Institute for Supply Management Archives - Shopfloor

ISM: Manufacturers Have Begun to Move Beyond Winter Storms

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The Institute for Supply Management’s manufacturing purchasing managers’ index edged slightly higher, up from 53.2 in February to 53.7 in March. This reflects modest gains in overall manufacturing activity since recent weather-related weaknesses. The good news was that production (up from 48.2 to 55.9) began expanding again. The pace of new orders (up from 54.5 to 55.1) also picked up a little, including export sales (up from 53.5 to 55.5).

The sample comments continue to note the negative impact of weather. A food and beverage leader put it bluntly when they said, “We need spring.” Others have begun to move beyond the winter struggles. For instance, a petroleum and coal products manufacturer said, “Business beginning to heat up, along with the weather.” Others noted their increasing optimism. This included the transportation equipment respondent who answered, “Business is good, and we are optimistic that orders will continue to come in at a decent pace.”

Hiring growth remains soft (down from 52.3 to 51.1), and sentiment continued to be lower than just a few months ago. The average PMI value from July to December of last year, for instance, was 56.3, with new orders and production averaging 61.8 and 62.6 during that time frame, respectively. Another positive was that the manufacturing sector has now expanded for 10 straight months.

Overall, manufacturers are cautiously optimistic about future sales and output, and there is hope that the momentum seen in the second half of 2013 return to produce strong returns for 2014. While growth in manufacturing activity remains below where it was at the end of last year, it appears that the drag from winter storms has begun to fade.

Chad Moutray is the chief economist, National Association of Manufacturers.


ISM: Manufacturing Activity Continued to Accelerate in September

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The Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) edged slightly higher, up from 55.7 in August to 56.2 in September. This was the fourth consecutive increase, illustrating improvements in the sector since the contraction observed in May. Moreover, September’s PMI was the fastest pace since April 2011.

The larger story is the progress acceleration in activity over the course of the past few months, with relatively strong growth in production and new orders. For instance, the index from production has bounced back from contracting in May (with a sub-50 reading of 48.6) to recording three months in a row of 60-plus readings. The production index increased from 62.4 in August to 62.6 in September. The sample comments tended to echo these sentiments, with many citing increasing demand for their goods.

Along those lines, the pace of new orders remained healthy despite a slight pullback from 63.2 to 60.5. Stronger sales activity should bode well for future output growth. One area of caution was in foreign markets. The exports index eased from 55.5 to 52.0, suggesting a moderation in the growth of sales overseas.

One of the weaker components of the PMI data has been hiring growth, with manufacturers continuing to be hesitant to add new workers. The employment index rose from 53.3 to 55.4, suggesting a pickup in hiring for the sector. This would be good news if true, particularly with manufacturers adding just 20,000 additional workers over the past year and several other reports, including the NAM/IndustryWeek Survey of Manufacturers, indicating only modest growth at best in terms of hiring.

Two other data points of note included inventories and prices. Stockpiles in general have been depleted over much of the past year or so, with negative inventories in five of the nine months so far in 2013. In September, inventory levels were unchanged, up from contractions in July and August. Meanwhile, pricing pressures have picked up a bit (up from 54.0 to 56.5), and yet, inflation remains mostly modest.

Overall, manufacturers wrapped up a pretty decent third quarter in terms of output and sales. That is definitely the case when compared to the softness experienced in the second quarter, when activity was essentially stalled. The average PMI reading for the last three months was 55.8, and more importantly, the average new orders reading was 60.7, indicating relatively strong growth in sales. As such, this data tends to mirror other reports that show an acceleration of activity of late for the sector.

Such data tend to support the notion of cautious optimism ahead, and yet, uncertainties in the marketplace could put a monkey wrench in such positivity. Fiscal uncertainty is likely to limit economic growth – at least in the short-term – and we continue to see growth rates for manufacturing that, while better than in the spring, are still not as robust as we might like. With that in mind, this manufacturing report suggests movement in the right direction, but policymakers would be wise to move beyond the short-term budget battles and begin debating ways to grow our economy for the long-term.

Chad Moutray is the chief economist, National Association of Manufacturers.


ISM: Manufacturing Activity Jumped Sharply in July

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The Institute for Supply Management (ISM) reported a sharp increase in activity in July. After a brief contraction in May (49.0), the purchasing managers’ index (PMI) rose to 50.9 in June and 55.4 in July. This gain was larger than expected, and it is a sign that manufacturing sales and production have picked up in the summer, recovering somewhat from the weaknesses seen in the spring months.

As a sign of this progress, the index for production jumped from 53.4 in June to 65.0 in July. This indicates a strong uptick in output. Note that we have been saying for a while that inventory stockpiles remain very low, and in July, they continued to decline (47.0). As such, increases in sales should necessitate higher production.

Indeed, the pace of new orders also rose, up from 51.9 to 58.3. This bodes well for growth moving forward. One slight downside was the international sales arena, with the growth in export sales easing slightly (down from 54.5 to 53.5). The good news on the export front, though, is that this data still indicates modest gains in exports. Meanwhile, imports grew at an even faster pace, up from 56.0 to 57.5.

Hiring appears to have accelerated a bit, as well. The index for employment shifted from a net decline in June (48.7) to a modest increase in July (54.4). With manufacturers shedding workers in each of the past four months, this might indicate positive gains in employment ahead. We will get the July jobs numbers tomorrow.

Despite the positive figures, the sample comments were mixed. One respondent said, “Business conditions remain stable, possibly improving somewhat in future months.” This statement is consistent with the upbeat PMI data, and yet,j others noted sales challenges. A machinery manufacturer referred to flat sales growth in that sector, and a transportation producer noted weaknesses in export markets.

Overall, the report is overwhelmingly positive for manufacturers, where softness in the market has been disappointing for much of the past year. Businesses tend to be cautiously optimistic about the second half of 2013, and the data help to support that view. With that said, weaknesses continue to persist and growth in the sector is still below what we would like to see. It will be important for policymakers to continue to explore pro-growth measures that will allow the manufacturing sector to build on these gains and to flourish. For now, though, it is safe to say that these PMI figures are getting off to a good start, as we begin the third quarter.

Chad Moutray is the chief economist, National Association of Manufacturers.

ISM: Manufacturing Contracts for First Time since July 2009

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The Institute for Supply Management (ISM) said that the manufacturing sector contracted in June for the first time since July 2009. The purchasing managers’ index fell from 53.5 in May to 49.7 in June. Readings over 50 suggest an expansion in the sector; therefore, this month’s PMI indicates a slight contraction. A sharp decline in new orders was responsible for the decrease. The index for new orders declined sharply from 60.1 to 47.8. New export orders also dropped below 50.

At the same time, several other components remained positive, albeit with the pace of growth lower. Measures for production and employment, for instance, continued to expand, but with the growth rate slowing from the previous month. Lower prices have also been helpful, with falling energy costs driving down inflationary pressures.

The sample comments help to add some context to the data. Many of them highlight recent weaknesses in the marketplace. One chemical producer said that slowing global growth has impacted their recent orders; the same sentiment was echoed by others. A machinery manufacturer observed, “Business is still strong, with some nagging question whether it will be sustained.” Indeed, anxieties about growth are leading some manufacturers to show some restraint. “We are watching our expenses very tightly and being cautious,” reported an apparel manufacturer. One positive side effect has been lower pricing pressures.

With that said, some respondents continued to report signs of growth, with someone in the primary metal industry noting strong business. Likewise, a peer in the petroleum sector suggesting continued struggles in recruiting skilled labor.

Overall, these numbers suggest that growth in the manufacturing sector has slowed significantly. The decline in new orders, including exports, does not bode well for activity in the next month or so. This shows that manufacturers are not immune to the struggles in Europe and elsewhere which have eased global growth. Businesses are also uncertain about domestic tax and regulatory policies in 2013 and beyond, with increasing conversations about the “fiscal cliff.”

Despite such headwinds, manufacturers have been cautiously optimistic about production and employment in the second half of this year. Manufacturing has been a bright spot in the recovery to date, and it will be important for the sector to return to growth as soon as possible. This will require stronger overseas growth, but it will also hinge on pro-growth policies stemming from Washington.

Chad Moutray is chief economist, National Association of Manufacturers.

ISM Survey: Manufacturing Much Stronger

By | Economy, Energy, General | One Comment

Wall Street Journal, “U.S. Manufacturing Posts Strong Expansion“:

Manufacturing activity in the U.S. turned in its best performance since May 2004 last month, as factory operators faced a big jump in raw materials prices, raising fears about rising inflation in the U.S….

On Tuesday, the Institute for Supply Management’s manufacturing index moved to a very strong 61.4 from 60.8 in January. The overall index had been expected to come in at 60.9. Readings over 50 indicate growth.

According to the February 2011 Manufacturing ISM Report On Business, “Economic activity in the manufacturing sector expanded in February for the 19th consecutive month, and the overall economy grew for the 21st consecutive month.”


Of the 18 manufacturing industries, 14 are reporting growth in February, in the following order: Apparel, Leather & Allied Products; Petroleum & Coal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; Textile Mills; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Paper Products; Wood Products; and Miscellaneous Manufacturing. The four industries reporting contraction in February are: Plastics & Rubber Products; Primary Metals; Nonmetallic Mineral Products; and Furniture & Related Products.

See also AP, “Manufacturing grew at fast pace.”

Then again…

A Positive Report for Manufacturing Amid the Uncertainty

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The Milwaukee Journal-Sentinel, which diligently covers manufacturing and Wisconsin industry, today reports on the latest Institute for Supply Management’s manufacturing report and the condition of the state’s manufacturers in “U.S. manufacturing strengthened in August.”  

ISM’s manufacturing index rose to 56.3 percent in August, up from 55.5 in July, and manufacturing has expanded for 13 straight months, indications that a “double-dip” recession is unlikely. Still, mixed signals.

Business has not rebounded to pre-recession peaks, but it’s much better than it was in 2009, said Dave Sucharski, general manager of Miro Tool & Manufacturing Inc., in Waukesha.

“Right now, all of the sectors of our company are busy,” he said. “The only downside is that orders are coming in with very short lead times.” To conserve cash, “customers are ordering things just when they need them,” he said, “and sometimes later than that.”

JS reporter Rick Barrett also notes points raised in the NAM’s Labor Day Report for 2010, released Wednesday.

“We have had four consecutive quarters of economic growth, but much of the increase was temporary in nature,” said David Huether, chief economist for the National Association of Manufacturers.

“More than half of the upturn in the economy over the past year was from business restocking inventories. Now, with inventory-to-sales ratios back to reasonable levels, this source of growth will likely fade,” Huether said.

The NAM’s Labor Day report is available at http://bit.ly/LaborDayReport .

The ISM index — available here — rose by an unexpected amount, which sparked probably too enthusiastic of reports about the economy, e.g., the Wall Street Journal blog entry, “Surprising Many, Manufacturing Is Bright Spot.” Congress is back soon, and could easily tarnish that brightness.

As NAM President John Engler wrote in the introduction to the Labor Day report:

Any serious Labor Day analysis of the U.S. economy and employment must address the uncertainty factor. Costly tax and regulatory proposals enacted or being considered by Congress and the Obama Administration make employers apprehensive, investors cautious and consumers anxious. Policies that expand government, taxes and regulations also pose serious questions about the ability of business in the United States to compete in the global marketplace. The predictable result is a faltering recovery and troubling times for U.S. workers.

Manufacturing Activity Remains Strong in May

By | Economy, General, Trade | No Comments

Today’s manufacturing report by the Institute for Supply Management shows that the manufacturing recovery remained strong in May. The overall index edged down slightly from 60.4 in April to 59.7 in May, and there were no significant movements in most of the survey components such as production or orders. The recent upturn in the housing activity due to the expiration of the homebuyer tax credit in April is having a positive impact on some industries such as wood products, electrical equipment and appliances, all of which reported increasing orders and production in today’s report. However, when the effects of the credit wear off in the coming months, the manufacturing expansion will likely decelerate a bit.

The rise in the employment component of today’s report to 59.9 – the highest level in six years – is a hopeful sign that this Friday’s employment report will include a fifth consecutive increase in manufacturing employment in May. At the same time, the fact that the export component increased to 62 – the highest level in two decades – is encouraging and shows that exports are continuing to lead the expansion. This is good news for manufacturers since manufacturing dominates U.S. exports (59 percent), and more than a quarter of manufacturing employment is supported by exports. Looking ahead, we will be watching exports for any spillover effects of the European debt crisis into the U.S. economy.

ISM Manufacturing Report Shows Continued Positive Momentum

By | Economy, Trade | No Comments

The Institute for Supply Management (ISM)’s Manufacturing PMI index rose to 60.5 in April — the highest level since June 2004 — showing that the manufacturing recovery gained momentum in April. (ISM release.) The improvement was broad-based across all manufacturing industries with increases in production, new orders and employment. The export component of today’s report remained at a near two-decade high last month, underscoring how exports continue to lead the economic recovery. This is good news for manufacturing workers given that more than a quarter of manufacturing employment is supported by exports.

Given significant upturns in several regional manufacturing surveys reported last week, today’s report was not a revelation. However, the fact that no industry reported a contraction last month was a welcome surprise. While most manufacturing sectors, lead by exporters, have moved into recovery over the past several quarters, a number of industries — especially those connected to housing — have continued to struggle. The homebuyer tax credit expired last month, and the credit’s pending deadline likely spurred construction-related industrial activity in April. Thus, a short-term correction in some manufacturing activity in the next couple of months would not be a surprise in the wake of the end of the housing tax credit.

While manufacturers are leading the economic expansion, the challenge will be to sustain those advances and build a recovery capable of driving down the jobless rate.

ISM Report: Manufacturing Slowdown, Exports Rise

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The pace of manufacturing growth in February was slower than in the previous month and fell short of expectations according to today’s Report on Business from the Institute for Supply Management (ISM). Severe winter weather likely affected last month’s manufacturing performance. Therefore, next month’s March report will be critically important to determine if a slowdown is truly emerging for manufacturers.

On a positive note, increases in exports continue to help drive production gains, along with slower cutbacks of inventories. While the employment measure has remained above the growth threshold level of 50 for three consecutive months, it will have to remain at this level for at least several months before a widespread upturn in manufacturing employment can be expected. Looking ahead, hiring is likely to remain subdued until the second half of the year when a stronger expansion is expected as consumer and business confidence pick up.

Manufacturing, Stirring

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From The Financial Post (Canada), “U.S. factory floor shows signs of life“:

Drew Greenblatt has added a couple of engineers, a robot and a third production schedule to meet the jump in demand from automakers, pharmaceutical companies and other customers who use his assembly-line baskets.

“Our guys are running overtime to keep pace with the backlog,” says Mr. Greenblatt, owner of Marlin Steel Wire Products in Baltimore.

The U.S. economic recovery is showing up in the unlikeliest of places — the U.S. factory floor.

The news peg is yesterday’s ISM’s manufacturing index, which climbed 3.1 points to 55.7 (vs. 53.3 consensus), with growth responding to the decline in inventories. From the Institute for Supply Managment, “October 2009 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 manufacturing sector grew for the third consecutive month in October, and the rate of growth is the highest since April 2006 when the PMI registered 56 percent. The jump in the index was driven by production and employment, with both registering significant gains. Production appears to be benefiting from the continuing strength in new orders, while the improvement in employment is due to some callbacks and opportunities for temporary workers. Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode.”

See earlier post by NAM’s chief economist, Dave Huether.