FOR RELEASE: May 2, 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 April 2005.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew in April for the 23rd consecutive month, while the overall economy grew for the 42nd 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. "In April, the manufacturing sector grew for the 23rd consecutive month based on the ISM data. This represents the longest period of growth in the last 16 years. However, the rate of growth slowed to its lowest level since July 2003. The trend is definitely toward a slower pace of growth, and that should relieve some of the pricing pressure that the sector has experienced during 2004 and year to date in 2005. Declines in Inventories indicate that manufacturers are adjusting to slower growth in new orders."
The 14 industries reporting growth in April — listed in order — are: Wood & Wood Products; Miscellaneous*; Rubber & Plastic Products; Instruments & Photographic Equipment; Furniture; Leather; Glass, Stone & Aggregate; Industrial & Commercial Equipment & Computers; Chemicals; Food; Tobacco; Fabricated Metals; Primary Metals; and Transportation & Equipment. Petroleum is the only industry reporting the same level of activity as last month. The industries reporting decreased activity in April are: Apparel; Paper; Electronic Components & Equipment; Printing & Publishing; and Textiles.
|MANUFACTURING AT A GLANCE|
|Backlog of Orders||53.0||56.0||-3.0||Growing||Slower||5|
*Number of months moving in current direction
Aluminum (18); Aluminum Extrusions; Beef; Butadiene; Caustic Soda (12); Chemicals (15); Coal; Copper (7); Corrugated Containers (15); Diesel Fuel (8); Energy (3); Freight (14); Fuel (3); Fuel Oil (2); Fuel Surcharges; Gasoline (3); Glass; LDPE; Machined Components (2); Natural Gas (33); Paper (14); PET; Petroleum-Based Products (2); Plastic Products (various forms) (15); Plastic Resin (3); Plastics (9); PVC; Resins (9); Rubber-Based Products; Steel* (19); Titanium (2); Titanium Dioxide; Wood (2); and Wood Pulp.
Caustic Soda (3); and Steel (16).
*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 April for the 23rd consecutive month. The PMI for April registered 53.3 percent, a decrease of 1.9 percentage points when compared to March's reading of 55.2 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 42.7 percent, over a period of time, generally indicates an expansion of the overall economy. The April 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 April (55.1 percent) corresponds to a 4.5 percent increase in gross domestic product (GDP) on an annual basis. In addition, if the PMI for April (53.3 percent) is annualized, it corresponds to a 3.8 percent increase in GDP annually.
|Apr 2005||53.3||Oct 2004||57.5|
|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|
|Average for 12 months – 58.1|
High – 62.6
Low – 53.3
ISM's New Orders Index grew in April with a reading of 53.7 percent. The index is 3.4 percentage points lower than the 57.1 percent registered in March, and it is the 24th 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). Eleven industries reported increases for the month of April: Wood & Wood Products; Instruments & Photographic Equipment; Glass, Stone & Aggregate; Miscellaneous*; Furniture; Rubber & Plastic Products; Chemicals; Fabricated Metals; Industrial & Commercial Equipment & Computers; Food; and Transportation & Equipment.
ISM's Production Index is 56.7 percent in April, 0.2 percentage point higher than the 56.5 percent reported in March. April is the 24th 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 April, 15 registered growth: Leather; Wood & Wood Products; Tobacco; Instruments & Photographic Equipment; Miscellaneous*; Chemicals; Rubber & Plastic Products; Furniture; Industrial & Commercial Equipment & Computers; Textiles; Glass, Stone & Aggregate; Primary Metals; Food; Fabricated Metals; and Transportation & Equipment.
ISM's Employment Index grew for the 18th consecutive month, following a 37-month trend of contraction. The index registered 52.3 percent in April compared to 53.3 percent in March, a decrease of 1 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 nine industries reporting growth in employment during April are: Miscellaneous*; Wood & Wood Products; Rubber & Plastic Products; Food; Furniture; Industrial & Commercial Equipment & Computers; Primary Metals; Transportation & Equipment; and Instruments & Photographic Equipment.
The delivery performance of suppliers to manufacturing organizations was slower for the 22nd consecutive month in April. ISM's Supplier Deliveries Index for April registered 51.5 percent, a decrease of 1 percentage point compared to March's reading of 52.5 percent. A reading above 50 percent indicates slower deliveries. The 10 industries reporting slower supplier deliveries in April are: Apparel; Rubber & Plastic Products; Paper; Glass, Stone & Aggregate; Furniture; Primary Metals; Wood & Wood Products; Instruments & Photographic Equipment; Chemicals; and Industrial & Commercial Equipment & Computers.
NOTE: A list of commodities in short supply is available on page 2 of this report.
Manufacturers' inventories declined in April following a one-month increase as ISM's Inventories Index registered 47.9 percent, down 6.2 percentage points when compared to March's 54.1 percent. 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 six industries reporting higher inventories in April are: Wood & Wood Products; Furniture; Industrial & Commercial Equipment & Computers; Food; Chemicals; and Transportation & Equipment.
The April Customers' Inventories Index is at 41.5 percent, 4.5 percentage points lower compared to the 46 percent reported in March. Respondents indicate that their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 47th consecutive month that the index has registered below 50 percent. Four industries reported higher customers' inventories during April and they are: Furniture; Miscellaneous*; Electronic Components & Equipment; and Chemicals.
ISM's Prices Index indicates manufacturers continue to pay higher prices in April. This is the 38th consecutive month the index has registered higher prices. April's index is at 71 percent, 2 percentage points lower than March's reading of 73 percent. In April, 52 percent of supply executives reported paying higher prices and 10 percent reported paying lower prices, while 38 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 April, 18 industries reported paying higher prices: Tobacco; Petroleum; Leather; Glass, Stone & Aggregate; Textiles; Transportation & Equipment; Printing & Publishing; Chemicals; Paper; Instruments & Photographic Equipment; Furniture; Primary Metals; Electronic Components & Equipment; Rubber & Plastic Products; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Miscellaneous*; and Food.
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 53 percent, indicating manufacturers' backlogs in April are growing at a slower rate when compared to March. Of the 87 percent of respondents who report their backlog of orders, 25 percent reported greater backlogs, 19 percent reported smaller backlogs, and 56 percent reported no change from March. The 11 industries reporting an increase in order backlogs during the month are: Wood & Wood Products; Apparel; Furniture; Textiles; Glass, Stone & Aggregate; Miscellaneous*; Industrial & Commercial Equipment & Computers; Fabricated Metals; Instruments & Photographic Equipment; Food; and Transportation & Equipment.
ISM's New Export Orders Index for April registered 57.2 percent, an increase of 1.8 percentage points when compared to March's index of 55.4 percent. This is the 40th consecutive month of growth in export orders. The 11 industries reporting growth in new export orders in April are: Tobacco; Food; Chemicals; Instruments & Photographic Equipment; Printing & Publishing; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Paper; Rubber & Plastic Products; Fabricated Metals; and Electronic Components & Equipment.
Imports of materials by manufacturers grew during April as the Imports Index registered 56.7 percent. The index decreased 2.2 percentage points when compared to March's index of 58.9 percent, indicating a slower rate of growth. The 13 industries reporting growth in import activity for April are: Miscellaneous*; Printing & Publishing; Furniture; Textiles; Industrial & Commercial Equipment & Computers; Glass, Stone & Aggregate; Transportation & Equipment; Wood & Wood Products; Electronic Components & Equipment; Rubber & Plastic Products; Instruments & Photographic Equipment; Fabricated Metals; and Chemicals.
*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 7 days to 110 days. Average leadtime for Production Materials rose 4 days to 50 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 and 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 indexes for five of the indicators with varying weights: New Orders &150; 30%; Production &150; 25%; Employment &150; 20%; Supplier Deliveries &150; 15%; and Inventories &150; 10%.
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 42.7 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 May 2005 data will be released at 10:00 a.m. (ET) on June 1, 2005.