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March 2010 Manufacturing ISM Report On Business®

FOR RELEASE: April 1, 2010


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


PMI at 59.6%

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 March 2010.


New Orders, Production, Employment and Inventories Growing
Supplier Deliveries Slower

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in March for the eighth consecutive month, and the overall economy grew for the 11th 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 manufacturing sector grew for the eighth consecutive month during March. The rate of growth as indicated by the PMI is the fastest since July 2004. Both new orders and production rose above 60 percent this month, closing the first quarter with significant momentum going forward. Although the Employment Index decreased 1 percentage point to 55.1 percent from February's reading of 56.1 percent, signs for employment in the sector continue to improve as the index registered a 10 percent month-over-month improvement, indicating that manufacturers are continuing to fill vacancies. The Inventories Index provided a surprise as it indicated growth for the first time following 46 months of liquidation — perhaps signaling manufacturers' willingness to increase inventories based on expected levels of activity."

PERFORMANCE BY INDUSTRY

The 17 manufacturing industries reporting growth in March — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Computer & Electronic Products; Paper Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Nonmetallic Mineral Products; Fabricated Metal Products; Wood Products; Printing & Related Support Activities; Chemical Products; and Primary Metals. Plastics & Rubber Products is the only industry reporting contraction during March.

WHAT RESPONDENTS ARE SAYING ...
  • "Certain markets served have increased by 50 percent in new customer orders, while other markets are not as strong." (Miscellaneous Manufacturing)
  • "Business levels continue to be strong coming out of the Chinese New Year. First quarter will be our best since 2000." (Machinery)
  • "Business is steady and prospects are good for Q2." (Food, Beverage & Tobacco Products)
  • "After-market sales are improving as more vehicles require maintenance." (Transportation Equipment)
  • "There is a serious shortage of basic electronic components, and lead times are becoming a problem. We are also seeing dramatic price increases." (Computer & Electronic Products)
MANUFACTURING AT A GLANCE
MARCH 2010


Index
Series
Index
March
Series
Index
February
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 59.6 56.5 +3.1 Growing Faster 8
New Orders 61.5 59.5 +2.0 Growing Faster 9
Production 61.1 58.4 +2.7 Growing Faster 10
Employment 55.1 56.1 -1.0 Growing Slower 4
Supplier Deliveries 64.9 61.1 +3.8 Slowing Faster 10
Inventories 55.3 47.3 +8.0 Growing From Contracting 1
Customers' Inventories 39.0 37.0 +2.0 Too Low Slower 12
Prices 75.0 67.0 +8.0 Increasing Faster 9
Backlog of Orders 58.0 61.0 -3.0 Growing Slower 3
Exports 61.5 56.5 +5.0 Growing Faster 9
Imports 57.0 56.0 +1.0 Growing Faster 7
             
OVERALL ECONOMY Growing Faster 11
Manufacturing Sector Growing Faster 8

*Number of months moving in current direction.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (9); Capacitors; Caustic Soda; Connectors; Copper; Copper Products; Corrugated Containers; Diesel Fuel; Packaging; Paper (2); Plastics (3); Plastic Resins (3); Polyethylene (2); Polyethylene Resins; Polypropylene (4); Scrap Metal; Steel (9); Steel Products (3); and Sulfuric Acid.

Commodities Down in Price

Natural Gas 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.



MARCH 2010 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing continued to grow in March, with the rate of growth accelerating as the PMI registered 59.6 percent, an increase of 3.1 percentage points when compared to February's seasonally adjusted reading of 56.5 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 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 11th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the eighth consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (58.2 percent) corresponds to a 5.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for March is annualized, it corresponds to a 5.9 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Mar 2010 59.6   Sep 2009 52.4
Feb 2010 56.5   Aug 2009 52.8
Jan 2010 58.4   Jul 2009 49.1
Dec 2009 54.9   Jun 2009 45.3
Nov 2009 53.7   May 2009 43.2
Oct 2009 55.2   Apr 2009 40.4
Average for 12 months – 51.8
High – 59.6
Low – 40.4

New Orders

ISM's New Orders Index registered 61.5 percent in March, 2 percentage points higher than the seasonally adjusted 59.5 percent registered in February. This is the ninth consecutive month of growth in the New Orders Index. A New Orders Index above 50.2 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 13 industries reporting growth in new orders in March — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Paper Products; Primary Metals; Textile Mills; Food, Beverage & Tobacco Products; Furniture & Related Products; Computer & Electronic Products; Fabricated Metal Products; Machinery; Chemical Products; Transportation Equipment; and Miscellaneous Manufacturing. Plastics & Rubber Products is the only industry reporting a decrease in new orders in March.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Mar 2010 41 48 11 +30 61.5
Feb 2010 36 49 15 +21 59.5
Jan 2010 41 43 16 +25 65.9
Dec 2009 35 46 19 +16 64.8

Production

ISM's Production Index registered 61.1 percent in March, which is an increase of 2.7 percentage points from the February reading of 58.4 percent (seasonally adjusted). An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the 10th consecutive month the Production Index has registered above 50 percent.

The 12 industries reporting growth in production during the month of March — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Wood Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Furniture & Related Products; Food, Beverage & Tobacco Products; Primary Metals; Computer & Electronic Products; and Fabricated Metal Products. The two industries reporting a decrease in production are: Paper Products; and Plastics & Rubber Products.


Production
%
Better
%
Same
%
Worse

Net

Index
Mar 2010 36 53 11 +25 61.1
Feb 2010 32 54 14 +18 58.4
Jan 2010 38 51 11 +27 66.2
Dec 2009 26 58 16 +10 59.7

Employment

ISM's Employment Index registered 55.1 percent in March, which is 1 percentage point lower than the seasonally adjusted 56.1 percent reported in February. This is the fourth consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Thirteen of the 18 manufacturing industries reported growth in employment in March in the following order: Textile Mills; Apparel, Leather & Allied Products; Paper Products; Machinery; Miscellaneous Manufacturing; Printing & Related Support Activities; Nonmetallic Mineral Products; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; and Transportation Equipment. The two industries that reported decreases in employment during March are: Plastics & Rubber Products; and Fabricated Metal Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Mar 2010 21 69 10 +11 55.1
Feb 2010 22 68 10 +12 56.1
Jan 2010 15 73 12 +3 53.3
Dec 2009 17 65 18 -1 50.2

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in March as the Supplier Deliveries Index registered 64.9 percent, which is 3.8 percentage points higher than the 61.1 percent registered in February (seasonally adjusted). This is the 10th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The 14 industries reporting slower supplier deliveries in March — listed in order — are: Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Textile Mills; Apparel, Leather & Allied Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Furniture & Related Products; Machinery; Printing & Related Support Activities; Paper Products; and Chemical Products. There were no industry reports of faster deliveries.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Mar 2010 27 73 0 +27 64.9
Feb 2010 23 72 5 +18 61.1
Jan 2010 18 79 3 +15 60.1
Dec 2009 16 78 6 +10 56.8

Inventories

Manufacturers' inventories expanded in March following 46 months of contraction, as the Inventories Index registered 55.3 percent. The index is 8 percentage points higher than the seasonally adjusted February reading of 47.3 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).

The 10 industries reporting higher inventories in March — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Transportation Equipment; Computer & Electronic Products; Machinery; Paper Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; and Fabricated Metal Products. The three industries that reported decreases in inventories in March are: Primary Metals; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Mar 2010 26 61 13 +13 55.3
Feb 2010 17 64 19 -2 47.3
Jan 2010 16 60 24 -8 46.5
Dec 2009 13 57 30 -17 43.0

Customers' Inventories*

The ISM Customers' Inventories Index registered 39 percent in March, 2 percentage points higher than in February when the index registered 37 percent, and the 12th consecutive month the Customers' Inventories Index has been below 50 percent. The index indicates that respondents believe their customers' inventories are too low at this time.

There were no industry reports of customers' inventories being too high during March. The 12 industries reporting customers' inventories as too low during March — listed in order — are: Electrical Equipment, Appliances & Components; Machinery; Wood Products; Primary Metals; Computer & Electronic Products; Paper Products; Printing & Related Support Activities; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; and Miscellaneous Manufacturing.

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

Net

Index
Mar 2010 75 11 56 33 -22 39.0
Feb 2010 71 7 60 33 -26 37.0
Jan 2010 73 4 56 40 -36 32.0
Dec 2009 73 7 56 37 -30 35.0

Prices*

The ISM Prices Index registered 75 percent in March, 8 percentage points higher than the 67 percent reported in February. This is the ninth consecutive month in which the Prices Index has registered above 50 percent. While 53 percent of respondents reported paying higher prices and 3 percent reported paying lower prices, 44 percent of supply executives reported paying the same prices as in February. A Prices Index above 49.3 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

The 17 industries reporting paying increased prices during the month of March — listed in order — are: Petroleum & Coal Products; Plastics & Rubber Products; Paper Products; Primary Metals; Printing & Related Support Activities; Miscellaneous Manufacturing; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Furniture & Related Products; and Chemical Products. There were no industry reports of paying lower prices on average during March.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Mar 2010 53 44 3 +50 75.0
Feb 2010 39 56 5 +34 67.0
Jan 2010 44 52 4 +40 70.0
Dec 2009 32 59 9 +23 61.5

Backlog of Orders*

ISM's Backlog of Orders Index registered 58 percent in March, 3 percentage points lower than the 61 percent reported in February. Of the 84 percent of respondents who reported their backlog of orders, 30 percent reported greater backlogs, 14 percent reported smaller backlogs, and 56 percent reported no change from February.

The 10 industries reporting increased order backlogs in March — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Nonmetallic Mineral Products; Primary Metals; Food, Beverage & Tobacco Products; Computer & Electronic Products; Fabricated Metal Products; Chemical Products; Transportation Equipment; and Electrical Equipment, Appliances & Components. The two industries that reported decreases in order backlogs during March are: Petroleum & Coal Products; and Plastics & Rubber Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Mar 2010 84 30 56 14 +16 58.0
Feb 2010 86 33 56 11 +22 61.0
Jan 2010 84 26 60 14 +12 56.0
Dec 2009 86 24 52 24 0 50.0

New Export Orders*

ISM's New Export Orders Index registered 61.5 percent in March, 5 percentage points higher than the 56.5 percent reported in February. This is the ninth consecutive month of growth in the New Export Orders Index.

The 10 industries reporting growth in new export orders in March — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Transportation Equipment; Computer & Electronic Products; and Miscellaneous Manufacturing. The only two industries reporting decreases in new export orders during March are: Primary Metals; and Plastics & Rubber Products.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Mar 2010 75 30 63 7 +23 61.5
Feb 2010 79 17 79 4 +13 56.5
Jan 2010 78 19 79 2 +17 58.5
Dec 2009 78 19 71 10 +9 54.5

Imports*

Imports of materials by manufacturers expanded in March as the Imports Index registered 57 percent, 1 percentage point higher than the 56 percent reported in February. This is the seventh consecutive month of growth in imports.

The eight industries reporting growth in imports during the month of March — listed in order — are: Apparel, Leather & Allied Products; Transportation Equipment; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Chemical Products; Machinery; and Fabricated Metal Products. The two industries reporting a decrease in imports during March are: Primary Metals; and Computer & Electronic Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Mar 2010 79 21 72 7 +14 57.0
Feb 2010 81 18 76 6 +12 56.0
Jan 2010 81 20 73 7 +13 56.5
Dec 2009 83 20 70 10 +10 55.0

* 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 2 days to 116 days. Average lead time for Production Materials decreased 5 days to 45 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 23 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Mar 2010 26 9 13 14 25 13 116
Feb 2010 27 6 13 15 26 13 118
Jan 2010 28 8 12 11 28 13 118
Dec 2009 31 7 8 21 20 13 110
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Mar 2010 26 40 20 10 2 2 45
Feb 2010 22 42 21 8 5 2 50
Jan 2010 24 36 23 10 4 3 53
Dec 2009 26 40 20 6 5 3 51
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Mar 2010 49 39 8 4 0 0 23
Feb 2010 48 36 13 3 0 0 24
Jan 2010 54 34 8 4 0 0 21
Dec 2009 54 33 12 1 0 0 21

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 42 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42 percent, it is generally declining. The distance from 50 percent or 42 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 April 2010 data will be released at 10:00 a.m. (ET) on Monday, May 3, 2010.


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