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February 2010 Manufacturing ISM Report On Business®

FOR RELEASE: March 1, 2010


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


PMI at 56.5%

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 February 2010.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in February for the seventh consecutive month, and the overall economy grew for the 10th 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 seventh consecutive month during February. While new orders and production were not as strong as they were in January, they still show significant month-over-month growth. Additionally, the Employment Index is very encouraging, as it is up 2.8 percentage points for the month to 56.1 percent. This is the third consecutive month of growth in the Employment Index. With these levels of activity, manufacturers are seemingly willing to hire where they have orders to support higher employment."

PERFORMANCE BY INDUSTRY

The 11 manufacturing industries reporting growth in February — listed in order — are: Machinery; Paper Products; Apparel, Leather & Allied Products; Computer & Electronic Products; Miscellaneous Manufacturing; Transportation Equipment; Textile Mills; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The five industries reporting contraction in February are: Wood Products; Furniture & Related Products; Primary Metals; Printing & Related Support Activities; and Chemical Products.

WHAT RESPONDENTS ARE SAYING ...
  • "Depends on division, plant and market served." (Transportation Equipment)
  • "Current economy has killed new capital sales." (Machinery)
  • "Commodities are firming again." (Food, Beverage & Tobacco Products)
  • "First quarter orders up compared to prior two years!" (Fabricated Metal Products)
  • "...lead times for electronic parts are pushing out to 8 to 24 weeks." (Computer & Electronic Products)
MANUFACTURING AT A GLANCE
FEBRUARY 2010


Index
Series
Index
February
Series
Index
January
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 56.5 58.4 -1.9 Growing Slower 7
New Orders 59.5 65.9 -6.4 Growing Slower 8
Production 58.4 66.2 -7.8 Growing Slower 9
Employment 56.1 53.3 +2.8 Growing Faster 3
Supplier Deliveries 61.1 60.1 +1.0 Slowing Faster 9
Inventories 47.3 46.5 +0.8 Contracting Slower 46
Customers' Inventories 37.0 32.0 +5.0 Too Low Slower 11
Prices 67.0 70.0 -3.0 Increasing Slower 8
Backlog of Orders 61.0 56.0 +5.0 Growing Faster 2
Exports 56.5 58.5 -2.0 Growing Slower 8
Imports 56.0 56.5 -0.5 Growing Slower 6
             
OVERALL ECONOMY Growing Slower 10
Manufacturing Sector Growing Slower 7

*Number of months moving in current direction.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (8); Cocoa Powder; Natural Gas (2); Paper; Plastics (2); Plastic Resins (2); Polyethylene; Polypropylene (3); Stainless Steel Products (2); Steel (8); and Steel Products (2).

Commodities Down in Price

Copper is the only commodity 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.



FEBRUARY 2010 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing continued to grow in February, but the rate of growth decelerated as the PMI registered 56.5 percent, a decrease of 1.9 percentage points when compared to January's seasonally adjusted reading of 58.4 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 42 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 10th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the seventh consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January and February (57.5 percent) corresponds to a 5.2 percent increase in real gross domestic product (GDP). In addition, if the PMI for February is annualized, it corresponds to a 4.9 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Feb 2010 56.5   Aug 2009 52.8
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
Average for 12 months – 49.9
High – 58.4
Low – 36.4

New Orders

ISM's New Orders Index registered 59.5 percent in February, 6.4 percentage points lower than the seasonally adjusted 65.9 percent registered in January. This is the eighth 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 10 industries reporting growth in new orders in February — listed in order — are: Plastics & Rubber Products; Machinery; Paper Products; Computer & Electronic Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. The three industries reporting decreases in new orders in February are: Wood Products; Furniture & Related Products; and Chemical Products.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Feb 2010 36 49 15 +21 59.5
Jan 2010 41 43 16 +25 65.9
Dec 2009 35 46 19 +16 64.8
Nov 2009 36 42 22 +14 61.5

Production

ISM's Production Index registered 58.4 percent in February, which is a decrease of 7.8 percentage points from the January reading of 66.2 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 ninth consecutive month the Production Index has registered above 50 percent.

The nine industries reporting growth in production during the month of February — listed in order — are: Miscellaneous Manufacturing; Machinery; Computer & Electronic Products; Plastics & Rubber Products; Paper Products; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components. The four industries reporting a decrease in production are: Wood Products; Furniture & Related Products; Chemical Products; and Printing & Related Support Activities.


Production
%
Better
%
Same
%
Worse

Net

Index
Feb 2010 32 54 14 +18 58.4
Jan 2010 38 51 11 +27 66.2
Dec 2009 26 58 16 +10 59.7
Nov 2009 33 50 17 +16 60.2

Employment

ISM's Employment Index registered 56.1 percent in February, which is 2.8 percentage points higher than the seasonally adjusted 53.3 percent reported in January. This is the third month of growth in manufacturing employment, and the highest reading since January 2005 (58.7 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.

Ten of the 18 manufacturing industries reported growth in employment in February in the following order: Textile Mills; Petroleum & Coal Products; Apparel, Leather & Allied Products; Paper Products; Machinery; Miscellaneous Manufacturing; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The four industries that reported decreases in employment during February are: Nonmetallic Mineral Products; Wood Products; Furniture & Related Products; and Plastics & Rubber Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Feb 2010 22 68 10 +12 56.1
Jan 2010 15 73 12 +3 53.3
Dec 2009 17 65 18 -1 50.2
Nov 2009 17 65 18 -1 49.6

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in February as the Supplier Deliveries Index registered 61.1 percent, which is 1 percentage point higher than the 60.1 percent registered in January (seasonally adjusted). This is the ninth consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The nine industries reporting slower supplier deliveries in February — listed in order — are: Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Transportation Equipment; Miscellaneous Manufacturing; Plastics & Rubber Products; Fabricated Metal Products; Paper Products; Machinery; and Computer & Electronic Products. The three industries reporting faster deliveries in February are: Petroleum & Coal Products; Printing & Related Support Activities; and Chemical Products.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Feb 2010 23 72 5 +18 61.1
Jan 2010 18 79 3 +15 60.1
Dec 2009 16 78 6 +10 56.8
Nov 2009 15 80 5 +10 55.7

Inventories

Manufacturers' inventories contracted at a slower rate in February as the Inventories Index registered 47.3 percent. The index is 0.8 percentage point higher than the seasonally adjusted January reading of 46.5 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 five industries reporting higher inventories in February are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Machinery; Computer & Electronic Products; and Paper Products. The eight industries that reported decreases in inventories in February — listed in order — are: Primary Metals; Miscellaneous Manufacturing; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; and Plastics & Rubber Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Feb 2010 17 64 19 -2 47.3
Jan 2010 16 60 24 -8 46.5
Dec 2009 13 57 30 -17 43.0
Nov 2009 8 63 29 -21 41.4

Customers' Inventories*

The ISM Customers' Inventories Index registered 37 percent in February, 5 percentage points higher than in January when the index registered 32 percent, and the 11th consecutive month the Customers' Inventories Index has been below 50 percent. The index indicates that respondents believe their customers' inventories are too low at this time.

The only industry reporting higher customers' inventories during February is Furniture & Related Products. The 12 industries that reported lower customers' inventories during February — listed in order — are: Electrical Equipment, Appliances & Components; Wood Products; Transportation Equipment; Machinery; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Paper Products; Computer & Electronic Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; and Printing & Related Support Activities.

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

Net

Index
Feb 2010 71 7 60 33 -26 37.0
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

Prices*

The ISM Prices Index registered 67 percent in February, 3 percentage points lower than the 70 percent reported in January. This is the eighth consecutive month that the Prices Index has registered above 50 percent. While 39 percent of respondents reported paying higher prices and 5 percent reported paying lower prices, 56 percent of supply executives reported paying the same prices as in January. 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 14 industries reporting paying increased prices during the month of February — listed in order — are: Plastics & Rubber Products; Fabricated Metal Products; Paper Products; Wood Products; Transportation Equipment; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Furniture & Related Products; Primary Metals; Machinery; Computer & Electronic Products; Miscellaneous Manufacturing; and Chemical Products. Nonmetallic Mineral Products is the only industry reporting paying lower prices during February.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Feb 2010 39 56 5 +34 67.0
Jan 2010 44 52 4 +40 70.0
Dec 2009 32 59 9 +23 61.5
Nov 2009 20 70 10 +10 55.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 61 percent in February, 5 percentage points higher than the 56 percent reported in January. Of the 86 percent of respondents who reported their backlog of orders, 33 percent reported greater backlogs, 11 percent reported smaller backlogs, and 56 percent reported no change from January.

The 13 industries reporting increased order backlogs in February — listed in order — are: Paper Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Computer & Electronic Products; Machinery; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Transportation Equipment; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Chemical Products. The three industries that reported decreases in order backlogs during February are: Petroleum & Coal Products; Furniture & Related Products; and Wood Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Feb 2010 86 33 56 11 +22 61.0
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

New Export Orders*

ISM's New Export Orders Index registered 56.5 percent in February, 2 percentage points lower than the 58.5 percent reported in January. This is the eighth consecutive month of growth in the New Export Orders Index, following nine consecutive months of contraction.

The nine industries reporting growth in new export orders in February — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Chemical Products; and Transportation Equipment. Primary Metals and Fabricated Metal Products are the only two industries reporting decreases in new export orders during February.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Feb 2010 79 17 79 4 +13 56.5
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

Imports*

Imports of materials by manufacturers expanded in February as the Imports Index registered 56 percent, 0.5 percentage point lower than the 56.5 percent reported in January. This is the sixth consecutive month of growth in imports.

The 10 industries reporting growth in imports during the month of February — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Furniture & Related Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Fabricated Metal Products. Chemical Products is the only industry reporting a decrease in imports during February.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Feb 2010 81 18 76 6 +12 56.0
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

* 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 is unchanged at 118 days. Average lead time for Production Materials decreased 3 days to 50 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 3 days to 24 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Feb 2010 27 6 13 15 26 13 118
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
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Feb 2010 22 42 21 8 5 2 50
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
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Feb 2010 48 36 13 3 0 0 24
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

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 March 2010 data will be released at 10:00 a.m. (ET) on Thursday, April 1, 2010.


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