ISM: U.S. manufacturing PMI slips 0.9 points to 52.9

RP news wires, Noria Corporation

Economic activity in the American manufacturing sector expanded in August for the seventh consecutive month, while the overall economy grew for the 70th consecutive month, say the nation's supply executives in the Institute for Supply Management's latest Manufacturing Report On Business.

The report was issued September 4 by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee.

"Viewed from the manufacturing sector, the overall economy continues to grow at a significant rate," said Ore. "In comparing August to July, the rate of growth in manufacturing was slightly less but continues the expansion, although at the slowest pace in the past five months. Both the New Orders Index and the Production Index are encouraging for continuing growth as we head toward the fourth quarter of 2007."

TOP PERFORMING INDUSTRIES

The 10 industries reporting growth in August — listed in order — are: Nonmetallic Mineral Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Wood Products; Chemical Products; Apparel, Leather & Allied Products; Fabricated Metal Products; Textile Mills; Electrical Equipment, Appliances & Components; and Furniture & Related Products.

WHAT RESPONDENTS ARE SAYING ...

"Business is strong but margins are down due to higher raw material cost." (Primary Metals)
"Business is still off by as much as 40 percent over last year in the building materials industry — residential." (Non-metallic Mineral Products)
"The Chinese government's recent decision to reduce the export rebate from 13 percent to 5 percent has resulted in higher priced export goods from China." (Plastics & Rubber Products)
"Inventory levels are high at our customers causing slower pulls toward the last quarter of 2007." (Transportation Equipment)
"We are starting to see signs of improvement." (Machinery)

MANUFACTURING AT A GLANCE AUGUST 2007
Index	Series Index August	Series Index July	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI	52.9	53.8	-0.9	Growing	Slower	7
New Orders	55.3	57.5	-2.2	Growing	Slower	9
Production	56.1	55.6	+0.5	Growing	Faster	7
Employment	51.3	50.2	+1.1	Growing	Faster	5
Supplier Deliveries	50.0	52.0	-2.0	Unchanged	From Slowing	1
Inventories	45.4	48.5	-3.1	Contracting	Faster	13
Customers' Inventories	49.0	51.0	-2.0	Too Low	From Too High	1
Prices	63.0	65.0	-2.0	Increasing	Slower	8
Backlog of Orders	50.5	52.0	-1.5	Growing	Slower	5
Exports	57.0	56.5	+0.5	Growing	Faster	57
Imports	52.5	54.5	-2.0	Growing	Slower	68

OVERALL ECONOMY				Growing	Slower	70
Manufacturing Sector				Growing	Slower	7

*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (9); Copper; Copper Products (5); Eggs; Flour; Freight; Lead; Packaging; Polyethylene Resins; Polypropylene Resins; Soybean Oil (3); and Steel.

Commodities Down in Price

Gasoline (2); Natural Gas (2); and Nickel (2).

Commodities in Short Supply

Sulfuric Acid is the only commodity listed in short supply.

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

AUGUST 2007 MANUFACTURING INDEX SUMMARIES

Purchasing Managers' Index (PMI)

Manufacturing grew at a slower rate in August as the PMI registered 52.9 percent, a decrease of 0.9 percentage point when compared to July's reading of 53.8 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 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the 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 PMI average for January through August (53.1 percent) corresponds to a 3.5 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for August (52.9 percent) is annualized, it corresponds to a 3.4 percent increase in real GDP annually."

THE LAST 12 MONTHS

Month	PMI	Month	PMI
Aug 2007	52.9	Feb 2007	52.3
Jul 2007	53.8	Jan 2007	49.3
Jun 2007	56.0	Dec 2006	51.4
May 2007	55.0	Nov 2006	49.9
Apr 2007	54.7	Oct 2006	51.5
Mar 2007	50.9	Sep 2006	52.7
Average for 12 months – 52.5 High – 56.0 Low – 49.3

New Orders

ISM's New Orders Index registered 55.3 percent in August. The index is 2.2 percentage points lower than the 57.5 percent reported in July. A New Orders Index above 49.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). Seven industries reported increases during August: Petroleum & Coal Products; Non-metallic Mineral Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Wood Products; Chemical Products; and Fabricated Metal Products.

New Orders	% Better	% Same	% Worse	Net	Index
Aug 2007	27	52	21	+6	55.3
Jul 2007	30	54	16	+14	57.5
Jun 2007	37	48	15	+22	60.3
May 2007	33	54	13	+20	59.6

Production

ISM's Production Index registered 56.1 percent in August, which is 0.5 percentage point higher than the 55.6 percent reported in July. August is the seventh consecutive month of production growth for manufacturers. An index above 49.8 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in August, seven registered growth: Non-metallic Mineral Products; Wood Products; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Fabricated Metal Products.

Production	% Better	% Same	% Worse	Net	Index
Aug 2007	26	56	18	+8	56.1
Jul 2007	26	56	18	+8	55.6
Jun 2007	35	55	10	+25	62.9
May 2007	30	59	11	+19	58.3

Employment

ISM's Employment Index registered 51.3 percent in August, which is an increase of 1.1 percentage points when compared to July's reading of 50.2 percent. An Employment Index above 49.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The four industries reporting growth in employment during August are: Furniture & Related Products; Chemical Products; Machinery; and Food, Beverage & Tobacco Products.

Employment	% Higher	% Same	% Lower	Net	Index
Aug 2007	10	79	11	-1	51.3
Jul 2007	15	70	15	0	50.2
Jun 2007	20	66	14	+6	51.1
May 2007	22	66	12	+10	51.9

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was unchanged in August. ISM's Supplier Deliveries Index registered 50 percent in August, indicating no change from July. A reading above 50 percent indicates slower deliveries. The six industries reporting slower supplier deliveries in August are: Printing & Related Support Activities; Non-metallic Mineral Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; and Chemical Products.

Supplier Deliveries	% Slower	% Same	% Faster	Net	Index
Aug 2007	6	90	4	+2	50.0
Jul 2007	7	91	2	+5	52.0
Jun 2007	7	87	6	+1	49.7
May 2007	5	93	2	+3	50.3

Inventories

Manufacturers' inventories registered 45.4 percent in August, which is 3.1 percentage points lower than July's reading of 48.5 percent. This is the 13th consecutive month of inventory liquidation. An Inventories Index greater than 42.4 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 four industries reporting higher inventories in August are: Textile Mills; Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Paper Products.

Inventories	% Higher	% Same	% Lower	Net	Index
Aug 2007	13	67	20	-7	45.4
Jul 2007	11	71	18	-7	48.5
Jun 2007	13	64	23	-10	45.3
May 2007	15	62	23	-8	46.1

Customers' Inventories*

The ISM Customers' Inventories Index registered 49 percent in August, which is 2 percentage points lower than the 51 percent reported in July. The index indicates that respondents believe their customers have less than sufficient inventories on hand (inventories are too low) at this time. Seven industries reported higher customers' inventories during August: Paper Products; Computer & Electronic Products; Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Fabricated Metal Products; and Chemical Products.

Customers' Inventories	% Reporting	%Too High	%About Right	%Too Low	Net	Index
Aug 2007	70	13	72	15	-2	49.0
Jul 2007	71	18	66	16	+2	51.0
Jun 2007	67	12	70	18	-6	47.0
May 2007	76	9	78	13	-4	48.0

Prices*

In August, the ISM Prices Index registered 63 percent, indicating manufacturers are paying higher prices on average when compared to July. While 33 percent of respondents reported paying higher prices and 7 percent reported paying lower prices, 60 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In August, 13 industries reported paying higher prices: Food, Beverage & Tobacco Products; Plastics & Rubber Products; Textile Mills; Printing & Related Support Activities; Transportation Equipment; Wood Products; Furniture & Related Products; Fabricated Metal Products; Paper Products; Chemical Products; Machinery; Miscellaneous Manufacturing; and Primary Metals.

Prices	% Higher	% Same	% Lower	Net	Index
Aug 2007	33	60	7	+26	63.0
Jul 2007	38	54	8	+30	65.0
Jun 2007	42	52	6	+36	68.0
May 2007	45	52	3	+42	71.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 50.5 percent in August, 1.5 percentage points lower than the 52 percent reported in July. Of the 84 percent of respondents who reported their backlog of orders, 19 percent reported greater backlogs, 18 percent reported smaller backlogs, and 63 percent reported no change from July. The five industries reporting an increase in order backlogs in August are: Wood Products; Machinery; Chemical Products; Transportation Equipment; and Food, Beverage & Tobacco Products.

Backlog of Orders	% Reporting	% Greater	% Same	% Less	Net	Index
Aug 2007	84	19	63	18	+1	50.5
Jul 2007	86	23	58	19	+4	52.0
Jun 2007	86	23	61	16	+7	53.5
May 2007	87	22	61	17	+5	52.5

New Export Orders*

ISM's New Export Orders Index registered 57 percent in August, an increase of 0.5 percentage point when compared to July's index of 56.5 percent. This is the 57th consecutive month of growth in export orders. The nine industries reporting growth in new export orders in August are: Wood Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Machinery.

New Export Orders	% Reporting	% Higher	% Same	% Lower	Net	Index
Aug 2007	79	20	74	6	+14	57.0
Jul 2007	80	20	73	7	+13	56.5
Jun 2007	78	18	76	6	+12	56.0
May 2007	78	24	70	6	+18	59.0

Imports*

Imports of materials by manufacturers grew during August as the Imports Index registered 52.5 percent, 2 percentage points lower than the 54.5 percent reported in July. This is the 68th consecutive month of growth in import orders. The eight industries reporting growth in import activity for August are: Apparel, Leather & Allied Products; Non-metallic Mineral Products; Furniture & Related Products; Plastics & Rubber Products; Chemical Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing.

Imports	% Reporting	% Higher	% Same	% Lower	Net	Index
Aug 2007	82	16	73	11	+5	52.5
Jul 2007	82	20	69	11	+9	54.5
Jun 2007	85	17	75	8	+9	54.5
May 2007	82	20	75	5	+15	57.5

* 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 leadtime for Capital Expenditures decreased 5 days to 110 days. Average leadtime for Production Materials decreased 3 days to 48 days. Average leadtime for Maintenance, Repair and Operating (MRO) Supplies increased two days to 24 days.

Percent Reporting
Capital Expenditures	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Aug 2007	19	10	16	23	22	10	110
Jul 2007	25	8	12	18	25	12	115
Jun 2007	26	8	12	18	23	13	115
May 2007	20	9	12	20	28	11	119

Production Materials	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Aug 2007	20	38	29	8	4	1	48
Jul 2007	22	38	22	12	4	2	51
Jun 2007	19	43	26	7	5	0	45
May 2007	20	41	24	12	2	1	46

MRO Supplies	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Aug 2007	45	41	11	3	0	0	24
Jul 2007	50	38	10	2	0	0	22
Jun 2007	50	36	9	5	0	0	23
May 2007	51	37	9	3	0	0	22

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; 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 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 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 41.9 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.9 percent, it is generally declining. The distance from 50 percent or 41.9 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 ISM 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 September 2007 data, will be released on Monday, October 1.