PMI at 50.2%: Sept. 2015 Manufacturing ISM Report On Business

Tempe, Arizona — Economic activity in the manufacturing sector expanded in September for the 33rd consecutive month, and the overall economy grew for the 76th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee. "The September PMI registered 50.2%, a decrease of 0.9 percentage point from the August reading of 51.1%. The New Orders Index registered 50.1%, a decrease of 1.6 percentage points from the reading of 51.7% in August. The Production Index registered 51.8%, 1.8 percentage points below the August reading of 53.6%. The Employment Index registered 50.5%, 0.7 percentage point below the August reading of 51.2%. Backlog of Orders registered 41.5%, a decrease of 5 percentage points from the August reading of 46.5%. The Prices Index registered 38%, a decrease of 1 percentage point from the August reading of 39%, indicating lower raw materials prices for the 11th consecutive month. The New Export Orders Index registered 46.5%, the same reading as in August. Comments from the panel are mixed with some concern about the global economy and customer confidence."

Of the 18 manufacturing industries, seven are reporting growth in September in the following order: printing & related support activities; textile mills; furniture & related products; food, beverage & tobacco products; miscellaneous manufacturing; paper products; and nonmetallic mineral products. The 11 industries reporting contraction in September – listed in order – are: primary metals; apparel, leather & allied products; petroleum & coal products; wood products; electrical equipment, appliances & components; machinery; computer & electronic products; fabricated metal products; plastics & rubber products; transportation equipment; and chemical products.

Commodities reported up/down in price and in short supply
Commodities up in price
Aluminum*; and steel*

Commodities down in price
Aluminum (10)*; copper (3); corn; HDPE resin (2); nickel (3); oil (2); plastic products (2); resins; stainless steel (11); and steel (3)*

Commodities in short supply
None (2)

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

*Reported as both up and down in price.

September 2015 manufacturing index summaries
PMI
Manufacturing expanded in September as the PMI registered 50.2%, a decrease of 0.9 percentage point from the August reading of 51.1%, indicating growth in manufacturing for the 33rd consecutive month. The September PMI is the lowest reading since May 2013 when the PMI registered 50.1%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI in excess of 43.1%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the September PMI indicates growth for the 76th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 33rd consecutive month. Holcomb stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (52.2%) corresponds to a 2.9% increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for September (50.2%) is annualized, it corresponds to a 2.2% increase in real GDP annually."

New orders
ISM’s New Orders Index registered 50.1% in September, a decrease of 1.6 percentage points when compared to the August reading of 51.7%, indicating growth in new orders for the 34th consecutive month, but at a slower rate. A New Orders Index above 52.1%, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

The seven industries reporting growth in new orders in September – listed in order – are: printing & related support activities; textile mills; furniture & related products; food, beverage & tobacco products; plastics & rubber products; chemical products; and miscellaneous manufacturing. the nine industries reporting a decrease in new orders during September – listed in order – are: apparel, leather & allied products; primary metals; wood products; transportation equipment; petroleum & coal products; nonmetallic mineral products; machinery; fabricated metal products; and electrical equipment, appliances & components.

Production
ISM’s Production Index registered 51.8% in September, which is a decrease of 1.8 percentage points when compared to the 53.6% reported in August, indicating growth in production for the 37th consecutive month. An index above 51.1%, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The nine industries reporting growth in production during the month of September – listed in order – are: printing & related support activities; nonmetallic mineral products; furniture & related products; food beverage & tobacco products; miscellaneous manufacturing; paper products; plastics & rubber products; chemical products; and fabricated metal products. The seven industries reporting a decrease in production during September – listed in order – are: primary metals; apparel, leather & allied products; petroleum & coal products; electrical equipment, appliances & components; machinery; transportation equipment; and computer & electronic products.

Employment
ISM’s Employment Index registered 50.5% in September, which is a decrease of 0.7 percentage point when compared to the 51.2% reported in August, indicating growth in employment for the fifth consecutive month. An Employment Index above 50.6%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, in September, eight industries reported employment growth in the following order: printing & related support activities; furniture & related products; paper products; nonmetallic mineral products; machinery; food, beverage & tobacco products; transportation equipment; and miscellaneous manufacturing. The nine industries reporting a decrease in employment in September – listed in order – are: wood products; apparel, leather & allied products; petroleum & coal products; electrical equipment, appliances & components; computer & electronic products; fabricated metal products; primary metals; plastics & rubber products; and chemical products.

Supplier deliveries
The delivery performance of suppliers to manufacturing organizations was slower in September as the Supplier Deliveries Index registered 50.2%, which is 0.5 percentage point lower than the 50.7% reported in August. This is the second month of slower supplier deliveries after two consecutive months of faster supplier deliveries. A reading below 50% indicates faster deliveries, while a reading above 50% indicates slower deliveries.

The five industries reporting slower supplier deliveries in September are: textile mills; food, beverage & tobacco products; electrical equipment, appliances & components; primary metals; and miscellaneous manufacturing. The six industries reporting faster supplier deliveries during September – listed in order – are: petroleum & coal products; paper products; chemical products; machinery; transportation equipment; and fabricated metal products. seven industries reported no change in supplier deliveries in September compared to August.

Inventories
The Inventories Index registered 48.5% in September, which is the same reading as in August, indicating raw materials inventories are contracting in September for the third consecutive month. An Inventories Index greater than 42.9%, 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 September – listed in order – are: textile mills; apparel, leather & allied products; transportation equipment; paper products; miscellaneous manufacturing; and food, beverage & tobacco products. The nine industries reporting lower inventories in September – listed in order – are: plastics & rubber products; primary metals; furniture & related products; nonmetallic mineral products; electrical equipment, appliances & components; machinery; fabricated metal products; computer & electrical products; and chemical products.

Customers' Inventories
ISM’s Customers’ Inventories Index registered 54.5% in September, an increase of 1.5 percentage points from August when customers’ inventories registered 53%. September’s reading indicates that customers’ inventories are considered to be too high for the second consecutive month.

The nine manufacturing industries reporting customers’ inventories as being too high during the month of September – listed in order – are: primary metals; furniture & related products; nonmetallic mineral products; chemical products; computer & electronic products; fabricated metal products; food, beverage & tobacco products; machinery; and transportation equipment. The two industries reporting customers’ inventories as too low during September are: apparel, leather & allied products; and plastics & rubber products. six industries reported no changes in customers’ inventories in September compared to August.

Prices
The ISM Prices Index registered 38% in September, which is 1 percentage point lower than in August, indicating a decrease in raw materials prices for the 11th consecutive month. In September, 6% of respondents reported paying higher prices, 30% reported paying lower prices, and 64% of supply executives reported paying the same prices as in August. A Prices Index above 52.1%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

Of the 18 manufacturing industries, no industries are reporting paying increased prices for their raw materials in September. The 14 industries reporting paying lower prices during the month of September – listed in order – are: textile mills; electrical equipment, appliances & components; primary metals; plastics & rubber products; chemical products; transportation equipment; petroleum & coal products; food, beverage & tobacco products; miscellaneous manufacturing; furniture & related products; nonmetallic mineral products; machinery; computer & electronic products; and fabricated metal products.

Backlog of orders
ISM’s Backlog of Orders Index registered 41.5% in September, a decrease of 5 percentage points as compared to the August reading of 46.5%. Of the 88% of respondents who measure their backlog of orders, 13% reported greater backlogs, 30% reported smaller backlogs, and 57% reported no change from August.

The only industry reporting an increase in order backlogs in September is Furniture & Related Products. The 16 industries reporting a decrease in order backlogs during September – listed in order – are: primary metals; apparel, leather & allied products; textile mills; nonmetallic mineral products; petroleum & coal products; paper products; wood products; transportation equipment; plastics & rubber products; miscellaneous manufacturing; electrical equipment, appliances & components; machinery; computer & electronic products; fabricated metal products; chemical products; and food, beverage & tobacco products.

New export orders
ISM’s New Export Orders Index registered 46.5% in September, which was the same reading as in August. This is the fourth consecutive month that the survey panel indicated their new export orders decreased.

The five industries reporting growth in new export orders in September are: furniture & related products; nonmetallic mineral products; miscellaneous manufacturing; chemical products; and fabricated metal products. The 11 industries reporting a decrease in new export orders during September – listed in order – are: wood products; petroleum and coal products; paper products; apparel, leather & allied products; primary metals; electrical equipment, appliances & components; plastics & rubber products; machinery; transportation equipment; food, beverage & tobacco products; and computer & electronic products.

Imports
ISM’s Imports Index registered 50.5% in September, which is 1 percentage point lower than the 51.5% reported in August. This month’s reading represents 32 consecutive months of growth in imports.

The six industries reporting growth in imports during the month of September – listed in order – are: textile mills; furniture & related products; plastics & rubber products; machinery; computer & electronic products; and chemical products. The six industries reporting a decrease in imports during September – listed in order – are: apparel, leather & allied products; petroleum & coal products; nonmetallic mineral products; fabricated metal products; miscellaneous manufacturing; and transportation equipment.

Buying policy
Average commitment lead-time for capital expenditures increased by 3 days to 133 days. Average lead-time for production materials increased by 1 day in September to 63 days. Average lead-time for maintenance, repair, and operating (MRO) Supplies increased by 2 days to 30 days.

Source: ISM