The report was issued January 3 by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee.
"Manufacturing proved resilient in December, as the PMI returned to growth registering 51.4 percent after a decline (under 50 percent) in November," said Ore. "Both New Orders and Production made significant gains to drive the PMI back above the breakeven point. Manufacturing employment remained relatively unchanged as the Employment Index shows a negligible change for the second consecutive month. The Prices Index is trending downward, relieving some of the inflationary pressure that has troubled manufacturing since the middle of 2003."
The nine industries reporting growth in December — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Plastics & Rubber Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Computer & Electronic Products; Primary Metals; Chemical Products; and Food, Beverage & Tobacco Products.
| MANUFACTURING AT A GLANCE DECEMBER 2006 | ||||||
|---|---|---|---|---|---|---|
Index |
Series Index December |
Series Index November |
Percentage Point Change |
Direction |
Rate of Change |
Trend* (Months) |
| PMI | 51.4 | 49.5 | +1.9 | Growing | From Contracting | 1 |
| New Orders | 52.1 | 48.7 | +3.4 | Growing | From Contracting | 1 |
| Production | 51.8 | 48.5 | +3.3 | Growing | From Contracting | 1 |
| Employment | 49.7 | 49.2 | +0.5 | Contracting | Slower | 2 |
| Supplier Deliveries | 53.4 | 52.8 | +0.6 | Slowing | Faster | 42 |
| Inventories | 48.4 | 49.7 | -1.3 | Contracting | Faster | 4 |
| Customers' Inventories | 50.5 | 50.5 | 0.0 | Too High | Same | 3 |
| Prices | 47.5 | 53.5 | -6.0 | Decreasing | From Increasing | 1 |
| Backlog of Orders | 45.0 | 46.5 | -1.5 | Contracting | Faster | 4 |
| Exports | 54.3 | 56.9 | -2.6 | Growing | Slower | 49 |
| Imports | 55.5 | 56.5 | -1.0 | Growing | Slower | 60 |
| OVERALL ECONOMY | Growing | Faster | 62 | |||
| Manufacturing Sector | Growing | From Contracting | 1 | |||
*Number of months moving in current direction
Aluminum; Chemicals; Corn (2); Metals; Natural Gas (2); Nickel (2); and Titanium.
Copper; HDPE; Natural Rubber; Petroleum Products (2); Polypropylene Resins; and Steel.
None.
Note: The number of consecutive months the commodity is listed is indicated after each item.
The manufacturing economy returned to growth in December as the PMI registered 51.4 percent, an increase of 1.9 percentage points when compared to November's reading of 49.5 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 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the December PMI indicates that both the overall economy and the manufacturing sector are growing. "The past relationship between the PMI and the overall economy indicates that the average PMI for January through December (53.9 percent) corresponds to a 4.1 percent increase in real gross domestic product (GDP). In addition, if the PMI for December (51.4 percent) is annualized, it corresponds to a 3.2 percent increase in real GDP annually."
| Month | PMI | Month | PMI | |
|---|---|---|---|---|
| Dec 2006 | 51.4 | Jun 2006 | 53.8 | |
| Nov 2006 | 49.5 | May 2006 | 54.4 | |
| Oct 2006 | 51.2 | Apr 2006 | 57.3 | |
| Sep 2006 | 52.9 | Mar 2006 | 55.2 | |
| Aug 2006 | 54.5 | Feb 2006 | 56.7 | |
| Jul 2006 | 54.7 | Jan 2006 | 54.8 | |
| Average for 12 months – 53.9 High – 57.3 Low – 49.5 | ||||
ISM's New Orders Index registered 52.1 percent in December. The index is 3.4 percentage points higher than the 48.7 percent reported in November. Manufacturers' orders are once again growing after a one-month decline in November. A New Orders Index above 51.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). Ten industries reported increases during December: Apparel, Leather & Allied Products; Petroleum & Coal Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Plastics & Rubber Products; Computer & Electronic Products; Primary Metals; Chemical Products; Food, Beverage & Tobacco Products; and Machinery.
| New Orders |
% Better |
% Same |
% Worse |
Net |
Index |
|---|---|---|---|---|---|
| Dec 2006 | 30 | 37 | 33 | -3 | 52.1 |
| Nov 2006 | 22 | 51 | 27 | -5 | 48.7 |
| Oct 2006 | 26 | 47 | 27 | -1 | 52.1 |
| Sep 2006 | 28 | 54 | 18 | +10 | 54.2 |
ISM's Production Index registered 51.8 percent in December, 3.3 percentage points higher than the 48.5 percent reported in November. Manufacturers' production is once again growing after a one-month decline in November. An index above 50 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in December, six registered growth: Apparel, Leather & Allied Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Chemical Products; and Computer & Electronic Products.
Production |
% Better |
% Same |
% Worse |
Net |
Index |
|---|---|---|---|---|---|
| Dec 2006 | 27 | 46 | 27 | 0 | 51.8 |
| Nov 2006 | 18 | 60 | 22 | -4 | 48.5 |
| Oct 2006 | 22 | 58 | 20 | +2 | 51.9 |
| Sep 2006 | 28 | 59 | 13 | +15 | 56.1 |
ISM's Employment Index registered 49.7 percent in December, an increase of 0.5 percentage point when compared to November's reading of 49.2 percent. This is the second consecutive month that manufacturing employment has contracted. An Employment Index above 48.9 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The seven industries reporting growth in employment during December are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Plastics & Rubber Products; Non-metallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products.
Employment |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Dec 2006 | 14 | 68 | 18 | -4 | 49.7 |
| Nov 2006 | 17 | 63 | 20 | -3 | 49.2 |
| Oct 2006 | 17 | 63 | 20 | -3 | 50.8 |
| Sep 2006 | 12 | 72 | 16 | -4 | 49.4 |
The delivery performance of suppliers to manufacturing organizations was slower for the 42nd consecutive month in December. ISM's Supplier Deliveries Index for December registered 53.4 percent, an increase of 0.6 percentage point when compared to November's reading of 52.8 percent. A reading above 50 percent indicates slower deliveries. The four industries reporting slower supplier deliveries in December are: Computer & Electronic Products; Primary Metals; Transportation Equipment; and Machinery.
| Supplier Deliveries |
% Slower |
% Same |
% Faster |
Net |
Index |
|---|---|---|---|---|---|
| Dec 2006 | 8 | 88 | 4 | +4 | 53.4 |
| Nov 2006 | 9 | 86 | 5 | +4 | 52.8 |
| Oct 2006 | 9 | 83 | 8 | +1 | 50.2 |
| Sep 2006 | 13 | 82 | 5 | +8 | 54.1 |
Manufacturers' inventories contracted at a faster rate in December as ISM's Inventories Index registered 48.4 percent, a 1.3 percentage point decrease when compared to November's reading of 49.7 percent. An Inventories Index greater than 42.2 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 December are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products.
Inventories |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Dec 2006 | 20 | 55 | 25 | -5 | 48.4 |
| Nov 2006 | 15 | 65 | 20 | -5 | 49.7 |
| Oct 2006 | 17 | 61 | 22 | -5 | 49.4 |
| Sep 2006 | 14 | 66 | 20 | -6 | 46.4 |
The ISM Customers' Inventories Index registered 50.5 percent in December, the same as reported in November. The index indicates that respondents believe their customers have more than sufficient inventories on hand (inventories are too high) at this time. This is the third month of growth in this index following 64 consecutive months in which the index registered below 50 percent. Seven industries reported higher customers' inventories during December: Electrical Equipment, Appliances & Components; Textile Mills; Furniture & Related Products; Food, Beverage & Tobacco Products; Paper Products; Fabricated Metal Products; and Machinery.
| Customers' Inventories |
% Reporting |
%Too High |
%About Right |
%Too Low |
Net |
Index |
|---|---|---|---|---|---|---|
| Dec 2006 | 79 | 18 | 65 | 17 | +1 | 50.5 |
| Nov 2006 | 72 | 14 | 73 | 13 | +1 | 50.5 |
| Oct 2006 | 74 | 19 | 66 | 15 | +4 | 52.0 |
| Sep 2006 | 71 | 15 | 68 | 17 | -2 | 49.0 |
In December, the ISM Prices Index registered 47.5 percent, indicating manufacturers are paying lower prices on average when compared to November. While 19 percent of respondents reported paying higher prices and 24 percent reported paying lower prices, 57 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In December, five industries reported paying higher prices: Petroleum & Coal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Transportation Equipment; and Computer & Electronic Products.
Prices |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Dec 2006 | 19 | 57 | 24 | -5 | 47.5 |
| Nov 2006 | 23 | 61 | 16 | +7 | 53.5 |
| Oct 2006 | 18 | 58 | 24 | -6 | 47.0 |
| Sep 2006 | 36 | 50 | 14 | +22 | 61.0 |
ISM's Backlog of Orders Index registered 45 percent, indicating manufacturers' backlogs in December are contracting for the fourth consecutive month. The index is 1.5 percentage points lower than the 46.5 percent reported in November. Of the 86 percent of respondents who reported their backlog of orders, 21 percent reported greater backlogs, 31 percent reported smaller backlogs, and 48 percent reported no change from November. The five industries reporting an increase in order backlogs in December are: Apparel, Leather & Allied Products; Primary Metals; Computer & Electronic Products; Miscellaneous Manufacturing; and Chemical Products.
| Backlog of Orders |
% Reporting |
% Greater |
% Same |
% Less |
Net |
Index |
|---|---|---|---|---|---|---|
| Dec 2006 | 86 | 21 | 48 | 31 | -10 | 45.0 |
| Nov 2006 | 86 | 17 | 59 | 24 | -7 | 46.5 |
| Oct 2006 | 85 | 14 | 61 | 25 | -11 | 44.5 |
| Sep 2006 | 83 | 14 | 65 | 21 | -7 | 46.5 |
ISM's New Export Orders Index registered 54.3 percent in December, a decrease of 2.6 percentage points when compared to November's index of 56.9 percent. This is the 49th consecutive month of growth in export orders. The nine industries reporting growth in new export orders in December are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Primary Metals; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment.
| New Export Orders |
% Reporting |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|---|
| Dec 2006 | 78 | 16 | 75 | 9 | +7 | 54.3 |
| Nov 2006 | 76 | 20 | 74 | 6 | +14 | 56.9 |
| Oct 2006 | 80 | 18 | 76 | 6 | +12 | 57.8 |
| Sep 2006 | 77 | 14 | 80 | 6 | +8 | 55.3 |
Imports of materials by manufacturers grew during December as the Imports Index registered 55.5 percent. The index is 1 percentage point lower when compared to November. This is the 60th consecutive month of growth in import orders. The nine industries reporting growth in import activity for December are: Apparel, Leather & Allied Products; Non-metallic Mineral Products; Primary Metals; Computer & Electronic Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Furniture & Related Products; Chemical Products; and Machinery.
Imports |
% Reporting |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|---|
| Dec 2006 | 84 | 20 | 71 | 9 | +11 | 55.5 |
| Nov 2006 | 83 | 21 | 71 | 8 | +13 | 56.5 |
| Oct 2006 | 85 | 19 | 76 | 5 | +14 | 57.0 |
| Sep 2006 | 81 | 18 | 76 | 6 | +12 | 56.0 |
* The Backlog of Orders, Prices, Customers' Inventories and Imports Indexes do not meet the accepted criteria for seasonal adjustments.
Average commitment leadtime for Capital Expenditures decreased 1 day to 110 days. Average leadtime for Production Materials increased 4 days to 51 days. Average leadtime for maintenance, repair and operating (MRO) supplies remained unchanged at 25 days.
| Percent Reporting | |||||||
|---|---|---|---|---|---|---|---|
Capital Expenditures |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Dec 2006 | 20 | 10 | 17 | 20 | 23 | 10 | 110 |
| Nov 2006 | 20 | 10 | 17 | 21 | 21 | 11 | 111 |
| Oct 2006 | 22 | 9 | 14 | 19 | 22 | 14 | 119 |
| Sep 2006 | 26 | 8 | 14 | 18 | 23 | 11 | 109 |
Production Materials |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Dec 2006 | 19 | 37 | 27 | 11 | 5 | 1 | 51 |
| Nov 2006 | 20 | 39 | 29 | 7 | 4 | 1 | 47 |
| Oct 2006 | 21 | 36 | 23 | 13 | 4 | 3 | 55 |
| Sep 2006 | 19 | 43 | 22 | 12 | 3 | 1 | 47 |
MRO Supplies |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Dec 2006 | 50 | 33 | 12 | 4 | 1 | 0 | 25 |
| Nov 2006 | 44 | 39 | 13 | 4 | 0 | 0 | 25 |
| Oct 2006 | 52 | 31 | 13 | 3 | 1 | 0 | 24 |
| Sep 2006 | 50 | 37 | 10 | 3 | 0 | 0 | 22 |
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.
The Manufacturing 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; Non-metallic 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, Inventories and New Export Orders) 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 varying weights: New Orders – 30 percent; Production – 25 percent; Employment – 20 percent; Supplier Deliveries – 15 percent; and Inventories – 10 percent.
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 42.0 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.0 percent, it is generally declining. The distance from 50 percent or 42.0 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 leadtime, 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 Report On Business is published monthly by the Institute for Supply Management. ISM, established in 1915, is the largest supply management organization in the world as well as one of the most respected. Its 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 next Manufacturing ISM Report On Business, featuring the January 2007 data, will be released at 10:00 a.m. (ET) on Thursday, February 1.