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FOR RELEASE: September 2, 2014


Contact:   Kristina Cahill
Report On Business® Analyst
ISM®, ROB Media Relations
Tempe, Arizona
800/888-6276, Ext. 3015
E-mail: kcahill@ism.ws


August 2014 Manufacturing ISM® Report On Business®

PMI® at 59%

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 August 2014.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in August for the 15th consecutive month, and the overall economy grew for the 63rd consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The August PMI® registered 59 percent, an increase of 1.9 percentage points from July's reading of 57.1 percent, indicating continued expansion in manufacturing. This month's PMI® reflects the highest reading since March 2011 when the index registered 59.1 percent. The New Orders Index registered 66.7 percent, an increase of 3.3 percentage points from the 63.4 percent reading in July, indicating growth in new orders for the 15th consecutive month. The Production Index registered 64.5 percent, 3.3 percentage points above the July reading of 61.2 percent. The Employment Index grew for the 14th consecutive month, registering 58.1 percent, a slight decrease of 0.1 percentage point below the July reading of 58.2 percent. Inventories of raw materials registered 52 percent, an increase of 3.5 percentage points from the July reading of 48.5 percent, indicating growth in inventories following one month of contraction. The August PMI® is led by the highest recorded New Orders Index since April 2004 when it registered 67.1 percent. At the same time, comments from the panel reflect a positive outlook mixed with caution over global geopolitical unrest."

Of the 18 manufacturing industries, 17 are reporting growth in August in the following order: Plastics & Rubber Products; Furniture & Related Products; Fabricated Metal Products; Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Paper Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Chemical Products; Primary Metals; Transportation Equipment; Computer & Electronic Products; Machinery; and Electrical Equipment, Appliances & Components. The only industry reporting contraction in August is Textile Mills.

WHAT RESPONDENTS ARE SAYING ...
  • "Business is looking good for food manufacturing. Packaging materials prices are staying in check, minimum wage is up a bit, but manageable." (Food, Beverage & Tobacco Products)
  • "The commercial building business is good, our business is up." (Fabricated Metal Products)
  • "Overall business conditions are flat. World issues taking a toll on business. Consumers are cutting back on spending." (Transportation Equipment)
  • "Overall business is improving. Order backlog is increasing. Quotes are increasing. Much more positive outlook in our sector." (Electrical Equipment, Appliances & Components)
  • "Business in the energy sector continues to remain very robust with no signs of backing off in the near future." (Computer & Electronic Products)
  • "Demand in the United States is consistent and geopolitics remain a concern." (Chemical Products)
  • "International markets are slower due to Euro holidays, political unrest and slowing Chinese markets. North American business off slightly." (Wood Products)
  • "Business is strong. Labor is becoming a difficult issue." (Furniture & Related Products)
  • "Demand is strong. Numbers are up over last year." (Machinery)
  • "Strongest month in years. Business is solid...Awesome!" (Primary Metals)
MANUFACTURING AT A GLANCE
AUGUST 2014


Index
Series
Index
Aug
Series
Index
Jul
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI® 59.0 57.1 +1.9 Growing Faster 15
New Orders 66.7 63.4 +3.3 Growing Faster 15
Production 64.5 61.2 +3.3 Growing Faster 6
Employment 58.1 58.2 -0.1 Growing Slower 14
Supplier Deliveries 53.9 54.1 -0.2 Slowing Slower 15
Inventories 52.0 48.5 +3.5 Growing From Contracting 1
Customers' Inventories 49.0 43.5 +5.5 Too Low Slower 33
Prices 58.0 59.5 -1.5 Increasing Slower 13
Backlog of Orders 52.5 49.5 +3.0 Growing From Contracting 1
Exports 55.0 53.0 +2.0 Growing Faster 21
Imports 56.0 52.0 +4.0 Growing Faster 19
             
OVERALL ECONOMY Growing Faster 63
Manufacturing Sector Growing Faster 15

Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries indexes.

*Number of months moving in current direction.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (7); Aluminum Products; Electronic Components; Hydrochloric Acid; PET Resin; Plastic Resin; Polypropylene (2); Propylene; Stainless Steel (6); Stainless Steel Products; Steel (9); and Steel — Hot Rolled.

Commodities Down in Price

Copper; Corn (2); Methanol (2); Natural Gas; and Soybean Oil (2).

Commodities in Short Supply

Stainless Steel; and Wood Pallets (4).

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



AUGUST 2014 MANUFACTURING INDEX SUMMARIES


PMI®

Manufacturing expanded in August as the PMI® registered 59 percent, an increase of 1.9 percentage points when compared to July's reading of 57.1 percent. August's PMI® reading of 59 percent is the highest reading since March 2011 when the PMI® registered 59.1 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 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the August PMI® indicates growth for the 63rd consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 15th consecutive month. Holcomb stated, "The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through August (55 percent) corresponds to a 3.9 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for August (59 percent) is annualized, it corresponds to a 5.2 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI®   Month PMI®
Aug 2014  59.0   Feb 2014  53.2
Jul 2014  57.1   Jan 2014  51.3
Jun 2014  55.3   Dec 2013  56.5
May 2014  55.4   Nov 2013  57.0
Apr 2014  54.9   Oct 2013  56.6
Mar 2014  53.7   Sep 2013  56.0
Average for 12 months – 55.5
High – 59.0
Low – 51.3

New Orders

ISM®'s New Orders Index registered 66.7 percent in August, an increase of 3.3 percentage points when compared to the 63.4 percent reported in July, indicating growth in new orders for the 15th consecutive month. This is the highest reading since April 2004 when the New Orders Index registered 67.1 percent. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 14 industries reporting growth in new orders in August — listed in order — are: Plastics & Rubber Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Petroleum & Coal Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Transportation Equipment; Chemical Products; Computer & Electronic Products; Primary Metals; and Machinery. The two industries reporting a decrease in new orders during August are: Wood Products; and Textile Mills.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Aug 2014 38 48 14 +24 66.7
Jul 2014 29 57 14 +15 63.4
Jun 2014 30 55 15 +15 58.9
May 2014 35 51 14 +21 56.9

Production

ISM®'s Production Index registered 64.5 percent in August, which is an increase of 3.3 percentage points when compared to the 61.2 percent reported in July, indicating growth in production for the sixth consecutive month, and is the highest reading since May 2010 when the Production Index registered 64.6 percent. An index above 51.1 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The 15 industries reporting growth in production during the month of August — listed in order — are: Wood Products; Plastics & Rubber Products; Primary Metals; Apparel, Leather & Allied Products; Paper Products; Fabricated Metal Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Furniture & Related Products; Nonmetallic Mineral Products; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Transportation Equipment; and Machinery. The two industries reporting a decrease in production during August are: Textile Mills; and Electrical Equipment, Appliances & Components.


Production
%
Better
%
Same
%
Worse

Net

Index
Aug 2014 35 53 12 +23 64.5
Jul 2014 31 54 15 +16 61.2
Jun 2014 32 55 13 +19 60.0
May 2014 36 54 10 +26 61.0

Employment

ISM®'s Employment Index registered 58.1 percent in August, which is a slight decrease of 0.1 percentage point when compared to the 58.2 percent reported in July, and represents the 14th consecutive month of growth in employment. An Employment Index above 50.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, 14 reported growth in employment in August in the following order: Wood Products; Printing & Related Support Activities; Fabricated Metal Products; Textile Mills; Furniture & Related Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Petroleum & Coal Products; Chemical Products; Computer & Electronic Products; Transportation Equipment; Miscellaneous Manufacturing; and Machinery. The three industries reporting a decrease in employment in August are: Electrical Equipment, Appliances & Components; Paper Products; and Primary Metals.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Aug 2014 25 63 12 +13 58.1
Jul 2014 23 68 9 +14 58.2
Jun 2014 23 63 14 +9 52.8
May 2014 24 64 12 +12 52.8

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations slowed in August at a slightly slower rate relative to July as the Supplier Deliveries Index registered 53.9 percent. This month's reading is 0.2 percentage points lower than the 54.1 percent reported in July. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The 11 industries reporting slower supplier deliveries in August — listed in order — are: Electrical Equipment, Appliances & Components; Furniture & Related Products; Plastics & Rubber Products; Fabricated Metal Products; Petroleum & Coal Products; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; Machinery; Chemical Products; and Computer & Electronic Products. The only industry reporting faster supplier deliveries during August is Textile Mills. Six industries reported no change in supplier deliveries in August compared to July.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Aug 2014 13 82 5 +8 53.9
Jul 2014 16 79 5 +11 54.1
Jun 2014 11 83 6 +5 51.9
May 2014 13 82 5 +8 53.2

Inventories*

The Inventories Index registered 52 percent in August, which is 3.5 percentage points higher than the 48.5 percent registered in July, and indicates raw materials inventories are growing following one month of contraction. An Inventories Index greater than 42.8 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 August — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Chemical Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The six industries reporting lower inventories in August — listed in order — are: Textile Mills; Petroleum & Coal Products; Nonmetallic Mineral Products; Fabricated Metal Products; Machinery; and Primary Metals.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Aug 2014 19 66 15 +4 52.0
Jul 2014 17 63 20 -3 48.5
Jun 2014 22 62 16 +6 53.0
May 2014 23 60 17 +6 53.0

Customers' Inventories*

ISM®'s Customers' Inventories Index registered 49 percent in August, an increase of 5.5 percentage points from July when customer inventories registered 43.5 percent. This indicates that customers' inventories are considered too low. Customers' inventories have been too low for 33 consecutive months, as a reading below 50 percent indicates customers' inventories are considered too low.

The four manufacturing industries reporting customers' inventories as being too high during the month of August are: Paper Products; Petroleum & Coal Products; Computer & Electronic Products; and Transportation Equipment. The seven industries reporting customers' inventories as too low during August — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Primary Metals; Plastics & Rubber Products; Fabricated Metal Products; Machinery; and Chemical Products. Seven industries reported no change in customer inventories in August compared to July.

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

Net

Index
Aug 2014 63 13 72 15 -2 49.0
Jul 2014 64 11 65 24 -13 43.5
Jun 2014 65 9 75 16 -7 46.5
May 2014 67 11 71 18 -7 46.5

Prices*

The ISM® Prices Index registered 58 percent in August, which is a decrease of 1.5 percentage points compared to the July reading of 59.5 percent. In August, 24 percent of respondents reported paying higher prices, 8 percent reported paying lower prices, and 68 percent of supply executives reported paying the same prices as in July. A Prices Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

Of the 18 manufacturing industries, nine reported paying increased prices during the month of August in the following order: Plastics & Rubber Products; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Chemical Products; Food, Beverage & Tobacco Products; Transportation Equipment; Miscellaneous Manufacturing; and Furniture & Related Products. The four industries reporting paying lower prices during the month of August are: Wood Products; Textile Mills; Petroleum & Coal Products; and Computer & Electronic Products.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Aug 2014 24 68 8 +16 58.0
Jul 2014 26 67 7 +19 59.5
Jun 2014 23 70 7 +16 58.0
May 2014 31 58 11 +20 60.0

Backlog of Orders*

ISM®'s Backlog of Orders Index registered 52.5 percent in August, which is 3 percentage points higher than the 49.5 percent reported in July, indicating growth in order backlogs following two months of contraction. Of the 87 percent of respondents who reported their backlog of orders, 25 percent reported greater backlogs, 20 percent reported smaller backlogs, and 55 percent reported no change from July.

The 11 industries reporting increased order backlogs in August — listed in order — are: Printing & Related Support Activities; Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; Petroleum & Coal Products; Furniture & Related Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The six industries reporting a decrease in order backlogs during August — listed in order — are: Wood Products; Textile Mills; Miscellaneous Manufacturing; Machinery; Primary Metals; and Chemical Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Aug 2014 87 25 55 20 +5 52.5
Jul 2014 86 21 57 22 -1 49.5
Jun 2014 83 18 60 22 -4 48.0
May 2014 85 21 63 16 +5 52.5

New Export Orders*

ISM®'s New Export Orders Index registered 55 percent in August, which is 2 percentage points higher than the 53 percent reported in July. August's reading reflects growth in the level of exports for the 21st consecutive month.

The 11 industries reporting growth in new export orders in August — listed in order — are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Petroleum & Coal Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Fabricated Metal Products; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; and Paper Products. The four industries reporting a decrease in new export orders during August are: Wood Products; Primary Metals; Computer & Electronic Products; and Machinery.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Aug 2014 76 18 74 8 +10 55.0
Jul 2014 77 14 78 8 +6 53.0
Jun 2014 74 16 77 7 +9 54.5
May 2014 75 21 71 8 +13 56.5

Imports*

ISM®'s Imports Index registered 56 percent in August, which is 4 percentage points higher than the 52 percent reported in July. This month's reading represents 19 consecutive months of growth in imports.

The 12 industries reporting growth in imports during the month of August — listed in order — are: Primary Metals; Apparel, Leather & Allied Products; Plastics & Rubber Products; Petroleum & Coal Products; Computer & Electronic Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; Machinery; and Fabricated Metal Products. The only industry reporting a decrease in imports during August is Paper Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Aug 2014 76 18 76 6 +12 56.0
Jul 2014 79 14 76 10 +4 52.0
Jun 2014 77 19 76 5 +14 57.0
May 2014 78 19 71 10 +9 54.5

* The Inventories, Customers' Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy

Average commitment lead time for Capital Expenditures decreased 6 days to 119 days. Average lead time for Production Materials increased 2 days to 62 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 1 day to 29 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Aug 2014 27 7 12 18 21 15 119
Jul 2014 27 5 11 18 23 16 125
Jun 2014 28 7 11 15 26 13 117
May 2014 25 7 13 17 20 18 127
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Aug 2014 13 41 23 13 7 3 62
Jul 2014 15 38 22 16 7 2 60
Jun 2014 13 39 22 17 7 2 61
May 2014 16 37 22 16 7 2 59
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Aug 2014 42 38 13 6 1 0 29
Jul 2014 41 38 14 7 0 0 28
Jun 2014 45 38 12 5 0 0 25
May 2014 46 36 13 4 1 0 26

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 and Supplier Deliveries) 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 subject annually to relatively minor changes when conditions warrant them. The PMI® is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), 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 43.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 43.2 percent, it is generally declining. The distance from 50 percent or 43.2 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.

The Manufacturing ISM® Report On Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month.

The industries reporting growth, as indicated in the Manufacturing ISM® Report On Business® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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 Institute for Supply Management®, the first supply institute in the world. Founded in 1915, ISM®'s mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. By executing and extending its mission through education, research, standards of excellence and information dissemination — including the renowned monthly ISM® Report On Business® — ISM® maintains a strong global influence among individuals and organizations. ISM® is a not-for-profit educational association that serves professionals with an interest in supply management who live and work in more than 80 countries. 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 website 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 September 2014 data will be released at 10:00 a.m. (ET) on Wednesday, October 1, 2014.



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