July 2010 Manufacturing ISM Report On Business®

FOR RELEASE: August 2, 2010


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


PMI at 55.5%

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 July 2010.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in July for the 12th consecutive month, and the overall economy grew for the 15th 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. "Manufacturing continued to grow during July, but at a slightly slower rate than in June. Employment, supplier deliveries and inventories improved during the month and reduced the impact of a month-over-month deceleration in new orders and production. July marks 12 consecutive months of growth in manufacturing, and indications are that demand is still quite strong in 10 of 18 industries. The prices that manufacturers paid for their inputs were slightly higher but stable, with only a few items on the short supply list."

PERFORMANCE BY INDUSTRY

Ten of the 18 manufacturing industries are reporting growth in July, in the following order: Plastics & Rubber Products; Miscellaneous Manufacturing; Paper Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Primary Metals; Textile Mills; Computer & Electronic Products; Fabricated Metal Products; and Chemical Products. The four industries reporting contraction in July are: Nonmetallic Mineral Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Machinery.

WHAT RESPONDENTS ARE SAYING...
  • "Business in July was strong, the best month since October 2008." (Fabricated Metal Products)
  • "Slow economy has killed sales for new equipment orders." (Machinery)
  • "Quoting activity and sales are slow, and backlog is dropping." (Computer & Electronic Products)
  • "Business continues to be sluggish and has fallen slightly as the economic ills continue." (Nonmetallic Mineral Products)
  • "Retailers are still unwilling to gamble on inventory." (Printing & Related Support Activities)
MANUFACTURING AT A GLANCE
JULY 2010


Index
Series
Index
July
Series
Index
June
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 55.5 56.2 -0.7 Growing Slower 12
New Orders 53.5 58.5 -5.0 Growing Slower 13
Production 57.0 61.4 -4.4 Growing Slower 14
Employment 58.6 57.8 +0.8 Growing Faster 8
Supplier Deliveries 58.3 57.3 +1.0 Slowing Faster 14
Inventories 50.2 45.8 +4.4 Growing From Contracting 1
Customers' Inventories 39.0 38.0 +1.0 Too Low Slower 16
Prices 57.5 57.0 +0.5 Increasing Faster 13
Backlog of Orders 54.5 57.0 -2.5 Growing Slower 7
Exports 56.5 56.0 +0.5 Growing Faster 13
Imports 52.5 56.5 -4.0 Growing Slower 11
             
OVERALL ECONOMY Growing Slower 15
Manufacturing Sector Growing Slower 12

*Number of months moving in current direction


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Capacitors; Corrugated Containers (5); Paper; Pulp; Steel* (13); and Titanium.

Commodities Down in Price

Machined Steel Parts; Polyethylene, Polypropylene Resins (2); and Steel*.

Commodities in Short Supply

Capacitors; Electrical Components; and Titanium Dioxide.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.



JULY 2010 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing continued to grow in July as the PMI registered 55.5 percent, a decrease of 0.7 percentage point when compared to June's reading of 56.2 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 15th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 12th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (58 percent) corresponds to a 5.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for July (55.5 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Jul 2010 55.5   Jan 2010 58.4
Jun 2010 56.2   Dec 2009 54.9
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
Average for 12 months – 56.3
High – 60.4
Low –52.4

New Orders

ISM's New Orders Index registered 53.5 percent in July, which is a decrease of 5 percentage points when compared to the 58.5 percent reported in June. This is the 13th 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 eight industries reporting growth in new orders in July — listed in order — are: Plastics & Rubber Products; Paper Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Primary Metals; Transportation Equipment; Food, Beverage & Tobacco Products; and Fabricated Metal Products. Five industries reported decreases in new orders in July: Nonmetallic Mineral Products; Printing & Related Support Activities; Machinery; Chemical Products; and Furniture & Related Products.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Jul 2010 27 53 20 +7 53.5
Jun 2010 36 50 14 +22 58.5
May 2010 50 38 12 +38 65.7
Apr 2010 52 40 8 +44 65.7

Production

ISM's Production Index registered 57 percent in July, which is a decrease of 4.4 percentage points from the June reading of 61.4 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 14th consecutive month the Production Index has registered above 50 percent.

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


Production
%
Better
%
Same
%
Worse

Net

Index
Jul 2010 31 50 19 +12 57.0
Jun 2010 40 47 13 +27 61.4
May 2010 51 37 12 +39 66.6
Apr 2010 49 44 7 +42 66.9

Employment

ISM's Employment Index registered 58.6 percent in July, which is 0.8 percentage point higher than the 57.8 percent reported in June. This is the eighth 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.

Ten of the 18 manufacturing industries reported growth in employment in July in the following order: Textile Mills; Paper Products; Computer & Electronic Products; Miscellaneous Manufacturing; Transportation Equipment; Fabricated Metal Products; Primary Metals; Machinery; Electrical Equipment, Appliances & Components; and Chemical Products. The two industries reporting a decrease in employment during July are: Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Jul 2010 26 66 8 +18 58.6
Jun 2010 26 63 11 +15 57.8
May 2010 28 66 6 +22 59.8
Apr 2010 26 68 6 +20 58.5

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in July as the Supplier Deliveries Index registered 58.3 percent, which is 1 percentage point higher than the 57.3 percent registered in June. This is the 14th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The 11 industries reporting slower supplier deliveries in July — listed in order — are: Plastics & Rubber Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Computer & Electronic Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Primary Metals; Food, Beverage & Tobacco Products; and Fabricated Metal Products. The only two industries reporting faster deliveries in July are: Nonmetallic Mineral Products and Paper Products.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Jul 2010 28 66 6 +22 58.3
Jun 2010 23 71 6 +17 57.3
May 2010 29 66 5 +24 61.0
Apr 2010 22 76 2 +20 61.3

Inventories

Manufacturers' inventories grew for the first time following three consecutive months of contraction. The Inventories Index registered 50.2 percent in July, indicating a slight increase when compared to June. The index is 4.4 percentage points higher than the 45.8 percent reported in June. 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 July — listed in order — are: Primary Metals; Plastics & Rubber Products; Transportation Equipment; Paper Products; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing. The five industries reporting decreases in inventories in July are: Machinery; Fabricated Metal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; and Chemical Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Jul 2010 19 60 21 -2 50.2
Jun 2010 13 66 21 -8 45.8
May 2010 13 66 21 -8 45.6
Apr 2010 20 61 19 +1 49.4

Customers' Inventories*

The ISM Customers' Inventories Index registered 39 percent in July, 1 percentage point higher than in June when the index registered 38 percent, and the 16th 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.

None of the 18 manufacturing industries reported customers' inventories as being too high during July. The 11 industries reporting customers' inventories as too low during July — listed in order — are: Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Printing & Related Support Activities; Computer & Electronic Products; Primary Metals; Chemical Products; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Nonmetallic Mineral Products.

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

Net

Index
Jul 2010 81 6 66 28 -22 39.0
Jun 2010 67 4 68 28 -24 38.0
May 2010 69 5 54 41 -36 32.0
Apr 2010 72 9 48 43 -34 33.0

Prices*

The ISM Prices Index registered 57.5 percent in July, 0.5 percentage point higher than the 57 percent reported in June. This is the 13th consecutive month in which the Prices Index has registered above 50 percent. While 33 percent of respondents reported paying higher prices and 18 percent reported paying lower prices, 49 percent of supply executives reported paying the same prices as in June. 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 10 industries reporting paying increased prices during the month of July — listed in order — are: Paper Products; Printing & Related Support Activities; Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Chemical Products; and Transportation Equipment. The three industries reporting paying lower prices on average during July are: Petroleum & Coal Products; Nonmetallic Mineral Products; and Fabricated Metal Products.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Jul 2010 33 49 18 +15 57.5
Jun 2010 32 50 18 +14 57.0
May 2010 60 35 5 +55 77.5
Apr 2010 60 36 4 +56 78.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 54.5 percent in July, 2.5 percentage points lower than the 57 percent reported in June. Of the 86 percent of respondents who reported their backlog of orders, 28 percent reported greater backlogs, 19 percent reported smaller backlogs, and 53 percent reported no change from June.

The six industries reporting increased order backlogs in July — listed in order — are: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; and Chemical Products. The five industries reporting decreases in order backlogs during July are: Nonmetallic Mineral Products; Printing & Related Support Activities; Fabricated Metal Products; Furniture & Related Products; and Machinery.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Jul 2010 86 28 53 19 +9 54.5
Jun 2010 85 31 52 17 +14 57.0
May 2010 85 30 59 11 +19 59.5
Apr 2010 82 31 53 16 +15 57.5

New Export Orders*

ISM's New Export Orders Index registered 56.5 percent in July, which is 0.5 percentage point higher than the 56 percent reported in June. This is the 13th consecutive month of growth in the New Export Orders Index.

The seven industries reporting growth in new export orders in July — listed in order — are: Furniture & Related Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Paper Products; Chemical Products; Fabricated Metal Products; and Transportation Equipment. Two industries reported a decrease in export orders during July: Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jul 2010 78 20 73 7 +13 56.5
Jun 2010 78 19 74 7 +12 56.0
May 2010 78 28 68 4 +24 62.0
Apr 2010 79 23 76 1 +22 61.0

Imports*

Imports of materials by manufacturers expanded in July as the Imports Index registered 52.5 percent, 4 percentage points lower than the 56.5 reported in June. This is the 11th consecutive month of growth in imports.

The five industries reporting growth in imports during the month of July are: Transportation Equipment; Computer & Electronic Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Fabricated Metal Products. The two industries reporting a decrease in imports during July are: Nonmetallic Mineral Products and Primary Metals.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jul 2010 78 14 77 9 +5 52.5
Jun 2010 77 20 73 7 +13 56.5
May 2010 82 17 79 4 +13 56.5
Apr 2010 83 23 70 7 +16 58.0

* 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 in unchanged at 112 days. Average lead time for Production Materials increased 2 days to 52 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies is unchanged at 23 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jul 2010 30 7 11 13 28 11 112
Jun 2010 28 8 9 16 29 10 112
May 2010 32 8 9 15 26 10 106
Apr 2010 32 5 10 17 26 10 107
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jul 2010 23 35 24 11 5 2 52
Jun 2010 25 36 22 11 4 2 50
May 2010 22 41 21 10 5 1 48
Apr 2010 20 48 18 8 3 3 50
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jul 2010 50 38 7 5 0 0 23
Jun 2010 48 38 11 3 0 0 23
May 2010 51 36 10 2 1 0 23
Apr 2010 50 38 8 4 0 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 August 2010 data will be released at 10:00 a.m. (ET) on Wednesday, September 1, 2010.



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