PMI at 56.4%; October Manufacturing ISM Report : Inventories Growing; Supplier Deliveries Slowing


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TEMPE, AZ--Nov. 1, 2013: Economic activity in the manufacturing sector expanded in October for the fifth consecutive month, and the overall economy grew for the 53rd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

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 56.4 percent, an increase of 0.2 percentage point from September's reading of 56.2 percent. The PMI™ has increased progressively each month since June, with October's reading reflecting the highest PMI™ in 2013. The New Orders Index increased slightly in October by 0.1 percentage point to 60.6 percent, while the Production Index decreased by 1.8 percentage points to 60.8 percent. Both the New Orders and Production Indexes have registered above 60 percent for three consecutive months. The Employment Index registered 53.2 percent, a decrease of 2.2 percentage points compared to September's reading of 55.4 percent. The panel's comments are generally positive about the current business climate; however, there are mixed responses on whether the government shutdown and potential default have had any effect on October's results."

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

WHAT RESPONDENTS ARE SAYING …

"New business is booming." (Textile Mills) "The government shutting down and threatening to go into a default position is causing all kinds of concerns in our markets." (Fabricated Metal Products) "The government shutdown has not had any impact on our business that I can determine, nor has it impacted any supplier shipments." (Chemical Products) "Government spending continues to be slow in defense and military. The government shutdown and debt ceiling crisis did not affect business." (Transportation Equipment) "Telecom market — wireless and VOIP — appear to be spiking. We are very busy; busier than we have ever been." (Computer & Electronic Products) "Seasonal demand has not decreased at the typical pace. Market showing resiliency in the residential market." (Primary Metals) "Business continues to improve every month for the past nine months." (Furniture & Related Products) "Big Box Store discounting providing increased sales bump short term." (Food, Beverage & Tobacco Products) "Our customers continue to be cautious and are closely managing their purchases. Business continues to be flat to slightly down." (Machinery) "Outlook on general appliance market continues in a positive direction. Uncertainty, however, looms with unclear government direction pending." (Electrical Equipment, Appliances & Components)

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price Corrugated Boxes (15); HDPE Resin (2); LDPE Resin; Polypropylene Resin; Stainless Steel; Steel — HRPO; and Steel Based Products.

Commodities Down in Price Caustic Soda is the only commodity reported down in price.

Commodities in Short Supply Electrical Components; and Helium.

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

OCTOBER 2013 MANUFACTURING INDEX SUMMARIES

PMI™ Manufacturing expanded in October as the PMI™ registered 56.4 percent, an increase of 0.2 percentage point when compared to September's reading of 56.2 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 42.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the October PMI™ indicates growth for the 53rd consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the fifth consecutive month. Holcomb stated, "The past relationship between the PMI™ and the overall economy indicates that the average PMI™ for January through October (53.3 percent) corresponds to a 3.5 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI™ for October (56.4 percent) is annualized, it corresponds to a 4.4 percent increase in real GDP annually."

New Orders ISM's New Orders Index registered 60.6 percent in October, an increase of 0.1 percentage point when compared to the September reading of 60.5 percent. This represents growth in new orders for the fifth consecutive month, at a slightly faster rate than in September. A New Orders Index above 52.2 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 10 industries reporting growth in new orders in October — listed in order — are: Textile Mills; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Machinery; Computer & Electronic Products; and Transportation Equipment. The four industries reporting a decrease in new orders during October are: Miscellaneous Manufacturing; Primary Metals; Paper Products; and Chemical Products.

Production ISM's Production Index registered 60.8 percent in October, which is a decrease of 1.8 percentage points when compared to the 62.6 percent reported in September. This month's reading indicates growth in production for the fifth consecutive month, but at a moderately slower rate than in September. An index above 51.2 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The 12 industries reporting growth in production during the month of October — listed in order — are: Textile Mills; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Plastics & Rubber Products; Machinery; Transportation Equipment; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Petroleum & Coal Products; and Miscellaneous Manufacturing. The three industries reporting a decrease in production in October are: Apparel, Leather & Allied Products; Primary Metals; and Chemical Products.

Employment ISM's Employment Index registered 53.2 percent in October, which is 2.2 percentage points lower than the 55.4 percent reported in September. This month's reading indicates expansion in employment for the fourth consecutive month, but at a slower rate than in September. An Employment Index above 50.5 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, 12 reported growth in employment in October in the following order: Textile Mills; Wood Products; Printing & Related Support Activities; Furniture & Related Products; Primary Metals; Paper Products; Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Petroleum & Coal Products. The five industries reporting a decrease in employment in October are: Apparel, Leather & Allied Products; Chemical Products; Miscellaneous Manufacturing; Machinery; and Computer & Electronic Products.Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed in October at a faster rate relative to September as the Supplier Deliveries Index registered 54.7 percent. This month's reading is 2.1 percentage points higher than the 52.6 percent reported in September. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The six industries reporting slower supplier deliveries in October — listed in order — are: Computer & Electronic Products; Petroleum & Coal Products; Machinery; Miscellaneous Manufacturing; Transportation Equipment; and Food, Beverage & Tobacco Products. The three industries reporting faster supplier deliveries in October are: Primary Metals; Electrical Equipment, Appliances & Components; and Fabricated Metal Products. Nine industries reported no change in supplier deliveries in October compared to September.

Inventories* The Inventories Index registered 52.5 percent in October, which is 2.5 percentage points higher than the 50 percent reported in September. This month's reading indicates that respondents are reporting inventories are growing relative to September's unchanged reading. 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 October — listed in order — are: Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; Petroleum & Coal Products; and Miscellaneous Manufacturing. The six industries reporting decreases in inventories in October — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Machinery; Fabricated Metal Products; Transportation Equipment; and Chemical Products. Six industries reported no change in raw materials inventories in October compared to September.

Customers' Inventories* The ISM Customers' Inventories Index registered 47 percent in October, which is 4 percentage points higher than in September when the index registered 43 percent. This month's reading indicates that customers' inventories are considered too low, but higher than reported in September. Customers' inventories have registered at or below 50 percent for 55 consecutive months. A reading below 50 percent indicates customers' inventories are considered too low.

The five manufacturing industries reporting customers' inventories as being too high during the month of October are: Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Paper Products; Food, Beverage & Tobacco Products; and Chemical Products. The six industries reporting customers' inventories as too low during October — listed in order — are: Primary Metals; Plastics & Rubber Products; Machinery; Fabricated Metal Products; Computer & Electronic Products; and Transportation Equipment. Seven industries reported no change in customer inventories in October compared to September.

Prices* The ISM Prices Index registered 55.5 percent in October, which is a decrease of 1 percentage point compared to the September reading of 56.5 percent. This month's reading indicates an increase in raw materials prices for the third consecutive month. In October, 22 percent of respondents reported paying higher prices, 11 percent reported paying lower prices, and 67 percent of supply executives reported paying the same prices as in September. A Prices Index above 49.7 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, eight reported paying increased prices during the month of October in the following order: Plastics & Rubber Products; Miscellaneous Manufacturing; Fabricated Metal Products; Machinery; Chemical Products; Paper Products; Food, Beverage & Tobacco Products; and Transportation Equipment. The only industry reporting paying lower prices during October is Petroleum & Coal Products. Nine industries reported no change in the price of raw materials in October compared to September.Backlog of Orders* ISM's Backlog of Orders Index registered 51.5 percent in October, which is 2 percentage points higher than the 49.5 percent reported in September. This is the first month of expanding order backlogs since April 2013, when the index registered 53 percent. Of the 86 percent of respondents who reported their backlog of orders, 24 percent reported greater backlogs, 21 percent reported smaller backlogs, and 55 percent reported no change from September.

The seven industries reporting increased order backlogs in October — listed in order — are: Textile Mills; Furniture & Related Products; Plastics & Rubber Products; Petroleum & Coal Products; Chemical Products; Machinery; and Computer & Electronic Products. The six industries reporting decreases in order backlogs during October — listed in order — are: Apparel, Leather & Allied Products; Wood Products; Miscellaneous Manufacturing; Primary Metals; Fabricated Metal Products; and Food, Beverage & Tobacco Products.

New Export Orders* ISM's New Export Orders Index registered 57 percent in October, which is 5 percentage points higher than the 52 percent reported in September. October's reading reflects growth in the level of exports relative to September, and is the highest reading since April 2012 when the index registered 59 percent. This month's reading also represents the 11th consecutive month of growth in new export orders.

The 10 industries reporting growth in new export orders in October — listed in order — are: Wood Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; Furniture & Related Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Transportation Equipment; and Chemical Products. The two industries reporting a decrease in new export orders during October are: Primary Metals; and Paper Products. Six industries reported no change in new export orders in October compared to September.Imports* ISM's Imports Index registered 55.5 percent in October, which is 0.5 percentage point higher than the 55 percent reported in September. October's reading reflects growth in the level of imports relative to September, at a slightly faster rate. This month's reading also represents the 11th consecutive month that the Imports Index has registered at or above 50 percent.

The eight industries reporting growth in imports during the month of October — listed in order — are: Furniture & Related Products; Plastics & Rubber Products; Machinery; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; Chemical Products; and Food, Beverage & Tobacco Products. The three industries reporting a decrease in imports during October are: Primary Metals; Apparel, Leather & Allied Products; and Miscellaneous Manufacturing. Seven industries reported no change in imports in October compared to September.

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