FOR RELEASE: April 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 March 2005.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew in March for the 22nd consecutive month, while the overall economy grew for the 41st 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. "The manufacturing sector maintained its strength in March, finishing the first quarter in a relatively strong position. Growth in New Orders and Inventories helped offset lower index readings in Production, Supplier Deliveries and Employment. Price inflation continues to present a problem for manufacturers as the Prices Index gained significant momentum."
The 16 industries reporting growth in March — listed in order — are: Primary Metals; Textiles; Glass, Stone & Aggregate; Wood & Wood Products; Instruments & Photographic Equipment; Electronic Components & Equipment; Rubber & Plastic Products; Furniture; Miscellaneous*; Industrial & Commercial Equipment & Computers; Chemicals; Fabricated Metals; Transportation & Equipment; Printing & Publishing; Apparel; and Food. The industries reporting the same level of activity as last month are: Tobacco and Petroleum. Paper is the only industry reporting decreased activity during March.
|MANUFACTURING AT A GLANCE|
|Backlog of Orders||56.0||50.5||+5.5||Growing||Faster||4|
*Number of months moving in current direction
ABS Plastic; Aluminum (17); Caustic Soda (11); Chemicals (14); Copper (6); Corrugated Containers (14); Diesel Fuel (7); Energy (2); Freight (13); Fuel (2); Fuel Oil; Gasoline (2); HDPE; Machined Components; MRO Items; Natural Gas (32); Oil (2); Oil-Based Products; Paper (13); Petroleum-Based Products; Plastic Products (various forms) (14); Plastic Resin (2); Plastics (8); Polyethylene; Polypropylene; Propylene; Resins (8); Solvents; Stainless Steel (7); Steel* (18); Titanium; and Wood.
Caustic Soda (2); Steel (15); and Steel Products (various forms).
*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 March for the 22nd consecutive month. The PMI for March registered 55.2 percent, a decrease of 0.1 percentage point when compared to February's seasonally adjusted reading of 55.3 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 March 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 through March (55.6 percent) corresponds to a 4.7 percent increase in gross domestic product (GDP) on an annual basis. In addition, if the PMI for March (55.2 percent) is annualized, it corresponds to a 4.5 percent increase in GDP annually.
|Mar 2005||55.2||Sep 2004||59.1|
|Feb 2005||55.3||Aug 2004||59.6|
|Jan 2005||56.4||Jul 2004||61.6|
|Dec 2004||57.3||Jun 2004||61.2|
|Nov 2004||57.6||May 2004||62.6|
|Oct 2004||57.5||Apr 2004||62.3|
|Average for 12 months - 58.8|
High - 62.6
Low - 55.2
ISM's New Orders Index grew in March with a reading of 57.1 percent. The index is 1.3 percentage points higher than the seasonally adjusted 55.8 percent registered in February, and it is the 23rd 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). Fifteen industries reported increases for the month of March: Primary Metals; Textiles; Miscellaneous*; Electronic Components & Equipment; Glass, Stone & Aggregate; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Wood & Wood Products; Chemicals; Transportation & Equipment; Furniture; Fabricated Metals; Food; and Printing & Publishing.
ISM's Production Index is 56.5 percent in March, 0.2 percentage point lower than the seasonally adjusted 56.7 percent reported in February. March is the 23rd 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 March, 14 registered growth: Glass, Stone & Aggregate; Textiles; Wood & Wood Products; Instruments & Photographic Equipment; Furniture; Electronic Components & Equipment; Chemicals; Miscellaneous*; Transportation & Equipment; Fabricated Metals; Rubber & Plastic Products; Primary Metals; Industrial & Commercial Equipment & Computers; and Printing & Publishing.
ISM's Employment Index grew for the 17th consecutive month, following a 37-month trend of contraction. The index registered 53.3 percent in March compared to 57.4 percent in February, a decrease of 4.1 percentage points. 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 12 industries reporting growth in employment during March are: Apparel; Wood & Wood Products; Paper; Electronic Components & Equipment; Printing & Publishing; Furniture; Transportation & Equipment; Rubber & Plastic Products; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; and Food.
The delivery performance of suppliers to manufacturing organizations was slower for the 21st consecutive month in March. ISM's Supplier Deliveries Index for March registered 52.5 percent, a decrease of 1.4 percentage points compared to February's seasonally adjusted reading of 53.9 percent. A reading above 50 percent indicates slower deliveries. The eight industries reporting slower supplier deliveries in March are: Instruments & Photographic Equipment; Rubber & Plastic Products; Miscellaneous*; Chemicals; Primary Metals; Industrial & Commercial Equipment & Computers; Paper; and Food.
NOTE: A list of commodities in short supply is available on page 2 of this report.
Manufacturers' inventories rose in March following a one-month decline as ISM's Inventories Index registered 54.1 percent (seasonally adjusted), up 5.5 percentage points when compared to February's 48.6 percentage points. 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 11 industries reporting higher inventories in March are: Furniture; Fabricated Metals; Printing & Publishing; Primary Metals; Wood & Wood Products; Electronic Components & Equipment; Food; Rubber & Plastic Products; Chemicals; Paper; and Industrial & Commercial Equipment & Computers.
The March Customers' Inventories Index is at 46 percent, 3.5 percentage points higher compared to 42.5 percent reported in February. Respondents indicate that their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 46th consecutive month that the index has registered below 50 percent. Five industries reported higher customer inventories during March and they are: Paper; Furniture; Food; Electronic Components & Equipment; and Primary Metals.
|% Reporting||%Too High||%About Right||%Too Low||Net||Index|
ISM's Prices Index indicates manufacturers continue to pay higher prices in March. This is the 37th consecutive month the index has registered higher prices. March's index is at 73 percent, 7.5 percentage points higher than February's reading of 65.5 percent. In March, 51 percent of supply executives reported paying higher prices and 5 percent reported paying lower prices, while 44 percent reported that prices were unchanged from the preceding month.
A Prices Index above 47.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In March, 18 industries reported paying higher prices: Petroleum; Rubber & Plastic Products; Instruments & Photographic Equipment; Paper; Chemicals; Miscellaneous*; Printing & Publishing; Food; Apparel; Furniture; Industrial & Commercial Equipment & Computers; Primary Metals; Electronic Components & Equipment; Transportation & Equipment; Glass, Stone & Aggregate; Textiles; Fabricated Metals; and Wood & Wood Products.
NOTE: A list of commodities up in price and down in price is available on page 2 of this report.
ISM's Backlog of Orders Index registered 56 percent, indicating manufacturers' backlogs in March are growing at a faster rate when compared to February. Of the 86 percent of respondents who report their backlog of orders, 29 percent reported greater backlogs, 17 percent reported smaller backlogs, and 54 percent reported no change from February. The 11 industries reporting an increase in order backlogs during the month are: Electronic Components & Equipment; Miscellaneous*; Apparel; Primary Metals; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Instruments & Photographic Equipment; Chemicals; Transportation & Equipment; and Food.
ISM's New Export Orders Index for March registered 55.4 percent, a decrease of 2 percentage points when compared to February's seasonally adjusted index of 57.4 percent. This is the 39th consecutive month of growth in export orders. The nine industries reporting growth in new export orders in March are: Miscellaneous*; Textiles; Rubber & Plastic Products; Instruments & Photographic Equipment; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Primary Metals; Food; and Fabricated Metals.
Imports of materials by manufacturers grew during March as the Imports Index registered 58.9 percent. The index decreased 1.8 percentage points when compared to February's seasonally adjusted index of 60.7 percent, indicating a slightly slower rate of growth. The 14 industries reporting growth in import activity for March are: Textiles; Apparel; Furniture; Miscellaneous*; Printing & Publishing; Fabricated Metals; Food; Industrial & Commercial Equipment & Computers; Wood & Wood Products; Electronic Components & Equipment; Transportation & Equipment; Rubber & Plastic Products; Chemicals; and Instruments & Photographic Equipment.
*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 declined 9 days to 103 days. Average leadtime for Production Materials declined 2 days to 46 days. Average leadtime for Maintenance, Repair and Operating (MRO) supplies declined 1 day to 21 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 April 2005 data will be released at 10:00 a.m. (ET) on May 2, 2005.