The report was issued July 1 by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee.
"Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June," said Ore. "Most encouraging is the gain in the Production Index, which is up 12.1 percentage points in the last two months to 52.5 percent. Aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries, as the Customers' Inventories Index remained below 50 percent for the third consecutive month. The Prices Index was unchanged from May, indicating that the supply/demand balance is improving. Overall, a slow recovery for manufacturing is forming based on the current trends in the ISM data."
PERFORMANCE BY INDUSTRY
Seven of the 18 manufacturing industries reported growth in June. These industries — listed in order — are: Petroleum & Coal Products; Printing & Related Support Activities; Wood Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; and Primary Metals. The industries reporting contraction in June — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Textile Mills; Transportation Equipment; Food, Beverage & Tobacco Products; and Fabricated Metal Products.
WHAT RESPONDENTS ARE SAYING ...
- "Customer inventory burn is complete and real demand has reappeared." (Machinery)
- "... a lot of people are requoting old business and using favorable pricing to negotiate with their current suppliers." (Computer & Electronic Products)
- "Banks are reluctant to lend to businesses, and until this changes the economy will continue to be weak." (Fabricated Metal Products)
- "Slow June, but firm large orders in July, August and September." (Food, Beverage & Tobacco Products)
- "Market appears to have bottomed out as aftermarket has picked up slightly over the past month." (Transportation Equipment)
| MANUFACTURING AT A GLANCE JUNE 2009 | ||||||
|---|---|---|---|---|---|---|
Index |
Series Index June |
Series Index May |
Percentage Point Change |
Direction |
Rate of Change |
Trend* (Months) |
| PMI | 44.8 | 42.8 | +2.0 | Contracting | Slower | 17 |
| New Orders | 49.2 | 51.1 | -1.9 | Contracting | From Growing | 1 |
| Production | 52.5 | 46.0 | +6.5 | Growing | From Contracting | 1 |
| Employment | 40.7 | 34.3 | +6.4 | Contracting | Slower | 11 |
| Supplier Deliveries | 50.6 | 49.8 | +0.8 | Slower | From Faster | 1 |
| Inventories | 30.8 | 32.9 | -2.1 | Contracting | Faster | 38 |
| Customers' Inventories | 43.5 | 46.0 | -2.5 | Too Low | Faster | 3 |
| Prices | 50.0 | 43.5 | +6.5 | Unchanged | From Decreasing | 1 |
| Backlog of Orders | 47.5 | 48.0 | -0.5 | Contracting | Faster | 14 |
| Exports | 49.5 | 48.0 | +1.5 | Contracting | Slower | 9 |
| Imports | 46.0 | 42.5 | +3.5 | Contracting | Slower | 17 |
| OVERALL ECONOMY | Growing | Faster | 2 | |||
| Manufacturing Sector | Contracting | Slower | 17 | |||
*Number of months moving in current direction.
COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY
Commodities Up in Price
Aluminum Based Products; Copper; Corn; Diesel Fuel; Oil; and Plastics.
Commodities Down in Price
Caustic Soda (4); Corrugated Containers (6); Steel (10); and Steel Products (5).
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.
JUNE 2009 MANUFACTURING INDEX SUMMARIES
Purchasing Managers' Index (PMI)
Manufacturing contracted at a slower rate in June as the PMI registered 44.8 percent, which is 2 percentage points higher than the 42.8 percent reported in May. This is the 17th 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 growth for the second consecutive month in the overall economy, and continuing contraction in the manufacturing sector. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through June (39.2 percent) corresponds to a 0.6 percent decrease in real gross domestic product (GDP). However, if the PMI for June (44.8 percent) is annualized, it corresponds to a 1.1 percent increase in real GDP annually."
THE LAST 12 MONTHS
| Month | PMI | Month | PMI | |
|---|---|---|---|---|
| Jun 2009 | 44.8 | Dec 2008 | 32.9 | |
| May 2009 | 42.8 | Nov 2008 | 36.6 | |
| Apr 2009 | 40.1 | Oct 2008 | 38.7 | |
| Mar 2009 | 36.3 | Sep 2008 | 43.4 | |
| Feb 2009 | 35.8 | Aug 2008 | 49.3 | |
| Jan 2009 | 35.6 | Jul 2008 | 49.5 | |
| Average for 12 months – 40.5 High – 49.5 Low – 32.9 | ||||
New Orders
ISM's New Orders Index registered 49.2 percent in June, 1.9 percentage points lower than the 51.1 percent registered in May. May represented the first month of growth in new orders, following 17 consecutive months of contraction. 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).
The 10 industries reporting growth in new orders in June — listed in order — are: Printing & Related Support Activities; Primary Metals; Wood Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Electrical Equipment, Appliances & Components; and Chemical Products. The five industries contracting in June — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery.
| New Orders |
% Better |
% Same |
% Worse |
Net |
Index |
|---|---|---|---|---|---|
| Jun 2009 | 28 | 48 | 24 | +4 | 49.2 |
| May 2009 | 27 | 54 | 19 | +8 | 51.1 |
| Apr 2009 | 31 | 40 | 29 | +2 | 47.2 |
| Mar 2009 | 28 | 31 | 41 | -13 | 41.2 |
Production
ISM's Production Index registered 52.5 percent in June, which is an increase of 6.5 percentage points from May's reading of 46 percent. An index above 50.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the first month the Production Index has moved above 50 percent, following nine months of contraction.
The 11 industries reporting growth in production during the month of June — listed in order — are: Petroleum & Coal Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Wood Products; Paper Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Chemical Products; Miscellaneous Manufacturing; Fabricated Metal Products; and Computer & Electronic Products. The five industries reporting decreases in production in June — listed in order — are: Furniture & Related Products; Apparel, Leather & Allied Products; Textile Mills; Transportation Equipment; and Machinery.
Production |
% Better |
% Same |
% Worse |
Net |
Index |
|---|---|---|---|---|---|
| Jun 2009 | 32 | 46 | 22 | +10 | 52.5 |
| May 2009 | 23 | 52 | 25 | -2 | 46.0 |
| Apr 2009 | 21 | 45 | 34 | -13 | 40.4 |
| Mar 2009 | 17 | 39 | 44 | -27 | 36.4 |
Employment
ISM's Employment Index registered 40.7 percent in June, which is 6.4 percentage points higher than the 34.3 percent reported in May. This is the 11th 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.
Three of the 18 manufacturing industries reported growth in employment in June: Petroleum & Coal Products; Nonmetallic Mineral Products; and Miscellaneous Manufacturing. The 13 industries that reported decreases in employment during June — listed in order — are: Furniture & Related Products; Apparel, Leather & Allied Products; Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Fabricated Metal Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; and Plastics & Rubber Products.
Employment |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Jun 2009 | 9 | 66 | 25 | -16 | 40.7 |
| May 2009 | 8 | 56 | 36 | -28 | 34.3 |
| Apr 2009 | 7 | 58 | 35 | -28 | 34.4 |
| Mar 2009 | 8 | 41 | 51 | -43 | 28.1 |
Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in June as the Supplier Deliveries Index registered 50.6 percent, which is 0.8 percentage point higher than the 49.8 percent registered in May. This is the first month that the Supplier Deliveries Index has been above 50 percent, following eight months of faster delivery performance. A reading above 50 percent indicates slower deliveries.
The five industries reporting slower supplier deliveries in June are: Printing & Related Support Activities; Furniture & Related Products; Fabricated Metal Products; Transportation Equipment; and Chemical Products. The three industries reporting faster deliveries in June are: Primary Metals; Plastics & Rubber Products; and Computer & Electronic Products.
| Supplier Deliveries |
% Slower |
% Same |
% Faster |
Net |
Index |
|---|---|---|---|---|---|
| Jun 2009 | 8 | 87 | 5 | +3 | 50.6 |
| May 2009 | 8 | 86 | 6 | +2 | 49.8 |
| Apr 2009 | 5 | 80 | 15 | -10 | 44.9 |
| Mar 2009 | 7 | 73 | 20 | -13 | 43.6 |
Inventories
Manufacturers' inventories contracted in June as the Inventories Index registered 30.8 percent, which is 2.1 percentage points lower than May's reading of 32.9 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).
Textile Mills is the only one of the 18 manufacturing industries reporting higher inventories in June. The 13 industries that reported decreases in June — listed in order — are: Plastics & Rubber Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Computer & Electronic Products; Machinery; Furniture & Related Products; Paper Products; Fabricated Metal Products; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; and Food, Beverage & Tobacco Products.
Inventories |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Jun 2009 | 8 | 46 | 46 | -38 | 30.8 |
| May 2009 | 10 | 46 | 44 | -34 | 32.9 |
| Apr 2009 | 11 | 47 | 42 | -31 | 33.6 |
| Mar 2009 | 9 | 48 | 43 | -34 | 32.2 |
Customers' Inventories*
The ISM Customers' Inventories Index registered 43.5 percent in June, 2.5 percentage points lower than the 46 percent reported in May. The index indicates that respondents believe their customers' inventories are too low at this time. This is the third consecutive month the Customers' Inventories Index has been below 50 percent, following eight months above 50 percent.
Two industries reported higher customers' inventories during June: Furniture & Related Products; and Chemical Products. The 10 industries that reported lower customers' inventories during June — listed in order — are: Primary Metals; Nonmetallic Mineral Products; Textile Mills; Machinery; Printing & Related Support Activities; Plastics & Rubber Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Transportation Equipment.
| Customers' Inventories |
% Reporting |
%Too High |
%About Right |
%Too Low |
Net |
Index |
|---|---|---|---|---|---|---|
| Jun 2009 | 74 | 15 | 57 | 28 | -13 | 43.5 |
| May 2009 | 72 | 23 | 46 | 31 | -8 | 46.0 |
| Apr 2009 | 80 | 21 | 57 | 22 | -1 | 49.5 |
| Mar 2009 | 78 | 29 | 50 | 21 | +8 | 54.0 |
Prices*
The ISM Prices Index registered 50 percent in June, 6.5 percentage points higher than the 43.5 percent reported in May. Since the index is at the mid-point of 50, this indicates that manufacturers are paying the same prices on average when compared to the previous month. While 22 percent of respondents reported paying higher prices and 22 percent reported paying lower prices, 56 percent of supply executives reported paying the same prices as in May. 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.
The eight industries reporting paying increased prices during the month of June — listed in order — are: Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Fabricated Metal Products. The eight industries that reported paying lower prices during June — listed in order — are: Petroleum & Coal Products; Printing & Related Support Activities; Furniture & Related Products; Textile Mills; Paper Products; Machinery; Computer & Electronic Products; and Chemical Products.
Prices |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|
| Jun 2009 | 22 | 56 | 22 | 0 | 50.0 |
| May 2009 | 10 | 67 | 23 | -13 | 43.5 |
| Apr 2009 | 7 | 50 | 43 | -36 | 32.0 |
| Mar 2009 | 7 | 48 | 45 | -38 | 31.0 |
Backlog of Orders*
ISM's Backlog of Orders Index registered 47.5 percent in June, 0.5 percentage point lower than the 48 percent reported in May. Of the 84 percent of respondents who reported their backlog of orders, 21 percent reported greater backlogs, 26 percent reported smaller backlogs, and 53 percent reported no change from May.
The six industries reporting increased order backlogs in June — listed in order — are: Plastics & Rubber Products; Primary Metals; Printing & Related Support Activities; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing. The eight industries that reported decreases in order backlogs during June — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Machinery; Transportation Equipment; Computer & Electronic Products; Chemical Products; and Fabricated Metal Products.
| Backlog of Orders |
% Reporting |
% Greater |
% Same |
% Less |
Net |
Index |
|---|---|---|---|---|---|---|
| Jun 2009 | 84 | 21 | 53 | 26 | -5 | 47.5 |
| May 2009 | 85 | 19 | 58 | 23 | -4 | 48.0 |
| Apr 2009 | 86 | 13 | 55 | 32 | -19 | 40.5 |
| Mar 2009 | 83 | 11 | 49 | 40 | -29 | 35.5 |
New Export Orders*
ISM's New Export Orders Index registered 49.5 percent in June, 1.5 percentage points higher than the 48 percent reported in May. This is the ninth consecutive month of contraction in the New Export Orders Index.
The five industries reporting growth in new export orders in June are: Printing & Related Support Activities; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Miscellaneous Manufacturing. The eight industries that reported decreases in new export orders in June — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Computer & Electronic Products; Machinery; Transportation Equipment; and Chemical Products.
| New Export Orders |
% Reporting |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|---|
| Jun 2009 | 75 | 12 | 75 | 13 | -1 | 49.5 |
| May 2009 | 77 | 7 | 82 | 11 | -4 | 48.0 |
| Apr 2009 | 77 | 13 | 62 | 25 | -12 | 44.0 |
| Mar 2009 | 80 | 9 | 60 | 31 | -22 | 39.0 |
Imports*
Imports of materials by manufacturers contracted during June as the Imports Index registered 46 percent, 3.5 percentage points higher than the 42.5 percent reported in May. This is the 17th consecutive month of contraction in imports.
Two of the 18 manufacturing industries reported growth in imports during the month of June: Nonmetallic Mineral Products; and Computer & Electronic Products. The seven industries that reported decreases in imports in June — listed in order — are: Plastics & Rubber Products; Apparel, Leather & Allied Products; Machinery; Furniture & Related Products; Transportation Equipment; Electrical Equipment, Appliances & Components; and Chemical Products.
Imports |
% Reporting |
% Higher |
% Same |
% Lower |
Net |
Index |
|---|---|---|---|---|---|---|
| Jun 2009 | 81 | 7 | 78 | 15 | -8 | 46.0 |
| May 2009 | 83 | 12 | 61 | 27 | -15 | 42.5 |
| Apr 2009 | 85 | 10 | 64 | 26 | -16 | 42.0 |
| Mar 2009 | 85 | 5 | 56 | 39 | -34 | 33.0 |
* 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 five days to 106 days. Average lead time for Production Materials increased one day to 46 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased one day to 22 days.
| Percent Reporting | |||||||
|---|---|---|---|---|---|---|---|
Capital Expenditures |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Jun 2009 | 29 | 10 | 12 | 15 | 23 | 11 | 106 |
| May 2009 | 30 | 9 | 13 | 12 | 23 | 13 | 111 |
| Apr 2009 | 36 | 7 | 11 | 12 | 24 | 10 | 101 |
| Mar 2009 | 30 | 11 | 14 | 11 | 23 | 11 | 104 |
Production Materials |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Jun 2009 | 30 | 39 | 16 | 10 | 2 | 3 | 46 |
| May 2009 | 31 | 38 | 21 | 4 | 3 | 3 | 45 |
| Apr 2009 | 31 | 38 | 21 | 4 | 4 | 2 | 44 |
| Mar 2009 | 35 | 35 | 20 | 3 | 5 | 2 | 43 |
MRO Supplies |
Hand- to- Mouth |
30 Days |
60 Days |
90 Days |
6 Months |
1 Year+ |
Average Days |
| Jun 2009 | 49 | 38 | 11 | 2 | 0 | 0 | 22 |
| May 2009 | 52 | 33 | 12 | 2 | 1 | 0 | 23 |
| Apr 2009 | 59 | 28 | 8 | 3 | 2 | 0 | 22 |
| Mar 2009 | 56 | 33 | 7 | 3 | 1 | 0 | 21 |
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 41.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.2 percent, it is generally declining. The distance from 50 percent or 41.2 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. 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 July 2009 data, will be released on Monday, August 3.
