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January 2008 Manufacturing ISM Report On Business®

FOR RELEASE: February 1, 2008


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


PMI at 50.7%

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 January 2008.

This report reflects the U.S Department of Commerce's recently completed annual adjustment to the seasonal factors used to calculate the indexes.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in January, while the overall economy grew for the 75th 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 gained momentum in January as the PMI rose 2.3 percentage points, signaling stronger performance in January when compared to the seasonally adjusted 48.4 percent recorded in December. This represents a return to the recent trend of slow growth in manufacturing, as the PMI has averaged 50.2 percent for the past six months. The PMI was driven by the Production Index, which made a rebound of 6.6 percentage points during the month, while the New Orders Index reflected a slight decline at 49.5 percent."

TOP PERFORMING INDUSTRIES

The eight industries reporting growth in January — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Primary Metals; Miscellaneous Manufacturing; and Machinery. The industries reporting contraction in January are: Nonmetallic Mineral Products; Printing and Related Support Activities; Textile Mills; Wood Products; Furniture & Related Products; Fabricated Metal Products; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment.

WHAT RESPONDENTS ARE SAYING ...
  • "We are in a squeeze between supplier pressure to raise prices and customer pressure to reduce prices." (Chemical Products)
  • "The softness in residential construction has begun to manifest itself in commercial construction." (Machinery)
  • "Strong backlog now, better than last year [at the] same time." (Furniture & Related Products)
  • "Commodity prices continue to trade at all-time highs." (Food, Beverage & Tobacco Products)
  • "Customer demand was generally soft last month due to the holidays and a downturn in automobile production." (Fabricated Metal Products)
MANUFACTURING AT A GLANCE
JANUARY 2008


Index
Series
Index
January
Series
Index
December
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 50.7 48.4 +2.3 Growing From Contracting 1
New Orders 49.5 46.9 +2.6 Contracting Slower 2
Production 55.2 48.6 +6.6 Growing From Contracting 1
Employment 47.1 48.7 -1.6 Contracting Faster 3
Supplier Deliveries 52.8 52.6 +0.2 Slowing Faster 7
Inventories 49.1 45.4 +3.7 Contracting Slower 21
Customers' Inventories 49.5 51.5 -2.0 Too Low From Too High 1
Prices 76.0 68.0 +8.0 Increasing Faster 13
Backlog of Orders 44.0 43.0 +1.0 Contracting Slower 4
Exports 58.5 52.5 +6.0 Growing Faster 62
Imports 52.5 48.0 +4.5 Growing From Contracting 1
             
OVERALL ECONOMY Growing Faster 75
Manufacturing Sector Growing From Contracting 1

*Number of months moving in current direction
Indexes reflect newly released seasonal adjustment factors.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Caustic Soda (4); Chemicals; Cobalt; Copper Laden Products; Corn; Corrugated Containers (5); Diesel Fuel (2); Freight; Fuel Surcharges (2); Low Density Polyethylene; Natural Gas (3); Nickel; Oil (3); Oil-related Products; Plastic Resin; Polypropylene Resin (3); PVC; Soybean Oil; Steel; and Sulfuric Acid (3).

Commodities Down in Price

Zinc is the only commodity reported down in price.

Commodities in Short Supply

No commodities are reported in short supply.

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


SPECIAL QUESTIONS

Two additional questions were asked in a special poll of the manufacturing panel in January.

Question 1 — Is the turmoil in financial markets having any effect on your firm's ability to obtain regular or additional financing?

Yes — 7.4% No — 92.6%

Question 2 — Indicate how you and your management feel about the next 12 months compared to 2007.

Better 22.9%
Same 37.5%
Worse 39.6%
Diffusion Index 41.7%


JANUARY 2008 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing expanded in January as the PMI registered 50.7 percent, an increase of 2.3 percentage points when compared to December's seasonally adjusted reading of 48.4 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 41.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that both the overall economy and the manufacturing sector are growing at this time. "The past relationship between the PMI and the overall economy indicates that the PMI for January (50.7) corresponds to a 3 percent increase in real gross domestic product (GDP) on an annual basis."

THE LAST 12 MONTHS
Month PMI   Month PMI
Jan 2008 50.7   Jul 2007 52.3
Dec 2007 48.4   Jun 2007 53.4
Nov 2007 50.0   May 2007 52.8
Oct 2007 50.4   Apr 2007 52.8
Sep 2007 50.5   Mar 2007 50.7
Aug 2007 51.2   Feb 2007 51.5
Average for 12 months – 51.2
High – 53.4
Low – 48.4

New Orders

ISM's New Orders Index registered 49.5 percent in January. The index is 2.6 percentage points higher than the seasonally adjusted 46.9 percent reported in December. A New Orders Index above 51.6 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

Four industries reported increases during January: Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; and Machinery. The industries that reported decreases in January are: Nonmetallic Mineral Products; Wood Products; Furniture & Related Products; Printing & Related Support Activities; Textile Mills; Computer & Electronic Products; Fabricated Metal Products; Paper Products; and Electrical Equipment, Appliances & Components.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Jan 2008 25 43 32 -7 49.5
Dec 2007 15 55 30 -15 46.9
Nov 2007 27 46 27 0 52.5
Oct 2007 18 64 18 0 52.8

Production

ISM's Production Index rose to 55.2 percent in January, an increase of 6.6 percentage points when compared to December's seasonally adjusted reading of 48.6 percent. An index above 49.9 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

Of the industries reporting in January, eight registered growth: Petroleum & Coal Products; Food, Beverage & Tobacco Products; Primary Metals; Furniture & Related Products; Miscellaneous Manufacturing; Machinery; Fabricated Metal Products; and Chemical Products. The industries reporting contraction in January are: Nonmetallic Mineral Products; Printing & Related Support Activities; Textile Mills; Wood Products; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment.


Production
%
Better
%
Same
%
Worse

Net

Index
Jan 2008 26 51 23 +3 55.2
Dec 2007 16 58 26 -10 48.6
Nov 2007 23 55 22 +1 51.3
Oct 2007 18 60 22 -4 50.1

Employment

ISM's Employment Index registered 47.1 percent in January, which is a decrease of 1.6 percentage points when compared to December's seasonally adjusted reading of 48.7 percent. An Employment Index above 49.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The four industries reporting growth in employment during January are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Primary Metals; and Food, Beverage & Tobacco Products. The industries reporting contraction in employment in January are: Nonmetallic Mineral Products; Printing & Related Support Activities; Textile Mills; Plastics & Rubber Products; Furniture & Related Products; Machinery; Wood Products; and Fabricated Metal Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Jan 2008 11 68 21 -10 47.1
Dec 2007 11 71 18 -7 48.7
Nov 2007 14 67 19 -5 48.4
Oct 2007 17 66 17 0 51.8

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations continued to slow in January as the Supplier Deliveries Index increased 0.2 percentage point to 52.8 percent from 52.6 percent registered in December (seasonally adjusted). A reading above 50 percent indicates slower deliveries.

The seven industries reporting slower supplier deliveries in January are: Textile Mills; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Chemical Products; Computer & Electronic Products; and Fabricated Metal Products. The industries reporting faster supplier deliveries in January are: Printing & Related Support Activities; Nonmetallic Mineral Products; Primary Metals; and Machinery.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Jan 2008 6 91 3 +3 52.8
Dec 2007 8 88 4 +4 52.6
Nov 2007 5 92 3 +2 51.5
Oct 2007 7 87 6 +1 50.7

Inventories

Manufacturers' inventories contracted in January as the Inventories Index registered 49.1 percent, which is 3.7 percentage points higher than December's seasonally adjusted reading of 45.4 percent. This is the 21st consecutive month of inventory liquidation. An Inventories Index greater than 42.4 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 January are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Petroleum & Coal Products; Machinery; Paper Products; Food, Beverage & Tobacco Products; and Transportation Equipment. The industries reporting lower inventories in January are: Furniture & Related Products; Textile Mills; Fabricated Metal Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; and Chemical Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Jan 2008 17 64 19 -2 49.1
Dec 2007 16 57 27 -11 45.4
Nov 2007 18 55 27 -9 46.4
Oct 2007 17 57 26 -9 46.5

Customers' Inventories*

The ISM Customers' Inventories Index registered 49.5 percent in January, a decrease of 2 percentage points when compared to December's reading of 51.5 percent. The index indicates that respondents believe their customers' inventories are too low at this time.

Three industries reported higher customers' inventories during January: Plastics & Rubber Products; Furniture & Related Products; and Fabricated Metal Products. The industries reporting lower customer's inventories in January are: Miscellaneous Manufacturing; Wood Products; Primary Metals; Machinery; and Chemical Products.

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

Net

Index
Jan 2008 70 13 73 14 -1 49.5
Dec 2007 75 20 63 17 +3 51.5
Nov 2007 79 13 72 15 -2 49.0
Oct 2007 73 20 68 12 +8 54.0

Prices*

The ISM Prices Index registered 76 percent in January, indicating manufacturers are paying significantly higher prices on average when compared to December. While 55 percent of respondents reported paying higher prices and 3 percent reported paying lower prices, 42 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In January, 15 industries reported paying higher prices: Textile Mills; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Paper Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Wood Products; Printing & Related Support Activities; Primary Metals; Machinery; Fabricated Metal Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Transportation Equipment. Petroleum & Coal Products is the only industry reporting paying lower prices in January.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Jan 2008 55 42 3 +52 76.0
Dec 2007 43 50 7 +36 68.0
Nov 2007 42 51 7 +35 67.5
Oct 2007 33 60 7 +26 63.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 44 percent in January, 1 percentage point higher than the 43 percent reported in December. This is the fourth consecutive month of contraction in the Backlog of Orders Index. Of the 85 percent of respondents who reported their backlog of orders, 19 percent reported greater backlogs, 31 percent reported smaller backlogs, and 50 percent reported no change from December.

The two industries reporting an increase in order backlogs in January are: Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. The industries reporting a decrease in order backlogs in January are: Nonmetallic Mineral Products; Printing & Related Support Activities; Machinery; Fabricated Metal Products; Wood Products; Transportation Equipment; Miscellaneous Manufacturing; and Chemical Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Jan 2008 85 19 50 31 -12 44.0
Dec 2007 85 14 58 28 -14 43.0
Nov 2007 88 13 57 30 -17 41.5
Oct 2007 83 16 60 24 -8 46.0

New Export Orders*

ISM's New Export Orders Index registered 58.5 percent in January, an increase of 6 percentage points when compared to December's index of 52.5 percent. This is the 62nd consecutive month of growth in export orders.

The 10 industries reporting growth in new export orders in January are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Miscellaneous Manufacturing; Machinery; and Computer & Electronic Products. The industries reporting a decrease in new export orders in January are Nonmetallic Mineral Products and Wood Products.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jan 2008 78 24 69 7 +17 58.5
Dec 2007 75 17 71 12 +5 52.5
Nov 2007 77 19 79 2 +17 58.5
Oct 2007 77 19 76 5 +14 57.0

Imports*

Imports of materials by manufacturers expanded during January as the Imports Index registered 52.5 percent, 4.5 percentage points higher than the 48 percent reported in December.

The six industries reporting growth in import activity for January are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Plastics & Rubber Products; Transportation Equipment; and Machinery. The industries reporting contraction in import activity in January are: Wood Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; and Computer & Electronic Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jan 2008 82 16 73 11 +5 52.5
Dec 2007 80 13 70 17 -4 48.0
Nov 2007 83 10 75 15 -5 47.5
Oct 2007 77 8 79 13 -5 47.5

* 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 122 days. Average lead-time for Production Materials is unchanged at 50 days. Average lead-time for Maintenance, Repair and Operating (MRO) Supplies increased 4 days to 25 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jan 2008 22 9 12 17 27 13 122
Dec 2007 22 9 12 18 25 14 123
Nov 2007 21 9 13 19 25 13 120
Oct 2007 21 8 12 23 21 15 123
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jan 2008 23 36 27 8 4 2 50
Dec 2007 19 37 28 10 5 1 50
Nov 2007 20 39 28 8 4 1 48
Oct 2007 21 38 26 10 4 1 48
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jan 2008 50 34 10 5 1 0 25
Dec 2007 53 35 9 3 0 0 21
Nov 2007 56 31 10 3 0 0 21
Oct 2007 54 33 9 4 0 0 22

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 41.1 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.1 percent, it is generally declining. The distance from 50 percent or 41.1 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 February 2008 data will be released at 10:00 a.m. (ET) on Monday, March 3, 2008.


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