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 2009.
________________________

Economic activity in the manufacturing sector expanded in August, following 18 consecutive months of contraction, and the overall economy grew for the fourth 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 year-and-a-half decline in manufacturing output has come to an end, as 11 of 18 manufacturing industries are reporting growth when comparing August to July. While this is certainly a positive occurrence, we have to keep in mind that it is the beginning of a new cycle and that all industries are not yet participating in the growth. The August index of 52.9 percent is the highest since June 2007. The 4 percentage point increase was driven by significant strength in the New Orders Index, which is up 9.6 points to 64.9 percent, the highest since December 2004. The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand.”

PERFORMANCE BY INDUSTRY

Eleven of the 18 manufacturing industries reported growth in August. These industries — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Computer & Electronic Products; Transportation Equipment; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Chemical Products. The six industries reporting contraction in August — listed in order — are: Primary Metals; Plastics & Rubber Products; Furniture & Related Products; Wood Products; Food, Beverage & Tobacco Products; and Machinery.

WHAT RESPONDENTS ARE SAYING …

  • “Production is picking up as demand [for] orders is being accelerated.” (Nonmetallic Mineral Products)
  • “Demand from automotive manufacturers increasing thanks to ‘Cash for Clunkers.’” (Fabricated Metal Products)
  • “In addition to improved business come the complications of a supply chain drained of inventory.” (Paper Products)
  • “The sudden increase in customer demand, plus the low inventories held at services centers, is causing a shortage in the supply of raw steel.” (Transportation Equipment)
  • “[It] appears customers’ inventories are getting low, and they are cautiously placing orders.” (Apparel, Leather & Allied Products)

MANUFACTURING AT A GLANCE

AUGUST 2009

                       
Index

Series
Index
August

Series
Index
July

Percentage
Point
Change

Direction

Rate of
Change

Trend(a)
(Months)

 
PMI 52.9 48.9 +4.0 Growing From Contracting 1
New Orders 64.9 55.3 +9.6 Growing Faster 2
Production 61.9 57.9 +4.0 Growing Faster 3
Employment 46.4 45.6 +0.8 Contracting Slower 13
Supplier Deliveries 57.1 52.0 +5.1 Slowing Faster 3
Inventories 34.4 33.5 +0.9 Contracting Slower 40
Customers’ Inventories 39.0 42.5 -3.5 Too Low Faster 5
Prices 65.0 55.0 +10.0 Increasing Faster 2
Backlog of Orders 52.5 50.0 +2.5 Growing From Unchanged 1
Exports 55.5 50.5 +5.0 Growing Faster 2
Imports 49.5 50.0 -0.5 Contracting From Unchanged 1
OVERALL ECONOMY

Manufacturing Sector

Growing Faster 4
Growing From Contracting 1

(a) Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (2); Aluminum Based Products; Brass Products; Copper (3); Copper Based Products (2); Corn; Nickel (2); Plastic Resins (2); Polypropylene (2); Stainless Steel; Stainless Steel Products; Steel (2); Steel Products (2); and Steel Scrap.

Commodities Down in Price

Caustic Soda (6); and Natural Gas (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.

AUGUST 2009 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing’s 18 consecutive months of decline ended in August as the PMI registered 52.9 percent, which is 4 percentage points higher than the 48.9 percent reported in July. This is the highest reading since June 2007, when the index also registered 52.9 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 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the fourth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the first time since January 2008. Ore stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (42.2 percent) corresponds to a 0.3 percent increase in real gross domestic product (GDP). However, if the PMI for August (52.9 percent) is annualized, it corresponds to a 3.7 percent increase in real GDP annually."

THE LAST 12 MONTHS

          Month                     PMI                               Month                     PMI
 
Aug 2009 52.9 Feb 2009 35.8
Jul 2009 48.9 Jan 2009 35.6
Jun 2009 44.8 Dec 2008 32.9
May 2009 42.8 Nov 2008 36.6
Apr 2009 40.1 Oct 2008 38.7
Mar 2009 36.3 Sep 2008 43.4
Average for 12 months – 40.7

High – 52.9

Low – 32.9

New Orders

ISM’s New Orders Index registered 64.9 percent in August, 9.6 percentage points higher than the 55.3 percent registered in July. This represents the second consecutive month of growth in the index and the highest reading since December 2004, when it registered 66.3 percent. A New Orders Index above 48.8 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 August — listed in order — are: Textile Mills; Paper Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Wood Products; Chemical Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; and Machinery. The three industries reporting decreases in new orders in August are: Furniture & Related Products; Primary Metals; and Food, Beverage & Tobacco Products.

New Orders           %Better         %Same         %Worse         Net         Index
 
Aug 2009 43 41 16 +27 64.9
Jul 2009 33 45 22 +11 55.3
Jun 2009 28 48 24 +4 49.2
May 2009 27 54 19 +8 51.1

Production

ISM’s Production Index registered 61.9 percent in August, which is an increase of 4 percentage points from July’s reading of 57.9 percent. An index above 50.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures. This is the third consecutive month the Production Index has registered above 50 percent, following nine consecutive months of contraction.

The 13 industries reporting growth in production during the month of August — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Printing & Related Support Activities; Transportation Equipment; Nonmetallic Mineral Products; Chemical Products; Fabricated Metal Products; Primary Metals; and Machinery. The four industries reporting decreases in production in August are: Furniture & Related Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Wood Products.

Production           %Better         %Same         %Worse         Net         Index
 
Aug 2009 43 39 18 +25 61.9
Jul 2009 33 50 17 +16 57.9
Jun 2009 32 46 22 +10 52.5
May 2009 23 52 25 -2 46.0

Employment

ISM’s Employment Index registered 46.4 percent in August, which is 0.8 percentage point higher than the 45.6 percent reported in July. This is the 13th consecutive month of decline in employment. An Employment Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Four of the 18 manufacturing industries reported growth in employment in August: Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The nine industries that reported decreases in employment during August — listed in order — are: Furniture & Related Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Primary Metals; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Wood Products.

Employment           %Higher         %Same         %Lower         Net         Index
 
Aug 2009 13 68 19 -6 46.4
Jul 2009 11 70 19 -8 45.6
Jun 2009 9 66 25 -16 40.7
May 2009 8 56 36 -28 34.3

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in August as the Supplier Deliveries Index registered 57.1 percent, which is 5.1 percentage points higher than the 52 percent registered in July. This is the third consecutive month the Supplier Deliveries Index has been above 50 percent, following eight months of faster delivery performance. A reading above 50 percent indicates slower deliveries.

The nine industries reporting slower supplier deliveries in August — listed in order — are: Printing & Related Support Activities; Fabricated Metal Products; Plastics & Rubber Products; Computer & Electronic Products; Paper Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; and Chemical Products. The only industry reporting faster deliveries in August is Food, Beverage & Tobacco Products.

Supplier Deliveries           %Slower         %Same         %Faster        

Net

        Index
 
Aug 2009 18 79 3 +15 57.1
Jul 2009 14 80 6 +8 52.0
Jun 2009 8 87 5 +3 50.6
May 2009 8 86 6 +2 49.8

Inventories

Manufacturers’ inventories contracted in August as the Inventories Index registered 34.4 percent, which is 0.9 percentage point higher than July’s reading of 33.5 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).

Three of the 18 manufacturing industries reported higher inventories in August: Nonmetallic Mineral Products; Furniture & Related Products; and Food, Beverage & Tobacco Products. The 11 industries that reported decreases in August — listed in order — are: Plastics & Rubber Products; Primary Metals; Wood Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Machinery; Paper Products; Fabricated Metal Products; Printing & Related Support Activities; Miscellaneous Manufacturing; and Chemical Products.

Inventories         %Higher         %Same         %Lower         Net         Index
 
Aug 2009 14 44 42 -28 34.4
Jul 2009 5 55 40 -35 33.5
Jun 2009 8 46 46 -38 30.8
May 2009 10 46 44 -34 32.9

Customers’ Inventories(b)

The ISM Customers’ Inventories Index registered 39 percent in August, 3.5 percentage points lower than the 42.5 percent reported in July. The index indicates that respondents believe their customers’ inventories are too low at this time. This is the fifth consecutive month the Customers’ Inventories Index has been below 50 percent, following eight months above 50 percent.

Two industries reported higher customers’ inventories during August: Furniture & Related Products; and Food, Beverage & Tobacco Products. The 11 industries that reported lower customers’ inventories during August — listed in order — are: Printing & Related Support Activities; Nonmetallic Mineral Products; Computer & Electronic Products; Fabricated Metal Products; Machinery; Primary Metals; Plastics & Rubber Products; Chemical Products; Wood Products; Transportation Equipment; and Electrical Equipment, Appliances & Components.

Customers’ Inventories    

%
Reporting

   

%Too
High

   

%About
Right

   

%Too
Low

    Net     Index
 
Aug 2009 75 12 54 34 -22 39.0



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