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