FOR RELEASE: March 1, 2005
|ISM, Media Relations|
|800/888-6276, Ext. 3071|
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 cover only their local vicinity. 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 2005.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew in February for the 21st consecutive month, while the overall economy grew for the 40th 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, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "February was another good month in the manufacturing sector. While the overall rate of growth is slowing, the overall picture is improving as price increases and shortages are becoming less of a problem. Exports and imports remain strong. The recent trend of inventory growth reversed direction during February; this reduces possible concerns about involuntary inventory build. Customers' inventories declined slightly, reinforcing the probability that inventories are not yet a concern."
The 13 industries reporting growth in February — listed in order — are: Apparel; Textiles; Miscellaneous*; Transportation & Equipment; Electronic Components & Equipment; Tobacco; Chemicals; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Primary Metals; Food; Wood & Wood Products; and Paper. The one industry reporting the same level of activity as last month is Petroleum. The six industries reporting decreased activity from last month — listed in order — are: Leather; Glass, Stone & Aggregate; Fabricated Metals; Rubber & Plastic Products; Printing & Publishing; and Furniture.
|MANUFACTURING AT A GLANCE|
|Backlog of Orders||50.5||50.5||0.0||Increasing||Unchanged||3|
* Number of months moving in current direction
Aluminum (16); Benzene; Butadiene (3); Caustic Soda (10); Chemicals (13); Copper (5); Corrugated Containers (13); Crude Oil; Diesel Fuel (6); Energy; Freight (12); Fuel; Gasoline; Industrial Gases; Low-Density Polyethylene; Natural Gas* (31); Paper (12); Plastic Products (various forms) (13); Plastic Resin; Plastics (7); Polypropylene Resins (2); Pulp; Resins (7); Stainless Steel (6); Steel (17); Steel — Coated Sheet; Steel Products (various forms) (7); and Titanium Dioxide (2).
Cold-Rolled Steel; Hot-Rolled Steel; Natural Gas* (4); and Steel Scrap (2).
Aluminum; Caustic Soda; and Steel (14).
*Reported as both up and down in price.
Note: The number of consecutive months the commodity is listed is indicated after each item.
The PMI indicates that the manufacturing economy grew in February for the 21st consecutive month. The PMI for February registered 55.3 percent, a decrease of 1.1 percentage points when compared to January's seasonally adjusted reading of 56.4 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 42.7 percent, over a period of time, generally indicates an expansion of the overall economy. The February PMI indicates that both the overall economy and the manufacturing sector are growing. The past relationship between the PMI and the overall economy indicates that the average PMI for January and February (55.9 percent) corresponds to a 4.8 percent increase in gross domestic product (GDP) on an annual basis. In addition, if the PMI for February (55.3 percent) is annualized, it corresponds to a 4.6 percent increase in GDP annually.
|Average for 12 months – 59.4|
High – 62.6
Low – 55.3
ISM's New Orders Index grew in February with a reading of 55.8 percent. The index is 0.7 percentage point lower than the seasonally adjusted 56.5 percent registered in January, and it is the 22nd consecutive month the index has exceeded 50 percent. A New Orders Index above 51.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). Thirteen industries reported increases for the month of February: Textiles; Apparel; Miscellaneous*; Electronic Components & Equipment; Chemicals; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Primary Metals; Food; Wood & Wood Products; Instruments & Photographic Equipment; Furniture; and Printing & Publishing.
ISM's Production Index is 56.7 percent in February, 1.1 percentage points lower than the seasonally adjusted 57.8 percent reported in January. February is the 22nd consecutive month of growth in the index. An index above 50 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in February, 13 registered growth: Tobacco; Textiles; Apparel; Primary Metals; Transportation & Equipment; Miscellaneous*; Electronic Components & Equipment; Chemicals; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Paper; Food; and Wood & Wood Products.
ISM's Employment Index grew for the 16th consecutive month, following a 37-month trend of contraction. The index registered 57.4 percent in February compared to 58.1 percent in January, a decrease of 0.7 percentage point. An Employment Index above 48.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The 11 industries reporting growth in employment during February are: Leather; Apparel; Miscellaneous*; Electronic Components & Equipment; Textiles; Transportation & Equipment; Rubber & Plastic Products; Instruments & Photographic Equipment; Primary Metals; Industrial & Commercial Equipment & Computers; and Glass, Stone & Aggregate.
The delivery performance of suppliers to manufacturing organizations was slower for the 20th consecutive month in February. ISM's Supplier Deliveries Index for February registered 53.9 percent, an increase of 0.2 percentage point compared to January's seasonally adjusted reading of 53.7 percent. A reading above 50 percent indicates slower deliveries. The 10 industries reporting slower supplier deliveries in February are: Glass, Stone & Aggregate; Instruments & Photographic Equipment; Paper; Chemicals; Textiles; Miscellaneous*; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Food; and Electronic Components & Equipment.
NOTE: A list of commodities in short supply is available on page two of this report.
Manufacturers' inventories declined in February following three consecutive months of growth as ISM's Inventories Index registered 48.6 percent (seasonally adjusted). An Inventories Index greater than 42.3 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 nine industries reporting higher inventories in February are: Apparel; Furniture; Transportation & Equipment; Fabricated Metals; Glass, Stone & Aggregate; Primary Metals; Printing & Publishing; Instruments & Photographic Equipment; and Food.
The February Customers' Inventories Index is at 42.5 percent, 2 percentage points lower compared to 44.5 percent reported in January. Respondents indicate that their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 45th consecutive month that the index has registered below 50 percent. Four industries reported higher customer inventories during February and they are: Rubber & Plastic Products; Food; Electronic Components & Equipment; and Transportation & Equipment.
|% Reporting||%Too High||%About Right||%Too Low||Net||Index|
ISM's Prices Index indicates manufacturers continue to pay higher prices in February. This is the 36th consecutive month the index has registered higher prices. February's index is at 65.5 percent, 3.5 percentage points lower than January's reading of 69 percent. In February, 38 percent of supply executives reported paying higher prices and 7 percent reported paying lower prices, while 55 percent reported that prices were unchanged from the preceding month.
A Prices Index above 47.1 percent, over time, is generally consistent with a increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In February, 15 industries reported paying higher prices: Tobacco; Petroleum; Paper; Textiles; Chemicals; Miscellaneous*; Food; Rubber & Plastic Products; Transportation & Equipment; Printing & Publishing; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Electronic Components & Equipment; Wood & Wood Products; and Glass, Stone & Aggregate.
NOTE: A list of commodities up in price and down in price is available on page two of this report.
ISM's Backlog of Orders Index registered 50.5 percent, indicating manufacturers' backlogs in February are growing at the same rate as in January. Of the 84 percent of respondents who report their backlog of orders, 21 percent reported greater backlogs, 20 percent reported smaller backlogs, and 59 percent reported no change from January. The 10 industries reporting an increase in order backlogs during the month are: Apparel; Furniture; Primary Metals; Textiles; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Rubber & Plastic Products; Instruments & Photographic Equipment; Transportation & Equipment; and Chemicals.
ISM's New Export Orders Index for February registered 57.4 percent, an increase of 0.5 percentage point when compared to January's seasonally adjusted index of 56.9 percent. This is the 38th consecutive month of growth in export orders. The 11 industries reporting growth in new export orders in February are: Textiles; Apparel; Instruments & Photographic Equipment; Food; Primary Metals; Miscellaneous*; Industrial & Commercial Equipment & Computers; Paper; Chemicals; Electronic Components & Equipment; and Rubber & Plastic Products.
Imports of materials by manufacturers grew during February as the Imports Index registered 60.7 percent. The index decreased 0.4 percentage point when compared to January's seasonally adjusted index of 61.1 percent, indicating a slightly slower rate of growth. The 13 industries reporting growth in import activity for February are: Apparel; Transportation & Equipment; Furniture; Miscellaneous*; Textiles; Wood & Wood Products; Printing & Publishing; Fabricated Metals; Instruments & Photographic Equipment; Food; Electronic Components & Equipment; Rubber & Plastic Products; and Industrial & Commercial Equipment & Computers.
*Miscellaneous is a preponderance of jewelry, toys, sporting goods and musical instruments.
**The Backlog of Orders, Prices and Customers' Inventories Indexes do not meet the accepted criteria for seasonal adjustments.
Average commitment leadtime for Capital Expenditures rose 6 days to 112 days. Average leadtime for Production Materials rose 3 days to 48 days. Average leadtime for Maintenance, Repair and Operating (MRO) supplies rose 1 day to 22 days.
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.
The Manufacturing ISM Report On Business® is based on data compiled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies. Membership of the Business Survey Committee is diversified by Standard Industrial Classification (SIC) category, based on each industry's contribution to Gross Domestic Product (GDP). Twenty industries from various U.S. geographical areas are represented on the committee. The 20 manufacturing Standard Industry Classification codes are: Food; Tobacco; Textiles; Apparel; Wood & Wood Products; Furniture; Paper; Printing & Publishing; Chemicals; Petroleum; Rubber & Plastic Products; Leather; Glass, Stone & Aggregate; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Transportation & Equipment; Instruments & Photographic Equipment; and Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments).
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 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 indices for five of the indicators with varying weights: New Orders 30%; Production 25%; Employment 20%; Supplier Deliveries 15%; and Inventories 10%.
Diffusion indices 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 that it is generally declining. A PMI over 42.7 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding; below 42.7 percent, it is generally declining. The distance from 50 percent or 42.7 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 leadtime, 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 2005 data will be released at 10:00 a.m. (ET) on April 1, 2005.