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January 2010 Manufacturing ISM Report On Business®

FOR RELEASE: February 1, 2010


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


PMI at 58.4%

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 January 2010.

This report reflects the U.S. Department of Commerce's recently completed annual adjustment to the seasonal factors used to calculate the indexes.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in January for the sixth consecutive month, and the overall economy grew for the ninth 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 for the sixth consecutive month in January as the PMI rose to 58.4 percent, its highest reading since August 2004 when it registered 58.5 percent. This month's report provides significant assurance that the manufacturing sector is in recovery. Both the New Orders and Production Indexes are above 60 percent, indicating strong current and future performance for manufacturing. This month, 13 of 18 industries reported growth, up from nine industries last month, and this is a good indication that the impact of the recovery is expanding."

PERFORMANCE BY INDUSTRY

The 13 manufacturing industries reporting growth in January — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Machinery; Miscellaneous Manufacturing; Transportation Equipment; Paper Products; Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Wood Products; Fabricated Metal Products; and Plastics & Rubber Products. Furniture & Related Products is the only industry reporting contraction in January.

WHAT RESPONDENTS ARE SAYING ...
  • "Commodity prices are moving up again." (Printing & Related Support Activities)
  • "We now believe that we will not have a good upturn until the 3rd quarter of 2010." (Primary Metals)
  • "Overall activity is significantly higher than we typically see this time of year." (Machinery)
  • "Orders from automotive very strong." (Electrical Equipment, Appliances & Components)
  • "Lead times continue to be a problem for electronic components." (Computer & Electronic Products)
MANUFACTURING AT A GLANCE
JANUARY 2010


Index
Series
Index
January
Series
Index
December
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 58.4 54.9 +3.5 Growing Faster 6
New Orders 65.9 64.8 +1.1 Growing Faster 7
Production 66.2 59.7 +6.5 Growing Faster 8
Employment 53.3 50.2 +3.1 Growing Faster 2
Supplier Deliveries 60.1 56.8 +3.3 Slowing Faster 8
Inventories 46.5 43.0 +3.5 Contracting Slower 45
Customers' Inventories 32.0 35.0 -3.0 Too Low Faster 10
Prices 70.0 61.5 +8.5 Increasing Faster 7
Backlog of Orders 56.0 50.0 +6.0 Growing From Unchanged 1
Exports 58.5 54.5 +4.0 Growing Faster 7
Imports 56.5 55.0 +1.5 Growing Faster 5
             
OVERALL ECONOMY Growing Faster 9
Manufacturing Sector Growing Faster 6

*Number of months moving in current direction.
Indexes reflect newly released seasonal adjustment factors.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (7); Aluminum Products (2); Brass; Copper (8); Copper Based Products (7); Corrugated Containers; Diesel Fuel; Natural Gas; Nickel; Plastics; Plastic Resins; Polypropylene (2); Stainless Steel; Stainless Steel Products; Steel (7); Steel Products; and Zinc.

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.



JANUARY 2010 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing growth accelerated in January as the PMI registered 58.4 percent, an increase of 3.5 percentage points when compared to December's seasonally adjusted reading of 54.9 percent. This is the sixth consecutive month of growth in the manufacturing sector, and the highest reading for the Index since August 2004 when it registered 58.5 percent. Prior to this recent growth trend, the PMI declined for 13 consecutive months. 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 ninth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the sixth consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the PMI for January (58.4 percent) corresponds to a 5.5 percent increase in real gross domestic product (GDP) on an annual basis."

THE LAST 12 MONTHS
Month PMI   Month PMI
Jan 2010 58.4   Jul 2009 49.1
Dec 2009 54.9   Jun 2009 45.3
Nov 2009 53.7   May 2009 43.2
Oct 2009 55.2   Apr 2009 40.4
Sep 2009 52.4   Mar 2009 36.4
Aug 2009 52.8   Feb 2009 35.7
Average for 12 months – 48.1
High – 58.4
Low – 35.7

New Orders

ISM's New Orders Index registered 65.9 percent in January, 1.1 percentage points higher than the seasonally adjusted 64.8 percent registered in December. This is the seventh consecutive month of growth in the New Orders Index. 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 14 industries reporting growth in new orders in January — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Machinery; Wood Products; Paper Products; Food, Beverage & Tobacco Products; Primary Metals; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Transportation Equipment; Fabricated Metal Products; Computer & Electronic Products; and Chemical Products. The four industries reporting decreases in new orders in January are: Furniture & Related Products; Petroleum & Coal Products; Plastics & Rubber Products; and Printing & Related Support Activities.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Jan 2010 41 43 16 +25 65.9
Dec 2009 35 46 19 +16 64.8
Nov 2009 36 42 22 +14 61.5
Oct 2009 34 42 24 +10 58.3

Production

ISM's Production Index registered 66.2 percent in January, which is an increase of 6.5 percentage points from the December reading of 59.7 percent (seasonally adjusted). 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 eighth consecutive month the Production Index has registered above 50 percent.

The 15 industries reporting growth in production during the month of January — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Fabricated Metal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Paper Products; Machinery; Primary Metals; Computer & Electronic Products; and Chemical Products. The only industry reporting a decrease in production in January is Furniture & Related Products.


Production
%
Better
%
Same
%
Worse

Net

Index
Jan 2010 38 51 11 +27 66.2
Dec 2009 26 58 16 +10 59.7
Nov 2009 33 50 17 +16 60.2
Oct 2009 37 48 15 +22 62.2

Employment

ISM's Employment Index registered 53.3 percent in January, which is 3.1 percentage points higher than the seasonally adjusted 50.2 percent reported in December. This is the second month of growth in manufacturing employment, and the highest reading since April 2006 (54.9 percent). 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.

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


Employment
%
Higher
%
Same
%
Lower

Net

Index
Jan 2010 15 73 12 +3 53.3
Dec 2009 17 65 18 -1 50.2
Nov 2009 17 65 18 -1 49.6
Oct 2009 20 64 16 +4 51.8

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in January as the Supplier Deliveries Index registered 60.1 percent, which is 3.3 percentage points higher than the 56.8 percent registered in December (seasonally adjusted). This is the eighth consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The eight industries reporting slower supplier deliveries in January — listed in order — are: Machinery; Plastics & Rubber Products; Nonmetallic Mineral Products; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; Chemical Products; and Electrical Equipment, Appliances & Components. The two industries reporting faster deliveries in January are: Petroleum & Coal Products; and Primary Metals.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Jan 2010 18 79 3 +15 60.1
Dec 2009 16 78 6 +10 56.8
Nov 2009 15 80 5 +10 55.7
Oct 2009 15 83 2 +13 56.3

Inventories

Manufacturers' inventories contracted at a slower rate in January as the Inventories Index registered 46.5 percent. The index is 3.5 percentage points higher than the seasonally adjusted December reading of 43 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).

The two industries reporting higher inventories in January are: Apparel, Leather & Allied Products; and Miscellaneous Manufacturing. The nine industries that reported decreases in inventories in January — listed in order — are: Nonmetallic Mineral Products; Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Chemical Products; and Plastics & Rubber Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Jan 2010 16 60 24 -8 46.5
Dec 2009 13 57 30 -17 43.0
Nov 2009 8 63 29 -21 41.4
Oct 2009 19 55 26 -7 47.3

Customers' Inventories*

The ISM Customers' Inventories Index registered 32 percent in January, 3 percentage points lower than in December when the index registered 35 percent, and the lowest reading in the history of the index. The index indicates that respondents believe their customers' inventories are too low at this time. This is the 10th consecutive month the Customers' Inventories Index has been below 50 percent.

There were no reports of higher customers' inventories during January. The 13 industries that reported lower customers' inventories during January — listed in order — are: Electrical Equipment, Appliances & Components; Wood Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Transportation Equipment; Paper Products; Textile Mills; Machinery; Primary Metals; Computer & Electronic Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products.

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

Net

Index
Jan 2010 73 4 56 40 -36 32.0
Dec 2009 73 7 56 37 -30 35.0
Nov 2009 75 7 60 33 -26 37.0
Oct 2009 75 7 63 30 -23 38.5

Prices*

The ISM Prices Index registered 70 percent in January, 8.5 percentage points higher than the 61.5 percent reported in December. This is the seventh consecutive month that the Prices Index has registered above 50 percent. While 44 percent of respondents reported paying higher prices and 4 percent reported paying lower prices, 52 percent of supply executives reported paying the same prices as in December. 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 January — listed in order — are: Miscellaneous Manufacturing; Paper Products; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Transportation Equipment; Textile Mills; Chemical Products; Machinery; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Computer & Electronic Products. There were no reports of industries paying lower prices during January.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Jan 2010 44 52 4 +40 70.0
Dec 2009 32 59 9 +23 61.5
Nov 2009 20 70 10 +10 55.0
Oct 2009 37 56 7 +30 65.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 56 percent in January, 6 percentage points higher than the 50 percent reported in December. Of the 84 percent of respondents who reported their backlog of orders, 26 percent reported greater backlogs, 14 percent reported smaller backlogs, and 60 percent reported no change from December.

The 11 industries reporting increased order backlogs in January — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Plastics & Rubber Products; Primary Metals; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; and Fabricated Metal Products. The three industries that reported decreases in order backlogs during January are: Petroleum & Coal Products; Furniture & Related Products; and Printing & Related Support Activities.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Jan 2010 84 26 60 14 +12 56.0
Dec 2009 86 24 52 24 0 50.0
Nov 2009 85 23 58 19 +4 52.0
Oct 2009 81 27 53 20 +7 53.5

New Export Orders*

ISM's New Export Orders Index registered 58.5 percent in January, 4 percentage points higher than the 54.5 percent reported in December. This is the seventh consecutive month of growth in the New Export Orders Index, following nine consecutive months of contraction.

The eight industries reporting growth in new export orders in January — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; and Machinery. There were no industries reporting decreases in new export orders.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jan 2010 78 19 79 2 +17 58.5
Dec 2009 78 19 71 10 +9 54.5
Nov 2009 79 22 68 10 +12 56.0
Oct 2009 75 24 63 13 +11 55.5

Imports*

Imports of materials by manufacturers expanded in January as the Imports Index registered 56.5 percent, 1.5 percentage points higher than the 55 percent reported in December. This is the fifth consecutive month of growth in imports.

The eight industries reporting growth in imports during the month of January — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; and Fabricated Metal Products. There were no industries reporting decreases in imports during January.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jan 2010 81 20 73 7 +13 56.5
Dec 2009 83 20 70 10 +10 55.0
Nov 2009 81 12 79 9 +3 51.5
Oct 2009 82 14 74 12 +2 51.0

* 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 increased 8 days to 118 days. Average lead time for Production Materials increased 2 days to 53 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies was unchanged at 21 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jan 2010 28 8 12 11 28 13 118
Dec 2009 31 7 8 21 20 13 110
Nov 2009 35 6 10 13 27 9 102
Oct 2009 34 7 10 15 24 10 103
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jan 2010 24 36 23 10 4 3 53
Dec 2009 26 40 20 6 5 3 51
Nov 2009 26 36 24 8 4 2 48
Oct 2009 25 40 26 6 2 1 41
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jan 2010 54 34 8 4 0 0 21
Dec 2009 54 33 12 1 0 0 21
Nov 2009 56 29 12 2 1 0 22
Oct 2009 54 32 12 2 0 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 42 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42 percent, it is generally declining. The distance from 50 percent or 42 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 February 2010 data will be released at 10:00 a.m. (ET) on Monday, March 1, 2010.


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