order — are: Plastics & Rubber Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Computer & Electronic Products; Machinery; Furniture & Related Products; Paper Products; Fabricated Metal Products; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; and Food, Beverage & Tobacco Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Jun 2009 8 46 46 -38 30.8
May 2009 10 46 44 -34 32.9
Apr 2009 11 47 42 -31 33.6
Mar 2009 9 48 43 -34 32.2

Customers' Inventories*

The ISM Customers' Inventories Index registered 43.5 percent in June, 2.5 percentage points lower than the 46 percent reported in May. The index indicates that respondents believe their customers' inventories are too low at this time. This is the third consecutive month the Customers' Inventories Index has been below 50 percent, following eight months above 50 percent.

Two industries reported higher customers' inventories during June: Furniture & Related Products; and Chemical Products. The 10 industries that reported lower customers' inventories during June — listed in order — are: Primary Metals; Nonmetallic Mineral Products; Textile Mills; Machinery; Printing & Related Support Activities; Plastics & Rubber Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Transportation Equipment.

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

Net

Index
Jun 2009 74 15 57 28 -13 43.5
May 2009 72 23 46 31 -8 46.0
Apr 2009 80 21 57 22 -1 49.5
Mar 2009 78 29 50 21 +8 54.0

Prices*

The ISM Prices Index registered 50 percent in June, 6.5 percentage points higher than the 43.5 percent reported in May. Since the index is at the mid-point of 50, this indicates that manufacturers are paying the same prices on average when compared to the previous month. While 22 percent of respondents reported paying higher prices and 22 percent reported paying lower prices, 56 percent of supply executives reported paying the same prices as in May. A Prices Index above 47.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

The eight industries reporting paying increased prices during the month of June — listed in order — are: Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Fabricated Metal Products. The eight industries that reported paying lower prices during June — listed in order — are: Petroleum & Coal Products; Printing & Related Support Activities; Furniture & Related Products; Textile Mills; Paper Products; Machinery; Computer & Electronic Products; and Chemical Products.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Jun 2009 22 56 22 0 50.0
May 2009 10 67 23 -13 43.5
Apr 2009 7 50 43 -36 32.0
Mar 2009 7 48 45 -38 31.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 47.5 percent in June, 0.5 percentage point lower than the 48 percent reported in May. Of the 84 percent of respondents who reported their backlog of orders, 21 percent reported greater backlogs, 26 percent reported smaller backlogs, and 53 percent reported no change from May.

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

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Jun 2009 84 21 53 26 -5 47.5
May 2009 85 19 58 23 -4 48.0
Apr 2009 86 13 55 32 -19 40.5
Mar 2009 83 11 49 40 -29 35.5

New Export Orders*

ISM's New Export Orders Index registered 49.5 percent in June, 1.5 percentage points higher than the 48 percent reported in May. This is the ninth consecutive month of contraction in the New Export Orders Index.

The five industries reporting growth in new export orders in June are: Printing & Related Support Activities; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Miscellaneous Manufacturing. The eight industries that reported decreases in new export orders in June — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Computer & Electronic Products; Machinery; Transportation Equipment; and Chemical Products.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jun 2009 75 12 75 13 -1 49.5
May 2009 77 7 82 11 -4 48.0
Apr 2009 77 13 62 25 -12 44.0
Mar 2009 80 9 60 31 -22 39.0

Imports*

Imports of materials by manufacturers contracted during June as the Imports Index registered 46 percent, 3.5 percentage points higher than the 42.5 percent reported in May. This is the 17th consecutive month of contraction in imports.

Two of the 18 manufacturing industries reported growth in imports during the month of June: Nonmetallic Mineral Products; and Computer & Electronic Products. The seven industries that reported decreases in imports in June — listed in order — are: Plastics & Rubber Products; Apparel, Leather & Allied Products; Machinery; Furniture & Related Products; Transportation Equipment; Electrical Equipment, Appliances & Components; and Chemical Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jun 2009 81 7 78 15 -8 46.0
May 2009 83 12 61 27 -15 42.5
Apr 2009 85 10 64 26 -16 42.0
Mar 2009 85 5 56 39 -34 33.0

* 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 5 days to 106 days. Average lead time for Production Materials increased 1 day to 46 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 22 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2009 29 10 12 15 23 11 106
May 2009 30 9 13 12 23 13 111
Apr 2009 36 7 11 12 24 10 101
Mar 2009 30 11 14 11 23 11 104
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2009 30 39 16 10 2 3 46
May 2009 31 38 21 4 3 3 45
Apr 2009 31 38 21 4 4 2 44
Mar 2009 35 35 20 3 5 2 43
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2009 49 38 11 2 0 0 22
May 2009 52 33 12 2 1 0 23
Apr 2009 59 28 8 3 2 0 22
Mar 2009 56 33 7 3 1 0 21

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 41.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.2 percent, it is generally declining. The distance from 50 percent or 41.2 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 July 2009 data will be released at 10:00 a.m. (ET) on Monday, August 3, 2009.


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