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March 2008 Manufacturing ISM Report On Business®

FOR RELEASE: April 1, 2008


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


PMI at 48.6%

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 2008.


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

(Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in March, while the overall economy grew for the 77th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector failed to grow in March as the PMI fell below 50 percent for the second consecutive month. This completes the weakest quarterly performance for the U.S. economy since Q2 of 2003. Manufacturers' order backlogs continue to erode as the New Orders Index failed to grow for the fourth consecutive month. Additionally, manufacturers continue to experience heavy cost pressures, as the prices they pay are still rising even with slower overall demand. Some manufacturers are still benefiting from strong export demand and continue to see growth in export orders."

PERFORMANCE BY INDUSTRY

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

WHAT RESPONDENTS ARE SAYING ...
  • "Automotive demand continues to decline." (Fabricated Metal Products)
  • "Business is still cautiously optimistic." (Machinery)
  • "High oil prices and material shortages are becoming a real challenge to deal with in day-to-day operations." (Paper Products)
  • "European business continues robust." (Primary Metals)
  • "Business continues to be down by 20 percent over the past four months." (Furniture & Related Products)
MANUFACTURING AT A GLANCE
MARCH 2008


Index
Series
Index
March
Series
Index
February
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 48.6 48.3 +0.3 Contracting Slower 2
New Orders 46.5 49.1 -2.6 Contracting Faster 4
Production 48.7 50.7 -2.0 Contracting From Growing 1
Employment 49.2 46.0 +3.2 Contracting Slower 5
Supplier Deliveries 53.6 50.1 +3.5 Slowing Faster 9
Inventories 44.9 45.4 -0.5 Contracting Faster 23
Customers' Inventories 51.0 49.0 +2.0 Too High From Too Low 1
Prices 83.5 75.5 +8.0 Increasing Faster 15
Backlog of Orders 47.5 45.0 +2.5 Contracting Slower 6
Exports 56.5 56.0 +0.5 Growing Faster 64
Imports 45.0 47.5 -2.5 Contracting Faster 2
             
OVERALL ECONOMY Growing Faster 77
Manufacturing Sector Contracting Slower 2

*Number of months moving in current direction


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (2); Aluminum Extrusions; Caustic Soda; Chemicals (3); Copper (2); Copper Laden Products; Corrugated Cartons; Crude Oil; Diesel Fuel; Electrical Components; Fuel Oil; Fuel Surcharges; Natural Gas (5); Plastics; Steel (3); Sulfuric Acid (5); and Zinc.

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

Caustic Soda is the only commodity reported in short supply.

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



MARCH 2008 MANUFACTURING INDEX SUMMARIES


PMI

Manufacturing failed to grow in March as the PMI registered 48.6 percent, which is an increase of 0.3 percentage point when compared to February's seasonally adjusted reading of 48.3 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 41.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates the overall economy is growing and the manufacturing sector is contracting at this time. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (49.2 percent) corresponds to a 2.5 percent increase in real gross domestic product (GDP). In addition, if the PMI for March (48.6 percent) is annualized, it corresponds to a 2.4 percent increase in real GDP annually."

THE LAST 12 MONTHS
Month PMI   Month PMI
Mar 2008 48.6   Sep 2007 50.5
Feb 2008 48.3   Aug 2007 51.2
Jan 2008 50.7   Jul 2007 52.3
Dec 2007 48.4   Jun 2007 53.4
Nov 2007 50.0   May 2007 52.8
Oct 2007 50.4   Apr 2007 52.8
Average for 12 months — 50.8
High — 53.4
Low — 48.3

New Orders

ISM's New Orders Index registered 46.5 percent in March. The index is 2.6 percentage points lower than the seasonally adjusted 49.1 percent reported in February. A New Orders Index above 51.6 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

Eight industries reported increases during March: Printing & Related Support Activities; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Primary Metals; Computer & Electronic Products; and Chemical Products. The industries that reported decreases during March are: Nonmetallic Mineral Products; Plastics & Rubber Products; Wood Products; Machinery; Fabricated Metal Products; and Transportation Equipment.

New
Orders
%
Better
%
Same
%
Worse

Net

Index
Mar 2008 25 50 25 0 46.5
Feb 2008 27 48 25 +2 49.1
Jan 2008 25 43 32 -7 49.5
Dec 2007 15 55 30 -15 46.9

Production

ISM's Production Index declined to 48.7 percent in March, a decrease of 2 percentage points when compared to February's seasonally adjusted reading of 50.7 percent. An index above 49.9 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

Of the industries reporting in March, six registered growth: Apparel, Leather & Allied Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Primary Metals; Computer & Electronic Products; and Transportation Equipment. The industries that reported decreased production during March are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; and Machinery.


Production
%
Better
%
Same
%
Worse

Net

Index
Mar 2008 20 60 20 0 48.7
Feb 2008 25 52 23 +2 50.7
Jan 2008 26 51 23 +3 55.2
Dec 2007 16 58 26 -10 48.6

Employment

ISM's Employment Index registered 49.2 percent in March, which is an increase of 3.2 percentage points when compared to February's seasonally adjusted reading of 46 percent. An Employment Index above 49.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The eight industries reporting growth in employment during March are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Furniture & Related Products; Computer & Electronic Products; Transportation Equipment; and Food, Beverage & Tobacco Products. The industries that reported decreases in employment during March are: Textile Mills; Fabricated Metal Products; Chemical Products; Machinery; and Plastics & Rubber Products.


Employment
%
Higher
%
Same
%
Lower

Net

Index
Mar 2008 15 70 15 0 49.2
Feb 2008 10 74 16 -6 46.0
Jan 2008 11 68 21 -10 47.1
Dec 2007 11 71 18 -7 48.7

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations continued to slow in March as the Supplier Deliveries Index increased 3.5 percentage points to 53.6 percent from the seasonally adjusted 50.1 percent registered in February. A reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in March are: Printing & Related Support Activities; Fabricated Metal Products; Machinery; Transportation Equipment; and Food, Beverage & Tobacco Products. The industries reporting faster deliveries during March are: Nonmetallic Mineral Products; and Electrical Equipment, Appliances & Components.

Supplier
Deliveries
%
Slower
%
Same
%
Faster

Net

Index
Mar 2008 11 85 4 +7 53.6
Feb 2008 6 87 7 -1 50.1
Jan 2008 6 91 3 +3 52.8
Dec 2007 8 88 4 +4 52.6

Inventories

Manufacturers' inventories contracted in March as the Inventories Index registered 44.9 percent, which is 0.5 percentage point lower than February's seasonally adjusted reading of 45.4 percent. This is the 23rd consecutive month of inventory liquidation. An Inventories Index greater than 42.4 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The five industries reporting higher inventories in March are: Apparel, Leather & Allied Products; Textile Mills; Plastics & Rubber Products; Machinery; and Chemical Products. The industries that reported decreases during March are: Furniture & Related Products; Petroleum & Coal Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Nonmetallic Mineral Products.


Inventories
%
Higher
%
Same
%
Lower

Net

Index
Mar 2008 15 63 22 -7 44.9
Feb 2008 13 68 19 -6 45.4
Jan 2008 17 64 19 -2 49.1
Dec 2007 16 57 27 -11 45.4

Customers' Inventories*

The ISM Customers' Inventories Index registered 51 percent in March, an increase of 2 percentage points when compared to February's reading of 49 percent. The index indicates that respondents believe their customers' inventories are too high at this time.

Five industries reported higher customers' inventories during March: Plastics & Rubber Products; Furniture & Related Products; Wood Products; Fabricated Metal Products; and Chemical Products. The industries that reported lower customers' inventories during March are: Printing & Related Support Activities; Textile Mills; Electrical Equipment, Appliances & Components; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; and Machinery.

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

Net

Index
Mar 2008 78 16 70 14 +2 51.0
Feb 2008 70 13 72 15 -2 49.0
Jan 2008 70 13 73 14 -1 49.5
Dec 2007 75 20 63 17 +3 51.5

Prices*

The ISM Prices Index registered 83.5 percent in March, indicating manufacturers are paying higher prices on average when compared to February. This is the highest reading for the index since it registered 84.0 percent in October 2005. While 69 percent of respondents reported paying higher prices and 2 percent reported paying lower prices, 29 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In March, 17 industries reported paying higher prices: Textile Mills; Printing & Related Support Activities; Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Chemical Products; Transportation Equipment; Fabricated Metal Products; Machinery; Nonmetallic Mineral Products; Wood Products; Paper Products; Petroleum & Coal Products; Computer & Electronic Products; and Miscellaneous Manufacturing.


Prices
%
Higher
%
Same
%
Lower

Net

Index
Mar 2008 69 29 2 +67 83.5
Feb 2008 55 41 4 +51 75.5
Jan 2008 55 42 3 +52 76.0
Dec 2007 43 50 7 +36 68.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 47.5 percent in March, 2.5 percentage points higher than the 45 percent reported in February. This is the sixth consecutive month of contraction in the Backlog of Orders Index. Of the 85 percent of respondents who reported their backlog of orders, 18 percent reported greater backlogs, 23 percent reported smaller backlogs, and 59 percent reported no change from February.

The six industries reporting an increase in order backlogs in March are: Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Furniture & Related Products; Primary Metals; and Machinery. The industries that reported decreases in order backlogs during March are: Nonmetallic Mineral Products; Printing & Related Support Activities; Wood Products; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; and Chemical Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less

Net

Index
Mar 2008 85 18 59 23 -5 47.5
Feb 2008 87 22 46 32 -10 45.0
Jan 2008 85 19 50 31 -12 44.0
Dec 2007 85 14 58 28 -14 43.0

New Export Orders*

ISM's New Export Orders Index registered 56.5 percent in March, an increase of 0.5 percentage point when compared to February's index of 56 percent. This is the 64th consecutive month of growth in export orders.

The nine industries reporting growth in new export orders in March are: Electrical Equipment, Appliances & Components; Paper Products; Primary Metals; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Computer & Electronic Products; Transportation Equipment; Chemical Products; and Machinery. The industries that reported decreases in new export orders during March are: Wood Products and Fabricated Metal Products.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Mar 2008 76 22 69 9 +13 56.5
Feb 2008 75 22 68 10 +12 56.0
Jan 2008 78 24 69 7 +17 58.5
Dec 2007 75 17 71 12 +5 52.5

Imports*

Imports of materials by manufacturers contracted during March as the Imports Index registered 45 percent, 2.5 percentage points lower than the 47.5 percent reported in February.

The five industries reporting growth in import activity for March are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Textile Mills; Miscellaneous Manufacturing; and Transportation Equipment. The industries that reported decreases in imports during March are: Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Primary Metals; Fabricated Metal Products; Machinery; Chemical Products; Plastics & Rubber Products; and Food, Beverage & Tobacco Products.


Imports
%
Reporting
%
Higher
%
Same
%
Lower

Net

Index
Mar 2008 83 9 72 19 -10 45.0
Feb 2008 83 13 69 18 -5 47.5
Jan 2008 82 16 73 11 +5 52.5
Dec 2007 80 13 70 17 -4 48.0

* 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 1 day to 118 days. Average lead-time for Production Materials decreased 1 day to 46 days. Average lead-time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 21 days.

Percent Reporting

Capital
Expenditures
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Mar 2008 24 6 13 19 26 12 118
Feb 2008 21 10 10 21 26 12 119
Jan 2008 22 9 12 17 27 13 122
Dec 2007 22 9 12 18 25 14 123
 

Production
Materials
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Mar 2008 23 35 30 8 3 1 46
Feb 2008 20 40 28 7 4 1 47
Jan 2008 23 36 27 8 4 2 50
Dec 2007 19 37 28 10 5 1 50
 

MRO
Supplies
Hand-
to-
Mouth

30
Days

60
Days

90
Days

6
Months

1
Year+

Average
Days
Mar 2008 56 32 9 3 0 0 21
Feb 2008 55 31 10 4 0 0 22
Jan 2008 50 34 10 5 1 0 25
Dec 2007 53 35 9 3 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 41.1 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.1 percent, it is generally declining. The distance from 50 percent or 41.1 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.

Responses to Buying Policy reflect the percent reporting the current month's leadtime, the approximate weighted number of days ahead for which commitments are made for Production Materials; Capital Expenditures; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.

The Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM Report On Business® is posted on ISM's Web site at www.ism.ws on the first business day of every month after 10:10 a.m. (ET).

The next Manufacturing ISM Report On Business® featuring the April 2008 data will be released at 10:00 a.m. (ET) on Thursday, May 1, 2008.


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