The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “January marked 12 months of contraction in the manufacturing sector. However, the rate of decline as measured by the PMI was slower than experienced in December. The January New Orders Index is at 33.2 percent, up from the seasonally adjusted 23.1 percent recorded in December. While this is a significant month-over-month improvement, it is still a sign of continuing weakness in the sector. Comments from our respondents indicate that it will take a recovery in automobiles and housing for the manufacturing sector to once again prosper. On a positive note, the Prices Index continues to indicate significant deflation in the prices that manufacturers have to pay for their inputs, and this should ultimately be good for the consumer.”
PERFORMANCE BY INDUSTRY
The industries reporting growth in January — listed in order — are: Textile Mills; and Petroleum & Coal Products. The industries reporting contraction in January — listed in order — are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Paper Products; Plastics & Rubber Products; Transportation Equipment; Printing & Related Support Activities; Fabricated Metal Products; Computer & Electronic Products; Primary Metals; Chemical Products; Wood Products; Machinery; Miscellaneous Manufacturing; Furniture & Related Products; and Food, Beverage & Tobacco Products.
WHAT RESPONDENTS ARE SAYING …
- “The slowdown in the automobile industry is forcing their suppliers to reduce production and employment.” (Apparel, Leather & Allied Products)
- “Our manufacturing is tied to the automobile industry, and we are seeing the ‘trickle down’ effect.” (Chemical Products)
- “High inventory at customers is slowing production orders.” (Electrical Equipment, Appliances & Components)
- “Sales are settling in; Q4 was better than expected.” (Machinery)
- “Consumer confidence is low. Could see the entire year being down 20 percent to 30 percent.” (Fabricated Metals)
|
MANUFACTURING AT A GLANCE JANUARY 2009 |
||||||||||||
| Index |
Series
|
Series
|
Percentage
|
Direction |
Rate of
|
Trend(a)
|
||||||
| PMI | 35.6 | 32.9 | +2.7 | Contracting | Slower | 12 | ||||||
| New Orders | 33.2 | 23.1 | +10.1 | Contracting | Slower | 14 | ||||||
| Production | 32.1 | 26.3 | +5.8 | Contracting | Slower | 5 | ||||||
| Employment | 29.9 | 29.9 | 0 | Contracting | Same | 6 | ||||||
| Supplier Deliveries | 45.3 | 45.7 | -0.4 | Faster | Faster | 4 | ||||||
| Inventories | 37.5 | 39.6 | -2.1 | Contracting | Faster | 33 | ||||||
| Customers’ Inventories | 55.5 | 57.0 | -1.5 | Too High | Slower | 6 | ||||||
| Prices | 29.0 | 18.0 | +11.0 | Decreasing | Slower | 4 | ||||||
| Backlog of Orders | 29.5 | 23.0 | +6.5 | Contracting | Slower | 9 | ||||||
| Exports | 37.5 | 35.5 | +2.0 | Contracting | Slower | 4 | ||||||
| Imports | 36.5 | 39.0 | -2.5 | Contracting | Slower | 12 | ||||||
|
OVERALL ECONOMY
Manufacturing Sector |
Contracting | Slower | 4 | |||||||||
| Contracting | Slower | 12 | ||||||||||
(a) Number of months moving in current direction
Indexes reflect newly released seasonal adjustment factors.
COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY
Commodities Up in Price
Corrugated Containers(b); Electrical Components; Polypropylene(b); and Steel(b) (2).
Commodities Down in Price
Aluminum (4); Aluminum Extrusions; Copper (6); Corrugated Containers(b); Diesel Fuel (6); Gasoline (3); Natural Gas (6); Oil (2); Polyethylene (3); Polypropylene(b) (4); Scrap Metal (2); Stainless Steel (4); Stainless Steel Products (2); Steel(b) (5); and Steel — Cold Rolled.
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.
(b) Reported as both up and down in price
JANUARY 2009 MANUFACTURING INDEX SUMMARIES
PMI
Manufacturing contracted in January as the PMI registered 35.6 percent, 2.7 percentage points higher than the seasonally adjusted 32.9 percent reported in December. This is the 12th consecutive month of contraction in the manufacturing sector. 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 contraction in both the overall economy and the manufacturing sector. Ore stated, "The past relationship between the PMI and the overall economy indicates that the PMI for January (35.6 percent) corresponds to a 1.7 percent decline in real gross domestic product (GDP) on an annual basis."
THE LAST 12 MONTHS
| Month | PMI | Month | PMI | ||||||||||||||||||||||||||||||||||||||
| Jan 2009 | 35.6 | Jul 2008 | 49.5 | ||||||||||||||||||||||||||||||||||||||
| Dec 2008 | 32.9 | Jun 2008 | 49.5 | ||||||||||||||||||||||||||||||||||||||
|
Nov 2008 |
36.6 | May 2008 | 49.3 | ||||||||||||||||||||||||||||||||||||||
| Oct 2008 | 38.7 | Apr 2008 | 48.6 | ||||||||||||||||||||||||||||||||||||||
| Sep 2008 | 43.4 | Mar 2008 | 49.0 | ||||||||||||||||||||||||||||||||||||||
| Aug 2008 | 49.3 | Feb 2008 | 48.8 | ||||||||||||||||||||||||||||||||||||||
|
Average for 12 months – 44.3
High – 49.5 Low – 32.9 |
|||||||||||||||||||||||||||||||||||||||||
New Orders
ISM’s New Orders Index registered 33.2 percent in January, 10.1 percentage points higher than the 23.1 percent registered in December (seasonally adjusted). This is the 14th consecutive month of contraction in the New Orders Index. 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).
In January, two of the 18 manufacturing industries reported growth in new orders: Textile Mills; and Food, Beverage & Tobacco Products. The industries failing to grow in January are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Wood Products; Transportation Equipment; Primary Metals; Paper Products; Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Furniture & Related Products; Petroleum & Coal Products; Printing & Related Support Activities; Miscellaneous Manufacturing; and Machinery.
| New Orders | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Jan 2009 | 15 | 33 | 52 | -37 | 33.2 | |||||||||||||||||||||
| Dec 2008 | 5 | 31 | 64 | -59 | 23.1 | |||||||||||||||||||||
| Nov 2008 | 12 | 29 | 59 | -47 | 28.1 | |||||||||||||||||||||
| Oct 2008 | 13 | 35 | 52 | -39 | 32.4 |
Production
ISM’s Production Index registered 32.1 percent in January, which is an increase of 5.8 percentage points from December’s seasonally adjusted reading of 26.3 percent. An index above 50.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
Three industries reported growth in production during the month of January: Textile Mills; Petroleum & Coal Products; and Food, Beverage & Tobacco Products. The industries failing to grow in January are: Primary Metals; Paper Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Computer & Electronic Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Machinery; Furniture & Related Products; Chemical Products; Printing & Related Support Activities; and Wood Products.
| Production | %Better | %Same | %Worse | Net | Index | |||||||||||||||||||||
| Jan 2009 | 13 | 33 | 54 | -41 | 32.1 | |||||||||||||||||||||
| Dec 2008 | 7 | 33 | 60 | -53 | 26.3 | |||||||||||||||||||||
| Nov 2008 | 12 | 38 | 50 | -38 | 32.0 | |||||||||||||||||||||
| Oct 2008 | 11 | 43 | 46 | -35 | 33.6 |
Employment
ISM’s Employment Index registered 29.9 percent in January, which is the same as the seasonally adjusted reading reported in December. This is the sixth 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.
Petroleum & Coal Products is the only industry reporting growth in employment during January. The industries that reported decreases in employment during January are: Nonmetallic Mineral Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; Primary Metals; Chemical Products; Machinery; Printing & Related Support Activities; Wood Products; Miscellaneous Manufacturing; Paper Products; and Food, Beverage & Tobacco Products.
| Employment | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Jan 2009 | 5 | 46 | 49 | -44 | 29.9 | |||||||||||||||||||||
| Dec 2008 | 7 | 43 | 50 | -43 | 29.9 | |||||||||||||||||||||
| Nov 2008 | 8 | 51 | 41 | -33 | 34.3 | |||||||||||||||||||||
| Oct 2008 | 7 | 53 | 40 | -33 | 34.2 |
Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was faster for the fourth consecutive month in January as the Supplier Deliveries Index registered 45.3 percent, which is 0.4 percentage point lower than the 45.7 percent registered in December (seasonally adjusted). A reading above 50 percent indicates slower deliveries.
The three industries reporting slower supplier deliveries in January are: Petroleum & Coal Products; Furniture & Related Products; and Transportation Equipment. The industries reporting faster deliveries in January are: Nonmetallic Mineral Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; and Machinery.
| Supplier Deliveries | %Slower | %Same | %Faster | Net | Index | |||||||||||||||||||||
| Jan 2009 | 7 | 74 | 19 | -12 | 45.3 | |||||||||||||||||||||
| Dec 2008 | 5 | 79 | 16 | -11 | 45.7 | |||||||||||||||||||||
| Nov 2008 | 6 | 84 | 10 | -4 | 48.6 | |||||||||||||||||||||
| Oct 2008 | 9 | 80 | 11 | -2 | 49.3 |
Inventories
Manufacturers’ inventories contracted in January as the Inventories Index registered 37.5 percent, which is 2.1 percentage points lower than December’s seasonally adjusted reading of 39.6 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).
Computer & Electronic Products is the only industry reporting higher inventories in January. The industries that reported decreases in January are: Paper Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Plastics & Rubber Products; Chemical Products; Printing & Related Support Activities; Wood Products; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Fabricated Metal Products; Furniture & Related Products; Petroleum & Coal Products; and Food, Beverage & Tobacco Products.
| Inventories | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Jan 2009 | 18 | 40 | 42 | -24 | 37.5 | |||||||||||||||||||||
| Dec 2008 | 18 | 40 | 42 | -24 | 39.6 | |||||||||||||||||||||
| Nov 2008 | 13 | 51 | 36 | -23 | 40.1 | |||||||||||||||||||||
| Oct 2008 | 16 | 55 | 29 | -13 | 44.0 |
Customers’ Inventories(c)
The ISM Customers’ Inventories Index registered 55.5 percent in January, 1.5 percentage points lower than the 57 percent reported in December. The index indicates that respondents believe their customers’ inventories are too high at this time.
Eight industries reported higher customers’ inventories during January: Primary Metals; Machinery; Plastics & Rubber Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Chemical Products. The industries that reported lower customers’ inventories during January are: Paper Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Petroleum & Coal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Nonmetallic Mineral Products.
| Customers’ Inventories |
%
|
%Too
|
%About
|
%Too
|
Net | Index | ||||||||||||
| Jan 2009 | 80 | 31 | 49 | 20 | +11 | 55.5 | ||||||||||||
| Dec 2008 | 73 | 30 | 54 | 16 | +14 | 57.0 | ||||||||||||
| Nov 2008 | 70 | 31 | 48 | 21 | +10 | 55.0 | ||||||||||||
| Oct 2008 | 77 | 28 | 54 | 18 | +10 | 55.0 |
Prices(c)
The ISM Prices Index registered 29 percent in January, compared to 18 percent in December, indicating manufacturers are paying lower prices on average when compared to December. While 12 percent of respondents reported paying higher prices and 54 percent reported paying lower prices, 34 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.
In January, Primary Metals is the only industry reporting paying higher prices. The industries that reported paying lower prices during January are: Printing & Related Support Activities; Textile Mills; Plastics & Rubber Products; Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; Fabricated Metal Products; Furniture & Related Products; Apparel, Leather & Allied Products; Transportation Equipment; Machinery; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Electrical Equipment, Appliances & Components.
| Prices | %Higher | %Same | %Lower | Net | Index | |||||||||||||||||||||
| Jan 2009 | 12 | 34 | 54 | -42 | 29.0 | |||||||||||||||||||||
| Dec 2008 | 2 | 32 | 66 | -64 | 18.0 | |||||||||||||||||||||
| Nov 2008 | 8 | 35 | 57 | -49 | 25.5 | |||||||||||||||||||||
| Oct 2008 | 14 | 46 | 40 | -26 | 37.0 |
Backlog of Orders(c)
ISM’s Backlog of Orders Index registered 29.5 percent in January, 6.5 percentage points higher than the 23 percent reported in December. Of the 84 percent of respondents who reported their backlog of orders, 6 percent reported greater backlogs, 47 percent reported smaller backlogs, and 47 percent reported no change from December.
There were no industries reporting increased order backlogs in January. The industries that reported decreases in order backlogs during January are: Primary Metals; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Nonmetallic Mineral Products; Paper Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; Furniture & Related Products; Printing & Related Support Activities; Wood Products; Chemical Products; Machinery; and Miscellaneous Manufacturing.
| Backlog of Orders |
%
|
%Greater | %Same | %Less | Net | Index | ||||||||||||
| Jan 2009 | 84 | 6 | 47 | 47 | -41 | 29.5 | ||||||||||||
| Dec 2008 | 86 | 5 | 36 | 59 | -54 | 23.0 | ||||||||||||
| Nov 2008 | 89 | 6 | 42 | 52 | -46 | 27.0 | ||||||||||||
| Oct 2008 | 87 | 9 | 41 | 50 | -41 | 29.5 |
New Export Orders(c)
ISM’s New Export Orders Index registered 37.5 percent in January, 2 percentage points higher than the 35.5 percent reported in December. This is the fourth month of contraction in the New Export Orders Index.
The two industries reporting growth in new export orders in January are: Textile Mills; and Apparel, Leather & Allied Products. The industries that reported decreases in new export orders in January are: Primary Metals; Paper Products; Transportation Equipment; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Machinery.
| New Export Orders |
%
|
%Higher | %Same | %Lower | Net | Index | ||||||||||||
|
Jan 2009 |
77 | 6 | 63 | 31 | -25 | 37.5 | ||||||||||||
| Dec 2008 | 75 | 7 | 57 | 36 | -29 | 35.5 | ||||||||||||
| Nov 2008 | 75 | 7 | 68 | 25 | -18 | 41.0 | ||||||||||||
| Oct 2008 | 77 | 7 | 68 | 25 | -18 | 41.0 |
Imports(c)
Imports of materials by manufacturers contracted during January as the Imports Index registered 36.5 percent, 2.5 percentage points lower than the 39 percent reported in December. This is the 12th consecutive month of contraction in imports.
None of the 18 manufacturing industries reported growth in imports during the month of January. The industries that reported decreases in imports are: Primary Metals; Furniture & Related Products; Paper Products; Computer & Electronic Products; Petroleum & Coal Products; Wood Products; Machinery; Transportation Equipment; Plastics & Rubber Products; Chemical Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Nonmetallic Mineral Products.
| Imports |
%
|
%Higher | %Same | %Lower | Net | Index | ||||||||||||
| Jan 2009 | 84 | 10 | 53 | 37 | -27 | 36.5 | ||||||||||||
| Dec 2008 | 84 | 11 | 56 | 33 | -22 | 39.0 | ||||||||||||
| Nov 2008 | 83 | 8 | 59 | 33 | -25 | 37.5 | ||||||||||||
| Oct 2008 | 79 | 8 | 66 | 26 | -18 | 41.0 |
(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 decreased 3 days to 98 days. Average lead time for Production Materials decreased 5 days to 42 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 2 days to 25 days.
|
Percent Reporting |
|||||||||||||||||||||
| Capital Expenditures |
Hand-to-
|
30
|
60
|
90
|
6
|
1
|
Average
|
||||||||||||||
| Jan 2009 | 29 | 11 | 13 | 19 | 18 | 10 | 98 | ||||||||||||||
| Dec 2008 | 33 | 6 | 11 | 17 | 24 | 9 | 101 | ||||||||||||||
| Nov 2008 | 28 | 8 | 11 | 20 | 23 | 10 | 106 | ||||||||||||||
| Oct 2008 | 23 | 12 | 12 | 17 | 24 | 12 | 114 | ||||||||||||||
| Production Materials |
Hand-to-
|
30
|
60
|
90
|
6
|
1
|
Average
|
||||||||||||||
| Jan 2009 | 28 | 43 | 21 | 3 | 3 | 2 | 42 | ||||||||||||||
| Dec 2008 | 31 | 37 | 22 | 5 | 1 | 4 | 47 | ||||||||||||||
| Nov 2008 | 24 | 40 | 23 | 7 | 4 | 2 | 48 | ||||||||||||||
| Oct 2008 | 27 | 37 | 24 | 6 | 3 | 3 | 48 |
| MRO Supplies |
Hand-to-
|
30
|
60
|
90
|
6
|
1
|
Average
|
||||||||||||||
| Jan 2009 | 51 | 34 | 11 | 2 | 2 | 0 | 25 | ||||||||||||||
| Dec 2008 | 57 | 31 | 9 | 2 | 0 | 1 | 23 | ||||||||||||||
| Nov 2008 | 62 | 26 | 8 | 2 | 2 | 0 | 21 | ||||||||||||||
| Oct 2008 | 52 | 36 | 8 | 2 | 1 | 1 | 25 |
About this Report
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 within this release, 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.
Data and Method of Presentation
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 gross domestic product (GDP). Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).
Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers’ Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).
The resulting single index number for those meeting the criteria for seasonal adjustments (PMI, New Orders, Production, Employment, Supplier Deliveries and Inventories) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The PMI is a composite index based on the seasonally adjusted diffusion indexes for five of the indicators with equal weights: New Orders, Production, Employment, Supplier Deliveries and Inventories.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI in excess of 41.1 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.1 percent, it is generally declining. The distance from 50 percent or 41.1 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.
Responses to Buying Policy reflect the percent reporting the current month’s lead time, the approximate weighted number of days ahead for which commitments are made for Production Materials; Capital Expenditures; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.
The Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM’s mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. This report has been issued by the association since 1931, except for a four-year interruption during World War II.
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).
The next Manufacturing ISM Report On Business® featuring the February 2009 data will be released at 10:00 a.m. (ET) on Monday, March 2, 2009.
Contact:
Institute for Supply Management, Tempe
Rose Marie Goupil,
800-888-6276, Ext. 3015
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