Tuesday, November 1, 2011

ISM Manufacturing Falls to 50.8 Reading for October

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While the ISM Non Manufacturing report to be released later this week represents far more of he economy, the ISM Manufacturing seems to get the lion's share of the attention.  We are still over 50 on this one, but not by much - so it's slightly expansionary, but below expectations.  Not sure if it will mean much on a day like today when Europe is dominating the news.  Full report here.

New orders improved which is a welcome change from the past few months.  Employment was essentially flat but the big news was the huge drop in prices.  This is the first reading below 50 on prices since May 2009.


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 50.8 percent, a decrease of 0.8 percentage point from September's reading of 51.6 percent, indicating expansion in the manufacturing sector for the 27th consecutive month. The New Orders Index increased 2.8 percentage points from September to 52.4 percent, indicating a return to growth after three months of contraction. The Prices Index, at 41 percent, dropped 15 percentage points, and is below the 50 percent mark for the first time since May 2009 when it registered 43.5 percent. Inventories decreased to 46.7 percent, which is 5.3 percentage points below the September reading of 52 percent. Comments from respondents are mixed, indicating positive relief from raw materials pricing and continuing strength in a few industries, but there is also more concern and caution about growth in this uncertain economy."
PERFORMANCE BY INDUSTRY
Of the 18 manufacturing industries, eight are reporting growth in October, in the following order: Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Paper Products; and Machinery. The six industries reporting contraction in October — listed in order — are: Plastics & Rubber Products; Chemical Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing.

WHAT RESPONDENTS ARE SAYING ...

  • "Starting to see some deflation on raw materials." (Chemical Products)
  • "Overall industry volumes remain flat vs. previous month. Uncertainty in supply chain is increasing due to lower volumes vs. historical." (Electrical Equipment, Appliances & Components)
  • "International: contraction in demand for our products is driving mitigation of excess material on order. Contract manufacturers are adjusting their resources accordingly." (Machinery)
  • "Business is very strong, both domestically and internationally." (Fabricated Metal Products)
  • "With metal prices declining, we are seeing some short-term forecast strength. If metal pricing increases again, this strength is expected to disappear again." (Primary Metals)
  • "Auto industry still strong." (Transportation Equipment)
  • "Business is slowing — not crashing — but uncertainty and caution is the order of the day." (Plastics & Rubber Products)
  • "Retail branded business is slower than expected due to consumers continuing to move to private label- and store-brand products for price advantage. Raw material supplies are in good shape, but prices are staying stubbornly higher than expected." (Food, Beverage & Tobacco Products)
MANUFACTURING AT A GLANCE
OCTOBER 2011


Index
Series
Index
Oct
Series
Index
Sep
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI50.851.6-0.8GrowingSlower27
New Orders52.449.6+2.8GrowingFrom Contacting1
Production50.151.2-1.1GrowingSlower2
Employment53.553.8-0.3GrowingSlower25
Supplier Deliveries51.351.4-0.1SlowingSlower29
Inventories46.752.0-5.3ContractingFrom Growing1
Customers' Inventories43.549.0-5.5Too LowFaster31
Prices41.056.0-15.0DecreasingFrom Increasing1
Backlog of Orders47.541.5+6.0ContractingSlower5
Exports50.053.5-3.5UnchangedFrom Growing1
Imports49.554.5-5.0ContractingFrom Growing1
OVERALL ECONOMYGrowingSlower29
Manufacturing SectorGrowingSlower27
*Number of months moving in current direction.


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