May 2010 Manufacturing ISM Report On Business®

FOR RELEASE: June 1, 2010


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


PMI at 59.7%

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 May 2010.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in May for the 10th consecutive month, and the overall economy grew for the 13th 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 10th consecutive month during May. The rate of growth as indicated by the PMI is driven by continued strength in new orders and production. Employment continues to grow as manufacturers have added to payrolls for six consecutive months. The recovery continues to broaden as 16 of 18 industries report growth. There are a number of reports, particularly in the tech sector, of shortages of components; this is the result of excessive inventory de-stocking during the downturn."

PERFORMANCE BY INDUSTRY

Sixteen of the 18 manufacturing industries are reporting growth in May, in the following order: Paper Products; Wood Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Primary Metals; Printing & Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Machinery; Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products. The only industry reporting contraction in May is Petroleum & Coal Products.

WHAT RESPONDENTS ARE SAYING ...
  • "Tight supply conditions exist for electronic components." (Computer & Electronic Products)
  • "No signs of the ramp-up abating anytime soon." (Machinery)
  • "Volatility of steel and steel-making components is forcing us to raise prices on our shipped goods to automotive customers." (Fabricated Metal Products)
  • "Aftermarket sales increased 25 percent during the past quarter." (Transportation Equipment)
  • "Sales exceeded budget for the fourth consecutive month." (Food, Beverage & Tobacco Products)
MANUFACTURING AT A GLANCE
MAY 2010


Index
Series
Index
May
Series
Index
April
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 59.7 60.4 -0.7 Growing Slower 10
New Orders 65.7 65.7 0.0 Growing Same 11
Production 66.6 66.9 -0.3 Growing Slower 12
Employment 59.8 58.5 +1.3 Growing Faster 6
Supplier Deliveries 61.0 61.3 -0.3 Slowing Slower 12
Inventories 45.6 49.4 -3.8 Contracting Faster 2
Customers' Inventories 32.0 33.0 -1.0 Too Low Faster 14
Prices 77.5 78.0 -0.5 Increasing Slower 11
Backlog of Orders 59.5 57.5 +2.0 Growing Faster 5
Exports 62.0 61.0 +1.0 Growing Faster 11
Imports 56.5 58.0 -1.5 Growing Slower 9
             
OVERALL ECONOMY Growing Slower 13
Manufacturing Sector Growing Slower 10

*Number of months moving in current direction.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (11); Butadiene Products; Caustic Soda (3); Copper* (3); Corrugated Containers (3); Galvanized Coils; Nylon Products; Paper; Paper Products; Plastics (5); Plastic Resins (5); Polypropylene (6); Pulp (2); Stainless Steel (2); Stainless Steel Products (2); Steel (11); Steel Products (5); and Sulfuric Acid (3).

Commodities Down in Price

Aluminum Products; and Copper*.

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.
*Reported as both up and down in price.



MAY 2010 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing continued to grow in May as the PMI registered 59.7 percent, a decrease of 0.7 percentage point when compared to April's reading of 60.4 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 13th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 10th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (58.9 percent) corresponds to a 5.7 percent increase in real gross domestic product (GDP). In addition, if the PMI for May (59.7 percent) is annualized, it corresponds to a 6 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
May 2010 59.7   Nov 2009 53.7
Apr 2010 60.4   Oct 2009 55.2
Mar 2010 59.6   Sep 2009 52.4
Feb 2010 56.5   Aug 2009 52.8
Jan 2010 58.4   Jul 2009 49.1
Dec 2009 54.9   Jun 2009 45.3
Average for 12 months – 54.8
High – 60.4
Low – 45.3

New Orders

ISM's New Orders Index registered 65.7 percent in May, which is the same rate of growth reported for the preceding month. This is the 11th 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 15 industries reporting growth in new orders in May— listed in order — are: Wood Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; Miscellaneous Manufacturing; Paper Products; Primary Metals; Furniture & Related Products; Transportation Equipment; Computer & Electronic Products; Printing & Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Machinery; and Food, Beverage & Tobacco Products. The only industry reporting a decrease in new orders in May is Petroleum & Coal Products.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
May 2010 50 38 12 +38 65.7
Apr 2010 52 40 8 +44 65.7
Mar 2010 41 48 11 +30 61.5
Feb 2010 36 49 15 +21 59.5

Production

ISM's Production Index registered 66.6 percent in May, which is a decrease of 0.3 percentage point from the April reading of 66.9 percent. 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 12th consecutive month the Production Index has registered above 50 percent.

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


Production
%
Better
%
Same
%
Worse

Net

Index
May 2010 51 37 12 +39 66.6
Apr 2010 49 44 7 +42 66.9
Mar 2010 36 53 11 +25 61.1
Feb 2010 32 54 14 +18 58.4

Employment

ISM's Employment Index registered 59.8 percent in May, which is 1.3 percentage points higher than the 58.5 percent reported in April. This is the sixth consecutive month of growth in manufacturing employment. 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.

Twelve of the 18 manufacturing industries reported growth in employment in May in the following order: Petroleum & Coal Products; Paper Products; Transportation Equipment; Fabricated Metal Products; Printing & Related Support Activities; Machinery; Computer & Electronic Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products. The two industries reporting a decrease in employment during May are: Plastics & Rubber Products and Primary Metals.


Employment
%
Higher
%
Same
%
Lower

Net

Index
May 2010 28 66 6 +22 59.8
Apr 2010 26 68 6 +20 58.5
Mar 2010 21 69 10 +11 55.1
Feb 2010 22 68 10 +12 56.1

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in May as the Supplier Deliveries Index registered 61 percent, which is 0.3 percentage point lower than the 61.3 percent registered in April. This is the 12th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The 12 industries reporting slower supplier deliveries in May — listed in order — are: Plastics & Rubber Products; Paper Products; Chemical Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Transportation Equipment; Miscellaneous Manufacturing; Machinery; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; and Computer & Electronic Products. The three industries reporting faster deliveries in May are: Petroleum & Coal Products; Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
May 2010 29 66 5 +24 61.0
Apr 2010 22 76 2 +20 61.3
Mar 2010 27 73 0 +27 64.9
Feb 2010 23 72 5 +18 61.1

Inventories

Manufacturers' inventories contracted in May for the second consecutive month as the Inventories Index registered 45.6 percent. The index is 3.8 percentage points lower than the April reading of 49.4 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 six industries reporting higher inventories in May — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Computer & Electronic Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Paper Products. The eight industries reporting decreases in inventories in May — listed in order — are: Plastics & Rubber Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Machinery.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
May 2010 13 66 21 -8 45.6
Apr 2010 20 61 19 +1 49.4
Mar 2010 26 61 13 +13 55.3
Feb 2010 17 64 19 -2 47.3

Customers' Inventories*

The ISM Customers' Inventories Index registered 32 percent in May, 1 percentage point lower than in April when the index registered 33 percent, and the 14th 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.

Food, Beverage & Tobacco Products is the only industry reporting customers' inventories as being too high during May. The 14 industries reporting customers' inventories as too low during May — listed in order — are: Nonmetallic Mineral Products; Petroleum & Coal Products; Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Apparel, Leather & Allied Products; Paper Products; Machinery; Printing & Related Support Activities; Transportation Equipment; Chemical Products; Primary Metals; and Computer & Electronic Products.

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

Net

Index
May 2010 69 5 54 41 -36 32.0
Apr 2010 72 9 48 43 -34 33.0
Mar 2010 75 11 56 33 -22 39.0
Feb 2010 71 7 60 33 -26 37.0

Prices*

The ISM Prices Index registered 77.5 percent in May, 0.5 percentage point lower than the 78 percent reported in April. This is the 11th consecutive month in which the Prices Index has registered above 50 percent. While 60 percent of respondents reported paying higher prices and 5 percent reported paying lower prices, 35 percent of supply executives reported paying the same prices as in April. 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 17 industries reporting paying increased prices during the month of May — listed in order — are: Wood Products; Plastics & Rubber Products; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Chemical Products; Printing & Related Support Activities; Fabricated Metal Products; Transportation Equipment; Textile Mills; Apparel, Leather & Allied Products; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; Nonmetallic Mineral Products; and Computer & Electronic Products. There were no industry reports of paying lower prices on average during May.


Prices
%
Higher
%
Same
%
Lower

Net

Index
May 2010 60 35 5 +55 77.5
Apr 2010 60 36 4 +56 78.0
Mar 2010 53 44 3 +50 75.0
Feb 2010 39 56 5 +34 67.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 59.5 percent in May, 2 percentage points higher than the 57.5 percent reported in April. Of the 85 percent of respondents who reported their backlog of orders, 30 percent reported greater backlogs, 11 percent reported smaller backlogs, and 59 percent reported no change from April.

The seven industries reporting increased order backlogs in May — listed in order — are: Electrical Equipment, Appliances & Components; Fabricated Metal Products; Paper Products; Transportation Equipment; Printing & Related Support Activities; Plastics & Rubber Products; and Food, Beverage & Tobacco Products. The five industries reporting decreases in order backlogs during May are: Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; Primary Metals; and Nonmetallic Mineral Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
May 2010 85 30 59 11 +19 59.5
Apr 2010 82 31 53 16 +15 57.5
Mar 2010 84 30 56 14 +16 58.0
Feb 2010 86 33 56 11 +22 61.0

New Export Orders*

ISM's New Export Orders Index registered 62 percent in May, 1 percentage point higher than the 61 percent reported in April. This is the 11th consecutive month of growth in the New Export Orders Index.

The nine industries reporting growth in new export orders in May — listed in order — are: Apparel, Leather & Allied Products; Machinery; Fabricated Metal Products; Chemical Products; Electrical Equipment, Appliances & Components; Paper Products; Transportation Equipment; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The only industry reporting a decrease in export orders during May is Plastics & Rubber Products.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
May 2010 78 28 68 4 +24 62.0
Apr 2010 79 23 76 1 +22 61.0
Mar 2010 75 30 63 7 +23 61.5
Feb 2010 79 17 79 4 +13 56.5

Imports*

Imports of materials by manufacturers expanded in May as the Imports Index registered 56.5 percent, 1.5 percentage points lower than the 58 percent reported in April. This is the ninth consecutive month of growth in imports.

The seven industries reporting growth in imports during the month of May — listed in order — are: Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Machinery; Chemical Products; and Miscellaneous Manufacturing. The only industry reporting a decrease in imports during May is Computer & Electronic Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
May 2010 82 17 79 4 +13 56.5
Apr 2010 83 23 70 7 +16 58.0
Mar 2010 79 21 72 7 +14 57.0
Feb 2010 81 18 76 6 +12 56.0

* 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 1 day to 106 days. Average lead time for Production Materials decreased 2 days to 48 days. Average lead time 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
May 2010 32 8 9 15 26 10 106
Apr 2010 32 5 10 17 26 10 107
Mar 2010 26 9 13 14 25 13 116
Feb 2010 27 6 13 15 26 13 118
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
May 2010 22 41 21 10 5 1 48
Apr 2010 20 48 18 8 3 3 50
Mar 2010 26 40 20 10 2 2 45
Feb 2010 22 42 21 8 5 2 50
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
May 2010 51 36 10 2 1 0 23
Apr 2010 50 38 8 4 0 0 22
Mar 2010 49 39 8 4 0 0 23
Feb 2010 48 36 13 3 0 0 24

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



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