TEMPE, AZ -- Economic activity in the manufacturing sector expanded in November for the 28th consecutive month, and the overall economy grew for the 30th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

“Seeing a slight slowdown in orders; could be related to the holidays.”

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 52.7 percent, an increase of 1.9 percentage points from October’s reading of 50.8 percent, indicating expansion in the manufacturing sector for the 28th consecutive month. The New Orders Index increased 4.3 percentage points from October to 56.7 percent, reflecting the second month of growth after three months of contraction. While the Prices Index, at 45 percent, increased 4 percentage points from the October reading of 41 percent, prices of raw materials continued to decrease (registering below 50 percent) for the second consecutive month. Respondents cite continuing concerns about the general economic environment, government regulations and European financial conditions, but are cautiously more optimistic about the next few months based on lower raw materials pricing and favorable levels of new orders.”

PERFORMANCE BY INDUSTRY

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

WHAT RESPONDENTS ARE SAYING …

  • “Business still holding its own. Some growth in margin now that some of the raw materials prices have abated. Oil is pushing $100 so that has not been favorable.” (Chemical Products)
  • “Orders for the remaining two months have increased after an extended ‘summer dip’ in sales overall. We expect to finish the year approximately 10 percent above 2010.” (Electrical Equipment, Appliances & Components)
  • “Seeing a slight slowdown in orders; could be related to the holidays.” (Primary Metals)
  • “Material lead times are getting longer. Seems like no one is hiring. Trying to do twice the output with the same amount of people.” (Food, Beverage & Tobacco Products)
  • “Japanese auto production has returned to 100 percent, and domestic manufacturing continues to increase.” (Fabricated Metal Products)
  • “Oil exploration seems to be really picking up. Government is permitting again, so business is the busiest we’ve ever seen.” (Computer & Electronic Products)
  • “The EPS ruling about higher fees for coal-generated electricity can have a huge, negative impact on our business if implemented in January 2012. We are at the peak of our seasonal demand push.” (Plastics & Rubber Products)
  • “Thailand flood impacting our business. Honda and Toyota cut production forecasts, and we are chasing some components made in Thailand.” (Transportation Equipment)

MANUFACTURING AT A GLANCE
NOVEMBER 2011

                                     
Index    

Series
Index
Nov

   

Series
Index
Oct

   

Percentage
Point
Change

    Direction    

Rate of
Change

   

Trend(a)
(Months)

                                     
PMI     52.7     50.8     +1.9     Growing     Faster     28
New Orders     56.7     52.4     +4.3     Growing     Faster     2
Production     56.6     50.1     +6.5     Growing     Faster     3
Employment     51.8     53.5     -1.7     Growing     Slower     26
Supplier Deliveries     49.9     51.3     -1.4     Faster     From Slowing     1
Inventories     48.3     46.7     +1.6     Contracting     Slower     2
Customers’ Inventories     50.0     43.5     +6.5     Unchanged     From Too Low     1
Prices     45.0     41.0     +4.0     Decreasing     Slower     2
Backlog of Orders     45.0     47.5     -2.5     Contracting     Faster     6
Exports     52.0     50.0     +2.0     Growing     From Unchanged     1
Imports     49.0     49.5     -0.5     Contracting     Faster     2
OVERALL ECONOMY

 

Manufacturing Sector

    Growing     Faster     30
    Growing     Faster     28

(a) Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum Products (4); Caustic Soda (2); Copper(b) (2); Copper Based Products; Corn Syrup; Electronic Components; Oil; Paper; and Plastic Resins(b).

Commodities Down in Price

Aluminum (3); Cardboard Products; Copper(b) (4); Corn (2); Natural Gas (4); Plastic Resins(b) (4); Plastic Products; Polypropylene; Stainless Steel; and Steel (7).

Commodities in Short Supply

Castings (3); Electronic Components; and Hydraulic Equipment.

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

(b) Reported as both up and down in price.

NOVEMBER 2011 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing continued its growth in November as the PMI registered 52.7 percent, an increase of 1.9 percentage points when compared to October’s reading of 50.8 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 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 30th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 28th consecutive month. Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (55.4 percent) corresponds to a 4.5 percent increase in real gross domestic product (GDP). In addition, if the PMI for November (52.7 percent) is annualized, it corresponds to a 3.6 percent increase in real GDP annually.”

THE LAST 12 MONTHS

          Month           PMI                     Month           PMI
                                                         
          Nov 2011           52.7                     May 2011           53.5
          Oct 2011           50.8                     Apr 2011           60.4
          Sep 2011           51.6                     Mar 2011           61.2
          Aug 2011           50.6                     Feb 2011           61.4
          Jul 2011           50.9                     Jan 2011           60.8
          Jun 2011           55.3                     Dec 2010           58.5
         

Average for 12 months – 55.6
High – 61.4
Low – 50.6

New Orders

ISM’s New Orders Index registered 56.7 percent in November, which is an increase of 4.3 percentage points when compared to the October reading of 52.4 percent, and represents a continuation of growth for the second consecutive month. 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 five industries reporting growth in new orders in November are: Wood Products; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Chemical Products. The six industries reporting decreases in new orders in November — listed in order — are: Nonmetallic Mineral Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Paper Products; Machinery; and Plastics & Rubber Products. Seven industries reported no change in new orders in November compared to October.

New Orders           %Better         %Same         %Worse         Net         Index
                                                     
Nov 2011           23         55         22         +1         56.7
Oct 2011           22         53         25         -3         52.4
Sep 2011           23         53         24         -1         49.6
Aug 2011           22         53         25         -3         49.6

Production

ISM’s Production Index registered 56.6 percent in November, which is an increase of 6.5 percentage points when compared to the October reading of 50.1 percent. This indicates growth for the third consecutive month after just one month of contraction. An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The seven industries reporting growth in production during the month of November — listed in order — are: Wood Products; Petroleum & Coal Products; Primary Metals; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; and Electrical Equipment, Appliances & Components. The six industries reporting a decrease in production in November — listed in order — are: Miscellaneous Manufacturing; Nonmetallic Mineral Products; Machinery; Transportation Equipment; Chemical Products; and Plastics & Rubber Products.

Production           %Better         %Same         %Worse         Net         Index
                                                     
Nov 2011           24         55         21         +3         56.6
Oct 2011           21         59         20         +1         50.1
Sep 2011           23         56         21         +2         51.2
Aug 2011           19         62         19         0         48.6

Employment

ISM’s Employment Index registered 51.8 percent in November, which is 1.7 percentage points lower than the 53.5 percent reported in October. This is the 26th consecutive month the Employment Index has been above 50 percent. An Employment Index above 50.1 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 November in the following order: Textile Mills; Wood Products; Paper Products; Primary Metals; Food, Beverage & Tobacco Products; Machinery; Fabricated Metal Products; and Computer & Electronic Products. The eight industries reporting a decrease in employment in November — listed in order — are: Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Plastics & Rubber Products; Petroleum & Coal Products; Chemical Products; Transportation Equipment; and Printing & Related Support Activities.

Employment           %Higher         %Same         %Lower         Net         Index
                                                     
Nov 2011           22         57         21         +1         51.8
Oct 2011           22         63         15         +7         53.5
Sep 2011           22         62         16         +6         53.8
Aug 2011           22         63         15         +7         51.8

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was faster in November as the Supplier Deliveries Index registered 49.9 percent, which is 1.4 percentage points lower than the 51.3 percent registered in October. This is the first month supplier deliveries have been faster than the previous month since May 2009, when the Supplier Deliveries Index also registered 49.9 percent. A reading above 50 percent indicates slower deliveries.

The six industries reporting slower supplier deliveries in November — listed in order — are: Petroleum & Coal Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Transportation Equipment; and Nonmetallic Mineral Products. The six industries reporting faster deliveries in November — listed in order — are: Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Machinery; Paper Products; and Chemical Products. Six industries reported no change in supplier deliveries in November compared to October.

Supplier Deliveries           %Slower         %Same         %Faster         Net         Index
                                                     
Nov 2011           9         79         12         -3         49.9
Oct 2011           10         81         9         +1         51.3
Sep 2011           12         81         7         +5         51.4
Aug 2011           12         81         7         +5         50.6

Inventories

The Inventories Index registered 48.3 percent in November, 1.6 percentage points higher than the 46.7 percent reported in October. 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 six industries reporting higher inventories in November — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; Machinery; and Paper Products. The eight industries reporting decreases in inventories in November — listed in order — are: Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Printing & Related Support Activities; Fabricated Metal Products; Chemical Products; Computer & Electronic Products; and Transportation Equipment.

Inventories           %Higher         %Same         %Lower         Net         Index
                                                     
Nov 2011           16         61         23         -7         48.3
Oct 2011           17         59         24         -7         46.7
Sep 2011           23         58         19         +4         52.0
Aug 2011           23         63         14         +9         52.3

Customers’ Inventories(c)

The ISM Customers’ Inventories Index registered 50 percent in November, 6.5 percentage points higher than in October when the index registered 43.5 percent. This month’s reading, at 50 percent, indicates that respondents believe their customers’ inventories are unchanged from last month, and also represents the first month that the Customers’ Inventories Index has not registered below 50 percent since March 2009, when customers’ inventories was at 54 percent.

The six manufacturing industries reporting customers’ inventories as being too high during November — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Chemical Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Machinery. The eight industries reporting customers’ inventories as too low during November — listed in order — are: Miscellaneous Manufacturing; Nonmetallic Mineral Products; Petroleum & Coal Products; Printing & Related Support Activities; Transportation Equipment; Computer & Electronic Products; Paper Products; and Electrical Equipment, Appliances & Components.

Customers’ Inventories          

%
Reporting

   

%Too
High

   

%About
Right

   

%Too
Low

    Net     Index
                                           
Nov 2011           65     19     62     19     0     50.0
Oct 2011           71     12     63     25     -13     43.5
Sep 2011           73     17     64     19     -2     49.0
Aug 2011           73     15     63     22     -7     46.5

Prices(c)

The ISM Prices Index registered 45 percent in November, 4 percentage points higher than the 41 percent reported in October. This is the second consecutive month of contraction in the Prices Index. In November, 19 percent of respondents reported paying higher prices, 29 percent reported paying lower prices and 52 percent of supply executives reported paying the same prices as in October. A Prices Index above 49.4 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, five industries report paying increased prices during the month of November: Primary Metals; Furniture & Related Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Transportation Equipment. The 10 industries reporting paying lower prices on average during the month of November — listed in order — are: Textile Mills; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Fabricated Metal Products; Petroleum & Coal Products; Machinery; Paper Products; Chemical Products; Plastics & Rubber Products; and Printing & Related Support Activities.

Prices           %Higher     %Same     %Lower     Net     Index
                                     
Nov 2011           19     52     29     -10     45.0
Oct 2011           14     54     32     -18     41.0
Sep 2011           26     60     14     +12     56.0
Aug 2011           29     53     18     +11     55.5

Backlog of Orders(c)

ISM’s Backlog of Orders Index registered 45 percent in November, which is 2.5 percentage points lower than the 47.5 percent reported in October. Of the 86 percent of respondents who reported their backlog of orders, 15 percent reported greater backlogs, 25 percent reported smaller backlogs, and 60 percent reported no change from October.

The three industries reporting increased order backlogs in November are: Textile Mills; Primary Metals; and Computer & Electronic Products. The 10 industries reporting decreases in order backlogs during November — listed in order — are: Nonmetallic Mineral Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Chemical Products; Transportation Equipment; Machinery; Petroleum & Coal Products; Paper Products; and Food, Beverage & Tobacco Products.

Backlog of Orders          

%
Reporting

    %Greater     %Same     %Less     Net     Index
                                           
Nov 2011           86     15     60     25     -10     45.0
Oct 2011           82     19     57     24     -5     47.5
Sep 2011           86     15     53     32     -17     41.5
Aug 2011           86     15     62     23     -8     46.0

New Export Orders(c)

ISM’s New Export Orders Index registered 52 percent in November, which is 2 percentage points higher than the 50 percent reported in October. The New Export Orders Index has registered 50 percent or greater for the past 29 consecutive months.

The six industries reporting growth in new export orders in November — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Computer & Electronic Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. The five industries reporting a decrease in new export orders during November are: Paper Products; Chemical Products; Machinery; Transportation Equipment; and Primary Metals. Six industries reported no change in exports in November compared to October.

New Export Orders          

%
Reporting

    %Higher     %Same     %Lower     Net     Index
                                           
Nov 2011           75     15     74     11     +4     52.0
Oct 2011           76     14     72     14     0     50.0
Sep 2011           78     18     71     11     +7     53.5
Aug 2011           76     16     69     15     +1     50.5

Imports(c)

ISM’s Imports Index registered 49 percent in November, which is 0.5 percentage point lower than the 49.5 percent reported in October. This is the second month of contraction in the index following 25 consecutive months of growth.

The five industries reporting growth in imports during the month of November are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products. The five industries reporting a decrease in imports during November are: Textile Mills; Primary Metals; Paper Products; Machinery; and Chemical Products. Eight industries reported no change in imports in November compared to October.

Imports          

%
Reporting

    %Higher     %Same     %Lower     Net     Index
                                           
Nov 2011           78     10     78     12     -2     49.0
Oct 2011           75     13     73     14     -1     49.5
Sep 2011           80     19     71     10     +9     54.5
Aug 2011           77     18     75     7     +11     55.5

(c) 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 remained unchanged at 113 days. Average lead time for Production Materials increased 2 days to 57 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 24 days.

Percent Reporting

                                                 
Capital Expenditures          

Hand-to-
Mouth

   

30
Days

   

60
Days

   

90
Days

   

6
Months

   

1
Year+

   

Average
Days

                                                 
Nov 2011           27     8     8     22     23     12     113
Oct 2011           24     8     11     22     24     11     113
Sep 2011           22     10     14     16     26     12     117
Aug 2011           28     8     8     19     25     12     114
Production Materials          

Hand-to-
Mouth

   

30
Days

   

60
Days

   

90
Days

   

6
Months

   

1
Year+

   

Average
Days

                                                 
Nov 2011           13     39     25     17     4     2     57
Oct 2011           16     39     25     13     5     2     55
Sep 2011           15     37     28     13     5     2     57
Aug 2011           14     46     22     13     3     2     52
MRO Supplies          

Hand-to-
Mouth

   

30
Days

   

60
Days

   

90
Days

   

6
Months

   

1
Year+

   

Average
Days

                                                 
Nov 2011           43     44     10     3     0     0     24
Oct 2011           44     40     12     4     0     0     25
Sep 2011           43     37     16     4     0     0     26
Aug 2011           45     39     12     3     1     0     26

Source: ISM

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