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Industry News: Manufacturing ISM Report Released

May 15, 2007
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TEMPE, AZ-Economic activity in the manufacturing sector expanded in February following a decline in January, while the overall economy grew for the 64th consecutive month, according to the nation’s supply executives in the Manufacturing Institute for Supply Management (ISM) Report On Business.

The report was issued by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey committee. “February proved to be a good month in the manufacturing sector as new orders, production and employment contributed to a solid growth scenario. The inventories index showed significant reduction in manufacturers’ inventories for the second consecutive month, and the backlog of orders index is growing once again. While the prices manufacturers pay reached their highest level in five months, concern about prices is still minimal due to the small number of commodities indicated as up in price. The trend in manufacturing, as well as the overall economy, is for slow but continuing growth.”

The manufacturing economy returned to growth in February as the Purchasing Managers Index (PMI) registered 52.3%, an increase of 3 percentage points when compared to January’s seasonally adjusted reading of 49.3%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI in excess of 41.9%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that both the overall economy and the manufacturing sector are growing. “The past relationship between the PMI and the overall economy indicates that the PMI average for January and February, 50.8%, corresponds to a 2.8% increase in real gross domestic product (GDP) annually. In addition, if the PMI for February, 52.3, is annualized, it corresponds to a 3.2% increase in real GDP annually.”

ISM’s Production Index registered 54.1% in February, 4.5 percentage points higher than the seasonally adjusted 49.6% reported in January. Manufacturers’ production is now growing following a one-month contraction in February. An index above 49.8%, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

ISM’s Employment Index registered 51.1% in February as the Index increased 1.6 percentage points when compared to January’s seasonally adjusted reading of 49.5%. February’s Index reverses a three-month trend of contraction in manufacturing employment. An Employment Index above 49.2%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The delivery performance of suppliers to manufacturing organizations was slower for the 44th consecutive month in February. ISM’s Supplier Deliveries Index registered 50.8% in February, a decrease of 1.9 percentage points when compared to January’s seasonally adjusted reading of 52.7%. A reading above 50% indicates slower deliveries.

Manufacturers’ inventories contracted for the seventh consecutive month in February as ISM’s Inventories Index registered 44.6%, a 4.7 percentage point increase when compared to January’s seasonally adjusted reading of 39.9%. An Inventories Index greater than 42.4%, over time, is generally consistent with expansion in the Bureau of Economic Analysis’ figures on overall manufacturing inventories, in chained 2000 dollars, or real dollar amounts adjusted over time for inflation

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 here, 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.

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 GDP.

The report  is published monthly by the Institute for Supply Management. 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).

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