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March 2011 Manufacturing ISM Report On Business®

FOR RELEASE: April 1, 2011


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


PMI at 61.2%

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 March 2011.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in March for the 20th consecutive month, and the overall economy grew for the 22nd 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 recent trend of rapid growth in the manufacturing sector continued in March, as the PMI registered above 60 percent for the third consecutive month. The component indexes of the PMI remain at very positive levels and signal strong sector performance in the first quarter. While manufacturers are benefiting from strength in new orders and production, there is significant concern with regard to commodity prices. Many manufacturers indicate the prices they have to pay for inputs are rising, and there is concern about the impact of higher prices on their margins."

PERFORMANCE BY INDUSTRY

Of the 18 manufacturing industries, 15 are reporting growth in March, in the following order: Apparel, Leather & Allied Products; Transportation Equipment; Fabricated Metal Products; Machinery; Textile Mills; Computer & Electronic Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Miscellaneous Manufacturing; and Printing & Related Support Activities. The two industries reporting contraction in March are: Wood Products and Primary Metals.

WHAT RESPONDENTS ARE SAYING ...
  • "Customer orders have picked up nicely. [This is] likely in anticipation of increasing prices due to commodity costs that will likely happen over next month." (Food, Beverage & Tobacco Products)
  • "New orders continue at a robust pace this month." (Miscellaneous Manufacturing)
  • "What will be the impact to the U.S. supply chain after the devastation caused by the Japan earthquake?" (Chemical Products)
  • "The building side of our business is mired with little hope of a rebound anytime soon." (Fabricated Metal Products)
  • "Steel and certain steel products causing concern over price increases and availability." (Machinery)
MANUFACTURING AT A GLANCE
MARCH 2011


Index
Series
Index
March
Series
Index
February
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 61.2 61.4 -0.2 Growing Slower 20
New Orders 63.3 68.0 -4.7 Growing Slower 21
Production 69.0 66.3 +2.7 Growing Faster 22
Employment 63.0 64.5 -1.5 Growing Slower 18
Supplier Deliveries 63.1 59.4 +3.7 Slowing Faster 22
Inventories 47.4 48.8 -1.4 Contracting Faster 2
Customers' Inventories 39.5 40.0 -0.5 Too Low Faster 24
Prices 85.0 82.0 +3.0 Increasing Faster 21
Backlog of Orders 52.5 59.0 -6.5 Growing Slower 3
Exports 56.0 62.5 -6.5 Growing Slower 21
Imports 56.5 55.0 +1.5 Growing Faster 19
             
OVERALL ECONOMY Growing Slower 22
Manufacturing Sector Growing Slower 20

*Number of months moving in current direction.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (7); Aluminum Products (3); Brass (4); Caustic Soda; Chemicals; Cocoa/Cocoa Powder (2); Copper (8); Copper Based Products (5); Corn (7); Corn Syrup; Diesel (4); Electronic Components; Fuel Oils (3); Fuel Surcharges; High Density Polyethylene; Nickel (2); PET; Plastics (3); Plastic Products (3); Plastic Resins (5); Polyethylene (2); Polyethylene Resin (3); Polypropylene (3); Resins; Resin Based Products; Rubber; Rubber Products (2); Silver; Stainless Steel (5); Steel (7); Steel — Hot Rolled (2); Steel Products (4); Steel Surcharges (3); Sugar (3); and Transportation Rates.

Commodities Down in Price

Natural Gas is the only commodity reported down in price.

Commodities in Short Supply

Cocoa Powder (2); Electric Components (3); and Titanium Dioxide.

Note: The number of consecutive months the commodity is listed is indicated after each item.



MARCH 2011 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing continued its rapid growth in March as the PMI registered 61.2 percent, a decrease of 0.2 percentage point when compared to February's reading of 61.4 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 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 22nd consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 20th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (61.1 percent) corresponds to a 6.5 percent increase in real gross domestic product (GDP). In addition, if the PMI for March (61.2 percent) is annualized, it corresponds to a 6.5 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Mar 2011 61.2   Sep 2010 55.3
Feb 2011 61.4   Aug 2010 55.2
Jan 2011 60.8   Jul 2010 55.1
Dec 2010 58.5   Jun 2010 55.3
Nov 2010 58.2   May 2010 57.8
Oct 2010 56.9   Apr 2010 59.6
Average for 12 months – 57.9
High – 61.4
Low –55.1

New Orders

ISM's New Orders Index registered 63.3 percent in March, which is a decrease of 4.7 percentage points when compared to the 68 percent reported in February. This is the 21st consecutive month of growth in the New Orders Index. A New Orders Index above 52.1 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 March — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Transportation Equipment; Fabricated Metal Products; Textile Mills; Paper Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Petroleum & Coal Products; Computer & Electronic Products; Chemical Products; Machinery; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. The two industries reporting decreases in new orders in March are: Wood Products and Primary Metals.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Mar 2011 43 47 10 +33 63.3
Feb 2011 43 46 11 +32 68.0
Jan 2011 46 36 18 +28 67.8
Dec 2010 31 47 22 +9 62.0

Production

ISM's Production Index registered 69 percent in March, which is an increase of 2.7 percentage points from the February reading of 66.3 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 22nd consecutive month the Production Index has registered above 50 percent.

The 14 industries reporting growth in production during the month of March — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; Paper Products; Food, Beverage & Tobacco Products; Machinery; Petroleum & Coal Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; and Chemical Products. The two industries reporting a decrease in production in March are: Printing & Related Support Activities; and Primary Metals.


Production
%
Better
%
Same
%
Worse

Net

Index
Mar 2011 41 52 7 +34 69.0
Feb 2011 43 47 10 +33 66.3
Jan 2011 40 44 16 +24 63.5
Dec 2010 30 52 18 +12 63.0

Employment

ISM's Employment Index registered 63 percent in March, which is 1.5 percentage points lower than the 64.5 percent reported in February. This is the 18th consecutive month of growth in manufacturing employment. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, 12 reported growth in employment in March in the following order: Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Textile Mills; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Paper Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Printing & Related Support Activities; and Fabricated Metal Products. The two industries reporting a decrease in employment during March are: Wood Products; and Petroleum & Coal Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Mar 2011 33 59 8 +25 63.0
Feb 2011 35 56 9 +26 64.5
Jan 2011 24 69 7 +17 61.7
Dec 2010 22 66 12 +10 58.9

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in March as the Supplier Deliveries Index registered 63.1 percent, which is 3.7 percentage points higher than the 59.4 percent registered in February. This is the 22nd 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 March — listed in order — are: Machinery; Apparel, Leather & Allied Products; Fabricated Metal Products; Transportation Equipment; Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components. None of the manufacturing industries reported faster deliveries in March.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Mar 2011 26 73 1 +25 63.1
Feb 2011 24 69 7 +17 59.4
Jan 2011 18 77 5 +13 58.6
Dec 2010 15 78 7 +8 56.7

Inventories

Manufacturers' inventories declined in March for the second consecutive month. The Inventories Index registered 47.4 percent, 1.4 percentage points less than the 48.8 percent recorded for February. An Inventories Index greater than 42.7 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 seven industries reporting higher inventories in March — listed in order — are: Apparel, Leather & Allied Products; Fabricated Metal Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; and Machinery. The eight industries reporting decreases in inventories in March — listed in order — are: Plastics & Rubber Products; Primary Metals; Petroleum & Coal Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Paper Products; and Transportation Equipment.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Mar 2011 19 60 21 -2 47.4
Feb 2011 19 63 18 +1 48.8
Jan 2011 25 54 21 +4 52.4
Dec 2010 24 52 24 0 51.8

Customers' Inventories*

The ISM Customers' Inventories Index registered 39.5 percent in March, 0.5 percentage point lower than in February when the index registered 40 percent. This is the 24th consecutive month the Customers' Inventories Index has been below 50 percent, indicating that respondents believe their customers' inventories are too low at this time.

The only manufacturing industry reporting customers' inventories as being too high during March is Primary Metals. The 11 industries reporting customers' inventories as too low during March — listed in order — are: Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Fabricated Metal Products.

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

Net

Index
Mar 2011 62 11 57 32 -21 39.5
Feb 2011 66 7 66 27 -20 40.0
Jan 2011 63 11 69 20 -9 45.5
Dec 2010 67 8 64 28 -20 40.0

Prices*

The ISM Prices Index registered 85 percent in March, 3 percentage points higher than the 82 percent reported in February and the highest reading since July 2008 when the index registered 88.5 percent. This is the 21st consecutive month the Prices Index has registered above 50 percent. While 72 percent of respondents reported paying higher prices and 2 percent reported paying lower prices, 26 percent of supply executives reported paying the same prices as in February. A Prices Index above 49.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

All 18 manufacturing industries report paying increased prices during the month of March in the following order: Textile Mills; Apparel, Leather & Allied Products; Wood Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Fabricated Metal Products; Machinery; Transportation Equipment; Primary Metals; Chemical Products; Paper Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Printing & Related Support Activities; Computer & Electronic Products; Petroleum & Coal Products; and Plastics & Rubber Products.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Mar 2011 72 26 2 +70 85.0
Feb 2011 66 32 2 +64 82.0
Jan 2011 64 35 1 +63 81.5
Dec 2010 48 49 3 +45 72.5

Backlog of Orders*

ISM's Backlog of Orders Index registered 52.5 percent in March, which is 6.5 percentage points lower than the 59 percent reported in February. Of the 85 percent of respondents who reported their backlog of orders, 26 percent reported greater backlogs, 21 percent reported smaller backlogs, and 53 percent reported no change from February.

The eight industries reporting increased order backlogs in March — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Nonmetallic Mineral Products; Furniture & Related Products; Machinery; Miscellaneous Manufacturing; and Fabricated Metal Products. The five industries reporting decreases in order backlogs during March are: Wood Products; Printing & Related Support Activities; Transportation Equipment; Chemical Products; and Electrical Equipment, Appliances & Components.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Mar 2011 85 26 53 21 +5 52.5
Feb 2011 82 31 56 13 +18 59.0
Jan 2011 83 34 48 18 +16 58.0
Dec 2010 84 21 52 27 -6 47.0

New Export Orders*

ISM's New Export Orders Index registered 56 percent in March, which is 6.5 percentage points lower than the 62.5 percent reported in February. This is the 21st consecutive month of growth in the New Export Orders Index.

The eight industries reporting growth in new export orders in March — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Primary Metals; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Chemical Products. The three manufacturing industries reporting a decrease in export orders during March are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; and Machinery.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Mar 2011 80 23 66 11 +12 56.0
Feb 2011 81 31 63 6 +25 62.5
Jan 2011 81 30 64 6 +24 62.0
Dec 2010 81 21 67 12 +9 54.5

Imports*

Imports of materials by manufacturers continued to expand in March as the Imports Index registered 56.5 percent, 1.5 percentage points higher than the 55 percentage points reported in February. This is the 19th consecutive month of growth in imports.

The eight industries reporting growth in imports during the month of March — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Fabricated Metal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; and Miscellaneous Manufacturing. The four industries reporting a decrease in imports during March are: Paper Products; Petroleum & Coal Products; Plastics & Rubber Products; and Computer & Electronic Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Mar 2011 78 18 77 5 +13 56.5
Feb 2011 77 19 72 9 +10 55.0
Jan 2011 82 20 70 10 +10 55.0
Dec 2010 82 13 75 12 +1 50.5

* 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 decreased 1 day to 107 days. Average lead time for Production Materials decreased 3 days to 53 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
Mar 2011 27 12 11 16 23 11 107
Feb 2011 32 7 8 18 24 11 108
Jan 2011 28 9 14 13 27 9 105
Dec 2010 28 9 15 14 24 10 105
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Mar 2011 17 38 27 13 3 2 53
Feb 2011 15 38 26 13 7 1 56
Jan 2011 13 38 30 14 2 3 57
Dec 2010 16 39 26 13 5 1 52
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Mar 2011 48 39 11 2 0 0 23
Feb 2011 51 36 10 2 1 0 23
Jan 2011 50 36 9 3 1 1 27
Dec 2010 44 41 9 5 0 1 28

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 42.5 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.5 percent, it is generally declining. The distance from 50 percent or 42.5 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 April 2011 data will be released at 10:00 a.m. (ET) on Monday, May 2, 2011.



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