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June 2013 Manufacturing ISM Report On Business®

FOR RELEASE: July 1, 2013


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


PMI™ at 50.9%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire United States, while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of June 2013.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in June following one month of contraction, and the overall economy grew for the 49th 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™ Manufacturing Business Survey Committee. "The PMI™ registered 50.9 percent, an increase of 1.9 percentage points from May's reading of 49 percent, indicating expansion in the manufacturing sector for the fifth time in the first six months of 2013. The New Orders Index increased in June by 3.1 percentage points to 51.9 percent, and the Production Index increased by 4.8 percentage points to 53.4 percent. The Employment Index registered 48.7 percent, a decrease of 1.4 percentage points compared to May's reading of 50.1 percent. Manufacturing employment contracted for the first time since September 2009, when the index registered 47.8 percent. The Prices Index registered 52.5 percent, increasing 3 percentage points from May, indicating that overall raw materials prices increased from last month. Comments from the panel generally indicate slow growth and improving business conditions."

Of the 18 manufacturing industries, 12 are reporting growth in June in the following order: Furniture & Related Products; Apparel, Leather & Allied Products; Paper Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Wood Products; Food, Beverage & Tobacco Products; Primary Metals; Fabricated Metal Products; Plastics & Rubber Products; Machinery; and Nonmetallic Mineral Products. The four industries reporting contraction in June are: Textile Mills; Transportation Equipment; Chemical Products; and Computer & Electronic Products.

WHAT RESPONDENTS ARE SAYING ...

  • "Business remains good to improving." (Miscellaneous Manufacturing)
  • "Industry volumes picking up with improved housing starts." (Electrical Equipment, Appliances & Components)
  • "Indications are that customers have acceptable inventory levels, and as a result, are backing down on new orders and reassessing market conditions." (Wood Products)
  • "Last couple of weeks a little slower." (Furniture & Related Products)
  • "Seeing signs of life through summer retail [sales] promotions — still an overall soft market." (Food, Beverage & Tobacco Products)
  • "Business is steady. Qualified CNC machinists are hard to find." (Fabricated Metal Products)
  • "Weather conditions are causing uncertainty in agricultural markets." (Machinery)
  • "Continued slow improvements." (Transportation Equipment)
  • "June sales appear to have rebounded from what was a lackluster May." (Paper Products)
  • "Slow growth continues to choke the recovery. We are not out of the woods yet by any stretch of the imagination." (Chemical Products)
MANUFACTURING AT A GLANCE
JUNE 2013


Index
Series
Index
Jun
Series
Index
May
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI™ 50.9 49.0 +1.9 Growing From Contracting 1
New Orders 51.9 48.8 +3.1 Growing From Contracting 1
Production 53.4 48.6 +4.8 Growing From Contracting 1
Employment 48.7 50.1 -1.4 Contracting From Growing 1
Supplier Deliveries 50.0 48.7 +1.3 Unchanged From Faster 1
Inventories 50.5 49.0 +1.5 Growing From Contracting 1
Customers' Inventories 45.0 46.0 -1.0 Too Low Faster 19
Prices 52.5 49.5 +3.0 Increasing From Decreasing 1
Backlog of Orders 46.5 48.0 -1.5 Contracting Faster 2
Exports 54.5 51.0 +3.5 Growing Faster 7
Imports 56.0 54.5 +1.5 Growing Faster 5
             
OVERALL ECONOMY Growing Faster 49
Manufacturing Sector Growing From Contracting 1

*Number of months moving in current direction.


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum Products; Caustic Soda (3); Corrugated Boxes (11); Corrugated Packaging (2); Lumber (6); Plastic Products; Plywood; and Polypropylene*.

Commodities Down in Price

Butter; Hydraulic Components; Polypropylene (2)*; Stainless Steel (2); Steel (3); Steel — Cold Rolled; Steel — Hot Rolled (2); and Sugar (2).

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.
*Reported as both up and down in price.



JUNE 2013 MANUFACTURING INDEX SUMMARIES


PMI™

Manufacturing expanded in June as the PMI™ registered 50.9 percent, an increase of 1.9 percentage points when compared to May's reading of 49 percent. June's reading of 50.9 percent reflects the resumption of growth in the manufacturing sector for 2013, following the only month of contraction for the year in May. 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 42.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the June PMI™ indicates growth for the 49th consecutive month in the overall economy, and indicates expansion in the manufacturing sector following one month of contraction. Holcomb stated, "The past relationship between the PMI™ and the overall economy indicates that the average PMI™ for January through June (51.5 percent) corresponds to a 2.9 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI™ for June (50.9 percent) is annualized, it corresponds to a 2.7 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI™   Month PMI™
Jun 2013 50.9   Dec 2012 50.2
May 2013 49.0   Nov 2012 49.9
Apr 2013 50.7   Oct 2012 51.7
Mar 2013 51.3   Sep 2012 51.6
Feb 2013 54.2   Aug 2012 50.7
Jan 2013 53.1   Jul 2012 50.5
Average for 12 months – 51.2
High – 54.2
Low – 49.0

New Orders

ISM's New Orders Index registered 51.9 percent in June, an increase of 3.1 percentage points when compared to the May reading of 48.8 percent. This represents growth in new orders after one month of contraction. A New Orders Index above 52.2 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

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

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Jun 2013 30 49 21 +9 51.9
May 2013 28 50 22 +6 48.8
Apr 2013 34 46 20 +14 52.3
Mar 2013 31 52 17 +14 51.4

Production

ISM's Production Index registered 53.4 percent in June, which is an increase of 4.8 percentage points when compared to the 48.6 percent reported in May. This month's reading indicates growth in production and follows the only month of contraction in production for the year. An index above 51.2 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The 11 industries reporting growth in production during the month of June — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Nonmetallic Mineral Products; Wood Products; Fabricated Metal Products; Primary Metals; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The three industries reporting a decrease in production in June are: Chemical Products; Machinery; and Transportation Equipment.


Production
%
Better
%
Same
%
Worse

Net

Index
Jun 2013 28 55 17 +11 53.4
May 2013 26 57 17 +9 48.6
Apr 2013 33 53 14 +19 53.5
Mar 2013 33 51 16 +17 52.2

Employment

ISM's Employment Index registered 48.7 percent in June, which is 1.4 percentage points lower than the 50.1 percent reported in May. This month's reading indicates contraction in employment for the first time since September 2009, when the index registered 47.8 percent. An Employment Index above 50.5 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, eight reported growth in employment in June in the following order: Wood Products; Furniture & Related Products; Paper Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Machinery; and Food, Beverage & Tobacco Products. The five industries reporting a decrease in employment in June are: Textile Mills; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; and Chemical Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Jun 2013 19 65 16 +3 48.7
May 2013 22 60 18 +4 50.1
Apr 2013 26 57 17 +9 50.2
Mar 2013 24 60 16 +8 54.2

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations in June was unchanged from May as the Supplier Deliveries Index registered 50 percent. This month's reading is 1.3 percentage points higher than the 48.7 percent reported in May. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The six industries reporting slower supplier deliveries in June — listed in order — are: Petroleum & Coal Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products. The four industries reporting faster supplier deliveries in June are: Primary Metals; Electrical Equipment, Appliances & Components; Transportation Equipment; and Paper Products. Eight industries reported no change in supplier deliveries in June compared to May.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Jun 2013 9 84 7 +2 50.0
May 2013 8 85 7 +1 48.7
Apr 2013 12 81 7 +5 50.9
Mar 2013 11 82 7 +4 49.4

Inventories*

The Inventories Index registered 50.5 percent in June, which is 1.5 percentage points higher than the 49 percent reported in May. This month's reading indicates that respondents are reporting inventories expanded in June, following three consecutive months of contraction. For the current year, inventories of raw materials have registered in a well-managed range from a high of 51.5 percent in February to a low of 46.5 percent in April. An Inventories Index greater than 42.7 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 June — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Primary Metals; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Machinery. The six industries reporting decreases in inventories in June — listed in order — are: Textile Mills; Miscellaneous Manufacturing; Plastics & Rubber Products; Chemical Products; Transportation Equipment; and Wood Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Jun 2013 19 63 18 +1 50.5
May 2013 20 58 22 -2 49.0
Apr 2013 18 57 25 -7 46.5
Mar 2013 20 59 21 -1 49.5

Customers' Inventories*

The ISM Customers' Inventories Index registered 45 percent in June, which is 1 percentage point lower than in May when the index registered 46 percent. This month's reading indicates that customers' inventories are considered too low, and lower than reported in May. Customers' inventories have registered at or below 50 percent for 51 consecutive months. 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 June are: Apparel, Leather & Allied Products; Primary Metals; Chemical Products; and Food, Beverage & Tobacco Products. The nine industries reporting customers' inventories as too low during June — listed in order — are: Plastics & Rubber Products; Furniture & Related Products; Machinery; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; Paper Products; and Computer & Electronic Products.

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

Net

Index
Jun 2013 66 10 70 20 -10 45.0
May 2013 70 14 64 22 -8 46.0
Apr 2013 71 11 67 22 -11 44.5
Mar 2013 75 14 67 19 -5 47.5

Prices*

The ISM Prices Index registered 52.5 percent in June, which is an increase of 3 percentage points compared to the May reading of 49.5 percent. This indicates that raw materials prices increased in June, following only one month of price decreases for the year in May. In June, 20 percent of respondents reported paying higher prices, 15 percent reported paying lower prices, and 65 percent of supply executives reported paying the same prices as in May. 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 June in the following order: Textile Mills; Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Paper Products; Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The five industries reporting paying lower prices during June are: Petroleum & Coal Products; Wood Products; Electrical Equipment, Appliances & Components; Machinery; and Fabricated Metal Products.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Jun 2013 20 65 15 +5 52.5
May 2013 19 61 20 -1 49.5
Apr 2013 15 70 15 0 50.0
Mar 2013 21 67 12 +9 54.5

Backlog of Orders*

ISM's Backlog of Orders Index registered 46.5 percent in June, which is 1.5 percentage points lower than the 48 percent reported in May. This is the second month of contracting order backlogs since January 2013, when the index registered 47.5 percent. Of the 84 percent of respondents who reported their backlog of orders, 17 percent reported greater backlogs, 24 percent reported smaller backlogs, and 59 percent reported no change from May.

The five industries reporting increased order backlogs in June are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; and Machinery. The seven industries reporting decreases in order backlogs during June — listed in order — are: Primary Metals; Textile Mills; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Wood Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Jun 2013 84 17 59 24 -7 46.5
May 2013 82 23 50 27 -4 48.0
Apr 2013 85 25 56 19 +6 53.0
Mar 2013 85 22 58 20 +2 51.0

New Export Orders*

ISM's New Export Orders Index registered 54.5 percent in June, which is 3.5 percentage points higher than the 51 percent reported in May. This month's reading represents the seventh consecutive month of growth in new export orders, and follows six consecutive months of contraction dating back to June 2012.

The seven industries reporting growth in new export orders in June — listed in order — are: Primary Metals; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Machinery; and Transportation Equipment. The two industries reporting a decrease in new export orders during June are: Food, Beverage & Tobacco Products; and Chemical Products. Eight industries reported no change in new export orders in June compared to May.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jun 2013 74 15 79 6 +9 54.5
May 2013 76 16 70 14 +2 51.0
Apr 2013 75 18 72 10 +8 54.0
Mar 2013 77 22 68 10 +12 56.0

Imports*

ISM's Imports Index registered 56 percent in June, which is 1.5 percentage points higher than the 54.5 percent reported in May. This month's reading represents the seventh consecutive month that the Imports Index has registered at or above 50 percent.

The 10 industries reporting growth in imports during the month of June — listed in order — are: Wood Products; Primary Metals; Fabricated Metal Products; Miscellaneous Manufacturing; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Food, Beverage & Tobacco Products; and Furniture & Related Products. The two industries reporting a decrease in imports during June are: Nonmetallic Mineral Products; and Apparel, Leather & Allied Products. Six industries reported no change in imports in June compared to May.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Jun 2013 76 20 72 8 +12 56.0
May 2013 75 16 77 7 +9 54.5
Apr 2013 76 19 72 9 +10 55.0
Mar 2013 77 18 72 10 +8 54.0

* 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 remained unchanged at 125 days. Average lead time for Production Materials decreased 2 days to 60 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 25 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2013 28 3 12 14 29 14 125
May 2013 27 5 10 19 23 16 125
Apr 2013 26 4 13 16 28 13 122
Mar 2013 28 7 9 19 25 12 114
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2013 16 36 23 18 4 3 60
May 2013 17 34 26 15 4 4 62
Apr 2013 18 30 33 13 3 3 58
Mar 2013 17 37 26 13 4 3 57
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Jun 2013 46 38 12 3 1 0 25
May 2013 43 40 13 3 1 0 26
Apr 2013 43 40 13 4 0 0 26
Mar 2013 44 39 13 3 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 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 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 42.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.2 percent, it is generally declining. The distance from 50 percent or 42.2 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 the Institute for Supply Management™, the first supply institute in the world. Founded in 1915, ISM exists to lead and serve the supply management profession and is a highly influential and respected association in the global marketplace. ISM's mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. 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 July 2013 data will be released at 10:00 a.m. (ET) on Thursday, August 1, 2013.



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