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April 2009 Manufacturing ISM Report On Business®

FOR RELEASE: May 1, 2009


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


PMI at 40.1%

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 April 2009.


New Orders, Production, Employment and Inventories Contracting
Prices Falling
Supplier Deliveries Faster

(Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in April for the 15th consecutive month, and the overall economy contracted for the seventh 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, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The decline in the manufacturing sector continues to moderate. After six consecutive months below the 40-percent mark, the PMI, driven by the New Orders Index at 47.2 percent, shows a significant improvement. While this is a big step forward, there is still a large gap that must be closed before manufacturing begins to grow once again. The Customers' Inventories Index indicates that channels are paring inventories to acceptable levels after reporting inventories as 'too high' for eight consecutive months. The prices manufacturers pay for their goods and services continue to decline; however, copper prices have bottomed and are now starting to rise. This is definitely a good start for the second quarter."

PERFORMANCE BY INDUSTRY

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

WHAT RESPONDENTS ARE SAYING ...
  • "International customers are having trouble getting cash for new orders, even though they need/want the equipment." (Computer & Electronic Products)
  • "Starting to see some signs of increased production and demand from some automotive customers." (Fabricated Metal Products)
  • "Business conditions continue to be soft, but agriculture-related products are still quite bullish." (Machinery)
  • "We are optimistic that things will change for the better in 3Q." (Chemical Products)
  • "Starting to hear of slight upticks in orders from some sectors of our business but not all." (Electrical Equipment, Appliances & Components)
MANUFACTURING AT A GLANCE
APRIL 2009


Index
Series
Index
April
Series
Index
March
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 40.1 36.3 +3.8 Contracting Slower 15
New Orders 47.2 41.2 +6.0 Contracting Slower 17
Production 40.4 36.4 +4.0 Contracting Slower 8
Employment 34.4 28.1 +6.3 Contracting Slower 9
Supplier Deliveries 44.9 43.6 +1.3 Faster Slower 7
Inventories 33.6 32.2 +1.4 Contracting Slower 36
Customers' Inventories 49.5 54.0 -4.5 Too Low From Too High 1
Prices 32.0 31.0 +1.0 Decreasing Slower 7
Backlog of Orders 40.5 35.5 +5.0 Contracting Slower 12
Exports 44.0 39.0 +5.0 Contracting Slower 7
Imports 42.0 33.0 +9.0 Contracting Slower 15
             
OVERALL ECONOMY Contracting Slower 7
Manufacturing Sector Contracting Slower 15

*Number of months moving in current direction


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Copper (2) is the only commodity reported up in price.

Commodities Down in Price

Aluminum (7); Aluminum Based Products; Caustic Soda (2); Corrugated Containers (4); Fuel Surcharges; Natural Gas (9); Scrap Metal; Steel (8); and Steel Products (3).

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.



APRIL 2009 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing contracted in April as the PMI registered 40.1 percent, which is 3.8 percentage points higher than the 36.3 percent reported in March. This is the 15th consecutive month of contraction in the manufacturing sector. 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 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates contraction in both the overall economy and the manufacturing sector. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through April (37 percent) corresponds to a 1.3 percent decrease in real gross domestic product (GDP). In addition, if the PMI for April (40.1 percent) is annualized, it corresponds to a 0.3 percent decrease in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Apr 2009 40.1   Oct 2008 38.7
Mar 2009 36.3   Sep 2008 43.4
Feb 2009 35.8   Aug 2008 49.3
Jan 2009 35.6   Jul 2008 49.5
Dec 2008 32.9   Jun 2008 49.5
Nov 2008 36.6   May 2008 49.3
Average for 12 months – 41.4
High – 49.5
Low – 32.9

New Orders

ISM's New Orders Index registered 47.2 percent in April, 6 percentage points higher than the 41.2 percent registered in March. This is the 17th consecutive month of contraction in the New Orders Index. A New Orders Index above 48.8 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

Six industries reported growth in new orders in April: Plastics & Rubber Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Computer & Electronic Products; and Machinery. The industries contracting in April are: Apparel, Leather & Allied Products; Textile Mills; Printing & Related Support Activities; Chemical Products; Primary Metals; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Paper Products.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Apr 2009 31 40 29 +2 47.2
Mar 2009 28 31 41 -13 41.2
Feb 2009 13 43 44 -31 33.1
Jan 2009 15 33 52 -37 33.2

Production

ISM's Production Index registered 40.4 percent in April, which is an increase of 4 percentage points from March's reading of 36.4 percent. An index above 50.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the eighth consecutive month of decline in production.

Three industries reported growth in production during the month of April: Miscellaneous Manufacturing; Computer & Electronic Products; and Machinery. The industries that reported decreases in production in April — listed in order — are: Printing & Related Support Activities; Textile Mills; Nonmetallic Mineral Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Chemical Products; Primary Metals; Paper Products; Transportation Equipment; Furniture & Related Products; Fabricated Metal Products; and Plastics & Rubber Products.


Production
%
Better
%
Same
%
Worse

Net

Index
Apr 2009 21 45 34 -13 40.4
Mar 2009 17 39 44 -27 36.4
Feb 2009 16 40 44 -28 36.3
Jan 2009 13 33 54 -41 32.1

Employment

ISM's Employment Index registered 34.4 percent in April, which is 6.3 percentage points higher than the 28.1 percent reported in March. This is the ninth consecutive month of decline in employment. An Employment Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

None of the 18 manufacturing industries reported growth in employment in April. The industries that reported decreases in employment during April — listed in order — are: Textile Mills; Primary Metals; Transportation Equipment; Petroleum & Coal Products; Printing & Related Support Activities; Furniture & Related Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; Miscellaneous Manufacturing; and Nonmetallic Mineral Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Apr 2009 7 58 35 -28 34.4
Mar 2009 8 41 51 -43 28.1
Feb 2009 6 40 54 -48 26.1
Jan 2009 5 46 49 -44 29.9

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was faster for the seventh consecutive month in April as the Supplier Deliveries Index registered 44.9 percent, which is 1.3 percentage points higher than the 43.6 percent registered in March. A reading above 50 percent indicates slower deliveries.

The two industries reporting slower supplier deliveries in April are: Furniture & Related Products; and Transportation Equipment. The industries reporting faster deliveries in April are: Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Primary Metals; Food, Beverage & Tobacco Products; Fabricated Metal Products; Machinery; and Chemical Products.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Apr 2009 5 80 15 -10 44.9
Mar 2009 7 73 20 -13 43.6
Feb 2009 6 78 16 -10 46.7
Jan 2009 7 74 19 -12 45.3

Inventories

Manufacturers' inventories contracted in April as the Inventories Index registered 33.6 percent, which is 1.4 percentage points higher than March's reading of 32.2 percent. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

Textile Mills is the only industry reporting higher inventories in April. The industries that reported decreases in April — listed in order — are: Plastics & Rubber Products; Furniture & Related Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Apparel, Leather & Allied Products; Machinery; Primary Metals; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; and Paper Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Apr 2009 11 47 42 -31 33.6
Mar 2009 9 48 43 -34 32.2
Feb 2009 19 38 43 -24 37.0
Jan 2009 18 40 42 -24 37.5

Customers' Inventories*

The ISM Customers' Inventories Index registered 49.5 percent in April, 4.5 percentage points lower than the 54 percent reported in March. The index indicates that respondents believe their customers' inventories are too low at this time. This is the first time the Customers' Inventories Index has been below 50 percent since July 2008.

Five industries reported higher customers' inventories during April: Textile Mills; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; and Fabricated Metal Products. The industries that reported lower customers' inventories during April are: Primary Metals; Wood Products; Miscellaneous Manufacturing; Machinery; Computer & Electronic Products; and Furniture & Related Products.

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

Net

Index
Apr 2009 80 21 57 22 -1 49.5
Mar 2009 78 29 50 21 +8 54.0
Feb 2009 80 28 46 26 +2 51.0
Jan 2009 80 31 49 20 +11 55.5

Prices*

The ISM Prices Index registered 32 percent in April, 1 percentage point higher than the 31 percent reported in March. Since the index is below the mid-point of 50, this indicates that manufacturers continue to pay lower prices on average when compared to the previous month. While 7 percent of respondents reported paying higher prices and 43 percent reported paying lower prices, 50 percent of supply executives reported paying the same prices as in March. A Prices Index above 47.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In April, none of the 18 manufacturing industries reported paying increased prices. The industries that reported paying lower prices during April — listed in order — are: Nonmetallic Mineral Products; Printing & Related Support Activities; Textile Mills; Fabricated Metal Products; Primary Metals; Transportation Equipment; Plastics & Rubber Products; Petroleum & Coal Products; Paper Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Computer & Electronic Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Chemical Products; and Machinery.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Apr 2009 7 50 43 -36 32.0
Mar 2009 7 48 45 -38 31.0
Feb 2009 7 44 49 -42 29.0
Jan 2009 12 34 54 -42 29.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 40.5 percent in April, 5 percentage points higher than the 35.5 percent reported in March. Of the 86 percent of respondents who reported their backlog of orders, 13 percent reported greater backlogs, 32 percent reported smaller backlogs, and 55 percent reported no change from March.

Three industries reported increased order backlogs in April: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; and Furniture & Related Products. The industries that reported decreases in order backlogs during April — listed in order — are: Apparel, Leather, & Allied Products; Primary Metals; Printing & Related Support Activities; Paper Products; Fabricated Metal Products; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing; and Computer & Electronic Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Apr 2009 86 13 55 32 -19 40.5
Mar 2009 83 11 49 40 -29 35.5
Feb 2009 86 8 46 46 -38 31.0
Jan 2009 84 6 47 47 -41 29.5

New Export Orders*

ISM's New Export Orders Index registered 44 percent in April, 5 percentage points higher than the 39 percent reported in March. This is the seventh consecutive month of contraction in the New Export Orders Index.

The four industries reporting growth in new export orders in April are: Paper Products; Plastics & Rubber Products; Miscellaneous Manufacturing; and Electrical Equipment, Appliances & Components. The industries that reported decreases in new export orders in April — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Furniture & Related Products; Primary Metals; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; and Machinery.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Apr 2009 77 13 62 25 -12 44.0
Mar 2009 80 9 60 31 -22 39.0
Feb 2009 79 7 61 32 -25 37.5
Jan 2009 77 6 63 31 -25 37.5

Imports*

Imports of materials by manufacturers contracted during April as the Imports Index registered 42 percent, 9 percentage points higher than the 33 percent reported in March. This is the 15th consecutive month of contraction in imports.

None of the 18 manufacturing industries reported growth in imports during the month of April. The industries that reported decreases in imports — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Plastics & Rubber Products; Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Computer & Electronic Products; Fabricated Metal Products; Machinery; Transportation Equipment; Chemical Products; and Nonmetallic Mineral Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Apr 2009 85 10 64 26 -16 42.0
Mar 2009 85 5 56 39 -34 33.0
Feb 2009 80 7 50 43 -36 32.0
Jan 2009 84 10 53 37 -27 36.5

* 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 3 days to 101 days. Average lead time for Production Materials increased 1 day to 44 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 1 day to 22 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Apr 2009 36 7 11 12 24 10 101
Mar 2009 30 11 14 11 23 11 104
Feb 2009 36 6 12 11 23 12 105
Jan 2009 29 11 13 19 18 10 98
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Apr 2009 31 38 21 4 4 2 44
Mar 2009 35 35 20 3 5 2 43
Feb 2009 30 44 15 4 4 3 45
Jan 2009 28 43 21 3 3 2 42
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Apr 2009 59 28 8 3 2 0 22
Mar 2009 56 33 7 3 1 0 21
Feb 2009 58 30 8 2 1 1 24
Jan 2009 51 34 11 2 2 0 25

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 41.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.2 percent, it is generally declining. The distance from 50 percent or 41.2 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 lead time, 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 2009 data will be released at 10:00 a.m. (ET) on Monday, June 1, 2009.


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