FOR RELEASE: July 1, 2005
|Contact:||Rose Marie Goupil|
|ISM, Media Relations|
|800/888-6276, Ext. 3015|
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 June 2005.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew in June for the 25th consecutive month, while the overall economy grew for the 44th 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 grew for the 25th consecutive month in June based on the ISM data. The improved rate of growth in New Orders is quite encouraging, particularly when combined with a slower rate at which prices are escalating. These are the most positive signs that we have seen in several months, and they indicate that we may be through the 'soft patch' that many observers touted. High energy costs and the stronger dollar are still major concerns to purchasers."
The 13 industries reporting growth in June — listed in order — are: Petroleum; Textiles; Food; Miscellaneous*; Wood & Wood Products; Furniture; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Chemicals; Electronic Components & Equipment; Printing & Publishing; and Primary Metals. The industries reporting decreased activity in June are: Apparel; Tobacco; Fabricated Metals; Glass, Stone & Aggregate; Paper; and Transportation & Equipment.
|MANUFACTURING AT A GLANCE|
|Customers' Inventories||44.0||47.5||-3.5||Too Low||Faster||49|
|Backlog of Orders||51.0||51.0||0||Growing||Unchanged||7|
*Number of months moving in current direction
Aluminum (20); Caustic Soda (14); Chemicals (17); Copper; Diesel Fuel (10); Energy (5); Natural Gas* (35); Nickel (2); Oil (2); Plastic Resins (5); Plastics (11); Stainless Steel (2); and Steel* (21).
Aluminum Extrusions (2); Corrugated Containers; Gasoline; Lumber; Natural Gas* (2); Paper Products; Polyethylene Resin; Polypropylene Resin; Resins; Steel* (4); and Steel Scrap.
Caustic Soda (5); Nickel; Steel (18); and Titanium.
*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 June for the 25th consecutive month. The PMI for June registered 53.8 percent, an increase of 2.4 percentage points when compared to May's reading of 51.4 percent. This reverses a trend in which the rate of growth had slowed for six consecutive months. 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 June 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 June (54.2 percent) corresponds to a 4.2 percent increase in gross domestic product (GDP) on an annual basis. In addition, if the PMI for June (53.8 percent) is annualized, it corresponds to a 4 percent increase in GDP annually.
|Jun 2005||53.8||Dec 2004||57.3|
|May 2005||51.4||Nov 2004||57.6|
|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|
|Average for 12 months – 56.5|
High – 61.6
Low – 51.4
ISM's New Orders Index grew in June with a reading of 57.2 percent. The index is 5.5 percentage points higher than the 51.7 percent registered in May, and June is the 26th 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 during June: Textiles; Miscellaneous*; Food; Wood & Wood Products; Rubber & Plastic Products; Instruments & Photographic Equipment; Chemicals; Industrial & Commercial Equipment & Computers; Furniture; Printing & Publishing; and Paper.
ISM's Production Index is 55.6 percent in June, 0.7 percentage point higher than the 54.9 percent reported in May. June is the 26th 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 June, 11 registered growth: Petroleum; Textiles; Miscellaneous*; Food; Furniture; Chemicals; Instruments & Photographic Equipment; Electronic Components & Equipment; Wood & Wood Products; Printing & Publishing; and Industrial & Commercial Equipment & Computers.
ISM's Employment Index declined in June for the second consecutive month, and this contraction follows an 18-month expansion period. The index registered 49.9 percent in June compared to 48.8 percent in May, an increase of 1.1 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 10 industries reporting growth in employment during June are: Petroleum; Furniture; Rubber & Plastic Products; Textiles; Wood & Wood Products; Electronic Components & Equipment; Instruments & Photographic Equipment; Miscellaneous*; Food; and Industrial & Commercial Equipment & Computers.
The delivery performance of suppliers to manufacturing organizations was slower for the 24th consecutive month in June. ISM's Supplier Deliveries Index for June registered 53.1 percent, an increase of 2.6 percentage points compared to May's reading of 50.5 percent. A reading above 50 percent indicates slower deliveries. The 11 industries reporting slower supplier deliveries in June are: Textiles; Primary Metals; Instruments & Photographic Equipment; Wood & Wood Products; Paper; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Chemicals; Electronic Components & Equipment; Food; and Miscellaneous*.
NOTE: A list of commodities in short supply is available on page 2 of this report.
Manufacturers' inventories declined in June for the third consecutive month as ISM's Inventories Index registered 47.8 percent, unchanged when compared to May. 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 five industries reporting higher inventories in June are: Textiles; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Food; and Printing & Publishing.
The June Customers' Inventories Index is at 44 percent, 3.5 percentage points lower than the 47.5 percent reported in May. Respondents indicate that their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 49th consecutive month that the index has registered below 50 percent. Four industries reported higher customers' inventories during June and they are: Miscellaneous*; Textiles; Paper; and Chemicals.
ISM's Prices Index indicates manufacturers continue to pay higher prices in June; however, the rate of increase slowed significantly during the month. This is the 40th consecutive month the index has registered higher prices. June's index is at 50.5 percent, 7.5 percentage points lower than May's reading of 58 percent. In June, 22 percent of supply executives reported paying higher prices and 21 percent reported paying lower prices, while 57 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 June, eight industries reported paying higher prices: Tobacco; Apparel; Glass, Stone & Aggregate; Printing & Publishing; Transportation & Equipment; Food; Chemicals; and Primary Metals.
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 51 percent, indicating manufacturers' backlogs in June are growing at the same rate when compared to May. Of the 87 percent of respondents who report their backlog of orders, 22 percent reported greater backlogs, 20 percent reported smaller backlogs, and 58 percent reported no change from May. The nine industries reporting an increase in order backlogs during the month are: Furniture; Wood & Wood Products; Miscellaneous*; Electronic Components & Equipment; Rubber & Plastic Products; Food; Primary Metals; Chemicals; and Industrial & Commercial Equipment & Computers.
ISM's New Export Orders Index for June registered 50.4 percent, a decrease of 4.5 percentage points when compared to May's index of 54.9 percent. This is the 42nd consecutive month of growth in export orders, and the lowest reading since January 2002 (50.2 percent). The 10 industries reporting growth in new export orders in June are: Miscellaneous*; Primary Metals; Instruments & Photographic Equipment; Printing & Publishing; Electronic Components & Equipment; Furniture; Chemicals; Industrial & Commercial Equipment & Computers; Food; and Fabricated Metals.
Imports of materials by manufacturers grew during June as the Imports Index registered 54.2 percent. The index increased 0.3 percentage point when compared to May's index of 53.9 percent, indicating a slightly faster rate of growth. The 11 industries reporting growth in import activity for June are: Furniture; Miscellaneous*; Textiles; Instruments & Photographic Equipment; Printing & Publishing; Paper; Fabricated Metals; Chemicals; Transportation & Equipment; Industrial & Commercial Equipment & Computers; and Electronic Components & 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 decreased 4 days to 113 days. Average leadtime for Production Materials remained unchanged at 48 days. Average leadtime for Maintenance, Repair and Operating (MRO) supplies declined 2 days 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 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 30%; Production 25%; Employment 20%; Supplier Deliveries 15%; and Inventories 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 July 2005 data will be released at 10:00 a.m. (ET) on August 1, 2005.