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The Stupid Trump Tariffs

By Tim Grady, Manufacturing Talk Radio

Trade War Ahead

By Tim Grady, Manufacturing Talk Radio

Before you read any further, let me define “stupid” as opposed to ‘ignorant’.  Ignorant, in my definition, is being unaware of things such as facts or the obvious.  Stupid is being well aware of the facts or the obvious and choosing to ignore them.  In my view, the Trump Tariffs are stupid for a myriad of reasons:

  • Tariffs have never worked to benefit any country. They have been used since George Washington first spoke as a U.S. president in favor of protected industries
  • Tariffs have usually made things worse overall for the manufacturing industry as a whole with even large producers like automotive experiencing the adverse impact of, in this case, the cost of steel and aluminum
  • Tariffs benefit the few, in this case – Big Steel, at the expense of the many, like any company currently using steel, aluminum or component parts from China, Canada, Mexico, Russia, or other countries that have agreed to quotas (which will make the supply chain even more lean and uncompetitive)
  • Tariffs cause prices to rise and demand to fall – the simple law of supply and demand still applies in a free market economy, but the vicissitudes of the cycle become amplified by cost increases and supply shortages
  • Tariffs are a partial stimulant to inflation, especially in a booming economy where inflation always rears its ugly head in the latter stages of an economic cycle, which the U.S. is now approaching
  • Tariffs do not support a free market economy; they create a protectionist economy manipulated by the central government that flies in the face of a free market
  • Tariffs, as they are currently being applied, are not for ‘national security’ in general, except for steel and aluminum in particular – maybe; all the other parts and products being whacked with tariffs have nothing to do with ‘national security’ but rather a ridiculous and unnecessary stand-off
  • Tariffs will make rebuilding America’s infrastructure much more expensive for the American taxpayer; there are already other Acts, such as the Buy American Act of 1933, that can be used to ensure that infrastructure steel be American-made
  • Tariffs on steel and aluminum resulted in Big Steel restarting old blast furnace plants, not investing in new mini-mill production because new plants will take years to build and go into production long after the tariffs have been rescinded and international competition returns to the market
  • Tariffs cost jobs in the country that imposes them – the USA is now seeing the bleeding edge of tariffs cutting into U.S. workers with the Tax Foundation estimating that nearly 50,000 jobs have already been lost or are scheduled for layoffs and up to 250,000 or more will be lost by the end of 2018 and early 2019, while the balance of 2019 may cause related job loses to rise to over 400,000
  • Tariffs are not pin-point punishment for China stealing the intellectual property of U.S. companies that chose to produce in China
  • Tariffs will not create or restore a trade balance between our trading partners – the USA has the largest economy in the world and the finest quality goods in high demand overseas; the reciprocal simply isn’t the case for any of our trading partners so a 1:1 parity on imports and exports is just not achievable
  • Tariffs may get a country like China to open more of their country to U.S. products, but you generally don’t build a relationship with a customer by poking them in the eye to get their attention while simultaneously shooting your own foot off and screaming, “There, take that!”

It is almost sickening to go on and on about a ‘trade strategy’ that was doomed from the outset and will likely sway both the mid-term elections this November and the chances for Trump’s re-election in November of 2020, by which time this economic cycle will have played out and the country will likely be in a recession.

And it is not just manufacturing that is taking the hit. Non-manufacturing, which the ISM reports as 78% of our economy, is beginning to feel the pain. People being interviewed on Manufacturing Talk Radio are saying that their company cannot get orders from potential manufacturing customers in some cases because manufacturing is growing uncertain about the short-term and long-term impacts of the Trump Tariffs. That means fewer orders, less need for people to fulfill orders, and looming layoffs in non-manufacturing, as well.

Thus, the conclusion here is that the Trump Tariffs are stupid as a trade strategy, but the Administration will somehow frame them as a ‘big win’ when they lose enough jobs and enough face which forces them to rescind the tariffs.  Now, if someone can come up with a rosey list of reasons why the Trump Tariffs are good for the U.S. – with real facts and not just bloviating, please enlighten me because from my point of view on manufacturing with its inevitable ripple effects into non-manufacturing, this will not end well for making America great again.

The views expressed in this article are those of the writer, and not endorsed by Manufacturing Talk Radio, the Metals & Manufacturing Outlookezine, or MBC.

October 2016 Manufacturing ISM® Report On Business®

PMI® at 51.9%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report’s information reflects the entire United States, while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of October 2016.

PMI® at 51.9%

New Orders, Production and Employment Growing
Inventories Contracting
Supplier Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in October, and the overall economy grew for the 89th 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® (ISM®) Manufacturing Business Survey Committee. “The October PMI® registered 51.9 percent, an increase of 0.4 percentage point from the September reading of 51.5 percent. The New Orders Index registered 52.1 percent, a decrease of 3 percentage points from the September reading of 55.1 percent. The Production Index registered 54.6 percent, 1.8 percentage points higher than the September reading of 52.8 percent. The Employment Index registered 52.9 percent, an increase of 3.2 percentage points from the September reading of 49.7 percent. Inventories of raw materials registered 47.5 percent, a decrease of 2 percentage points from the September reading of 49.5 percent. The Prices Index registered 54.5 percent in October, an increase of 1.5 percentage points from the September reading of 53 percent, indicating higher raw materials prices for the eighth consecutive month. Comments from the panel are largely positive citing a favorable economy and steady sales, with some exceptions.”

SPECIAL QUESTION

For inclusion in this report, our panel responded to a special question regarding the Hanjin Shipping Company bankruptcy to gain insights into the impact on their businesses this quarter. The responses were as follows:

  • Not impacted — 51.9%
  • Small, not material impact — 29.7%
  • Material, but manageable impact — 13.4%
  • Large material impact — 0.8%
  • Unsure — 4.2%

Of the 18 manufacturing industries, 10 are reporting growth in October in the following order: Textile Mills; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Computer & Electronic Products; Furniture & Related Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; and Chemical Products. The eight industries reporting contraction in October — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Machinery.

WHAT RESPONDENTS ARE SAYING …
  • “Domestic business steady. Export business trending higher.” (Chemical Products)
  • “Very favorable outlook in the market.” (Computer & Electronic Products)
  • “We are looking at a considerable slowdown for October and November. Production is down 20 percent.” (Primary Metals)
  • “Business is much better.” (Fabricated Metal Products)
  • “Strong economy driving steady sales.” (Food, Beverage & Tobacco Products)
  • “Due to the hurricane and other storms, our business is up significantly.” (Machinery)
  • “Ongoing strength seen in 2016 — it’s a good year.” (Miscellaneous Manufacturing)
  • “Customers continue to press price reductions.” (Transportation Equipment)
  • “Our business remains strong.” (Plastics & Rubber Products)
  • “Hard to predict oil price dynamics, but there seems to be a consensus that the market is stabilizing, at least above USD 50 bbl this month.” (Petroleum & Coal Products)
MANUFACTURING AT A GLANCE
October 2016

Index

Series
Index
Oct
Series
Index
Sep
Percentage
Point
Change

Direction

Rate
of
Change
Trend*
(Months)
PMI® 51.9 51.5 +0.4 Growing Faster 2
New Orders 52.1 55.1 -3.0 Growing Slower 2
Production 54.6 52.8 +1.8 Growing Faster 2
Employment 52.9 49.7 +3.2 Growing From Contracting 1
Supplier Deliveries 52.2 50.3 +1.9 Slowing Faster 6
Inventories 47.5 49.5 -2.0 Contracting Faster 16
Customers’ Inventories 49.5 53.0 -3.5 Too Low From Too High 1
Prices 54.5 53.0 +1.5 Increasing Faster 8
Backlog of Orders 45.5 49.5 -4.0 Contracting Faster 4
New Export Orders 52.5 52.0 +0.5 Growing Faster 8
Imports 52.0 49.0 +3.0 Growing From Contracting 1
OVERALL ECONOMY Growing Faster 89
Manufacturing Sector Growing Faster 2

Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes.

*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price

Corn; Corrugate; Diesel; HDPE (2); Methanol; Nickel; Petroleum (2); Plastic Resins (3); Polyethylene (2); Polypropylene (2); Propylene (3); Stainless Steel* (7); and Steel* (10).

Commodities Down in Price

Aluminum; Carbon Steel; Copper (2); Scrap Steel (3); Stainless Steel*; Steel* (4); Steel — Cold Rolled (3); and Steel — Hot Rolled (3).

Commodities in Short Supply

None.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.


OCTOBER 2016 MANUFACTURING INDEX SUMMARIES


PMI®

Manufacturing expanded in October as the PMI® registered 51.9 percent, an increase of 0.4 percentage point from the September reading of 51.5 percent, indicating growth in manufacturing for the second consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI® above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the October PMI® indicates growth for the 89th consecutive month in the overall economy, and indicates growth in the manufacturing sector for the second consecutive month. Holcomb stated, “The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through October (51 percent) corresponds to a 2.5 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for October (51.9 percent) is annualized, it corresponds to a 2.8 percent increase in real GDP annually.”

THE LAST 12 MONTHS
Month PMI® Month PMI®
Oct 2016 51.9 Apr 2016 50.8
Sep 2016 51.5 Mar 2016 51.8
Aug 2016 49.4 Feb 2016 49.5
Jul 2016 52.6 Jan 2016 48.2
Jun 2016 53.2 Dec 2015 48.0
May 2016 51.3 Nov 2015 48.4
Average for 12 months – 50.6
High – 53.2
Low – 48.0
New Orders

ISM®’s New Orders Index registered 52.1 percent in October, which is a decrease of 3 percentage points when compared to the 55.1 percent reported for September, indicating growth in new orders for the second consecutive month. 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 eight industries reporting growth in new orders in October — listed in order — are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Paper Products; Plastics & Rubber Products; Computer & Electronic Products; and Chemical Products. The eight industries reporting a decrease in new orders during October — listed in order — are: Wood Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Fabricated Metal Products; Primary Metals; and Machinery.

New
Orders
%
Better
%
Same
%
Worse
Net Index
Oct 2016 24 56 20 +4 52.1
Sep 2016 27 53 20 +7 55.1
Aug 2016 22 52 26 -4 49.1
Jul 2016 27 58 15 +12 56.9
Production

ISM®’s Production Index registered 54.6 percent in October, which is an increase of 1.8 percentage points when compared to the 52.8 percent reported for September, indicating growth in production in October for the second consecutive month. An index above 51.3 percent, 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 October — listed in order — are: Textile Mills; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Fabricated Metal Products; Chemical Products; and Computer & Electronic Products. The four industries reporting a decrease in production during October are: Primary Metals; Transportation Equipment; Machinery; and Plastics & Rubber Products.

Production %
Better
%
Same
%
Worse
Net Index
Oct 2016 25 56 19 +6 54.6
Sep 2016 24 56 20 +4 52.8
Aug 2016 19 59 22 -3 49.6
Jul 2016 25 58 17 +8 55.4
Employment

ISM®’s Employment Index registered 52.9 percent in October, an increase of 3.2 percentage points when compared to the September reading of 49.7 percent, indicating growth in employment in October following three consecutive months of contraction. An Employment Index above 50.6 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, the 11 industries reporting employment growth in October — listed in order — are: Textile Mills; Printing & Related Support Activities; Miscellaneous Manufacturing; Furniture & Related Products; Paper Products; Electrical Equipment, Appliances & Components; Machinery; Food, Beverage & Tobacco Products; Chemical Products; Nonmetallic Mineral Products; and Primary Metals. The five industries reporting a decrease in employment in October are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Plastics & Rubber Products; Transportation Equipment; and Fabricated Metal Products.

Employment %
Higher
%
Same
%
Lower
Net Index
Oct 2016 20 62 18 +2 52.9
Sep 2016 17 63 20 -3 49.7
Aug 2016 16 65 19 -3 48.3
Jul 2016 17 68 15 +2 49.4
Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in October as the Supplier Deliveries Index registered 52.2 percent, which is 1.9 percentage points higher than the 50.3 percent reported for September. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The seven industries reporting slower supplier deliveries in October — listed in order — are: Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Machinery; Computer & Electronic Products; and Primary Metals. The four industries reporting faster supplier deliveries in October are: Paper Products; Plastics & Rubber Products; Fabricated Metal Products; and Miscellaneous Manufacturing. Seven industries reported no change in supplier deliveries in October compared to September.

Supplier
Deliveries
%
Slower
%
Same
%
Faster
Net Index
Oct 2016 8 87 5 +3 52.2
Sep 2016 8 85 7 +1 50.3
Aug 2016 8 86 6 +2 50.9
Jul 2016 10 85 5 +5 51.8
Inventories*

The Inventories Index registered 47.5 percent in October, which is a decrease of 2 percentage points when compared to the 49.5 percent reported for September, indicating raw materials inventories are contracting in October for the 16th consecutive month. An Inventories Index greater than 42.8 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: Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Petroleum & Coal Products; and Miscellaneous Manufacturing. The 10 industries reporting lower inventories in October — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Machinery; Paper Products; Chemical Products; Fabricated Metal Products; Transportation Equipment; and Printing & Related Support Activities.

Inventories %
Higher
%
Same
%
Lower
Net Index
Oct 2016 16 63 21 -5 47.5
Sep 2016 16 67 17 -1 49.5
Aug 2016 18 62 20 -2 49.0
Jul 2016 19 61 20 -1 49.5
Customers’ Inventories*

ISM®’s Customers’ Inventories Index registered 49.5 percent in October, which is 3.5 percentage points lower than the 53 percent reported in September, indicating that customers’ inventory levels are considered too low in October.

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

Customers’
Inventories
%
Reporting
%Too
High
%About
Right
%Too
Low
Net Index
Oct 2016 59 13 73 14 -1 49.5
Sep 2016 58 17 72 11 +6 53.0
Aug 2016 54 16 67 17 -1 49.5
Jul 2016 59 13 76 11 +2 51.0
Prices*

The ISM® Prices Index registered 54.5 percent in October, which is 1.5 percentage points higher than reported in September, indicating an increase in raw materials prices for the eighth consecutive month. In October, 25 percent of respondents reported paying higher prices, 16 percent reported paying lower prices, and 59 percent of supply executives reported paying the same prices as in September. A Prices Index above 52.4 percent, 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, the seven industries that reported paying increased prices for its raw materials in October — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Petroleum & Coal Products; Chemical Products; Food, Beverage & Tobacco Products; Paper Products; and Computer & Electronic Products. The eight industries reporting paying lower prices during the month of October — listed in order — are: Textile Mills; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Nonmetallic Mineral Products; and Miscellaneous Manufacturing.

Prices %
Higher
%
Same
%
Lower
Net Index
Oct 2016 25 59 16 +9 54.5
Sep 2016 20 66 14 +6 53.0
Aug 2016 19 68 13 +6 53.0
Jul 2016 22 66 12 +10 55.0
Backlog of Orders*

ISM®’s Backlog of Orders Index registered 45.5 percent in October, a decrease of 4 percentage points when compared to the September reading of 49.5 percent, indicating contraction in order backlogs for the fourth consecutive month. Of the 88 percent of respondents who reported their backlog of orders, 16 percent reported greater backlogs, 25 percent reported smaller backlogs, and 59 percent reported no change from September.

The five industries reporting growth in order backlogs in October are: Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Computer & Electronic Products; and Paper Products. The 11 industries reporting a decrease in order backlogs during October — listed in order — are: Wood Products; Primary Metals; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Plastics & Rubber Products; Chemical Products; Miscellaneous Manufacturing; Machinery; and Fabricated Metal Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less
Net Index
Oct 2016 88 16 59 25 -9 45.5
Sep 2016 87 19 61 20 -1 49.5
Aug 2016 88 18 55 27 -9 45.5
Jul 2016 86 16 64 20 -4 48.0
New Export Orders*

ISM®’s New Export Orders Index registered 52.5 percent in October, an increase of 0.5 percentage point when compared to the 52 percent reported for September, indicating growth in new export orders for the eighth consecutive month.

The six industries reporting growth in new export orders in October — listed in order — are: Textile Mills; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Fabricated Metal Products; Chemical Products; and Computer & Electronic Products. The five industries reporting a decrease in new export orders during October are: Wood Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; and Machinery. Seven industries reported no change in new export orders in October compared to September.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower
Net Index
Oct 2016 79 12 81 7 +5 52.5
Sep 2016 76 15 74 11 +4 52.0
Aug 2016 78 16 73 11 +5 52.5
Jul 2016 76 14 77 9 +5 52.5
Imports*

ISM®’s Imports Index registered 52 percent in October, which is 3 percentage points above the September reading of 49 percent. This month’s reading indicates growth in imports following two consecutive months of contraction in imports.

The nine industries reporting growth in imports during the month of October — listed in order — are: Miscellaneous Manufacturing; Furniture & Related Products; Fabricated Metal Products; Computer & Electronic Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Nonmetallic Mineral Products. The three industries reporting a decrease in imports during October are: Electrical Equipment, Appliances & Components; Printing & Related Support Activities; and Transportation Equipment.

Imports %
Reporting
%
Higher
%
Same
%
Lower
Net Index
Oct 2016 81 11 82 7 +4 52.0
Sep 2016 81 12 74 14 -2 49.0
Aug 2016 83 8 78 14 -6 47.0
Jul 2016 80 14 76 10 +4 52.0

* The Inventories, Customers’ Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy

Average commitment lead time for Capital Expenditures increased in October by 4 days to 136 days. Average lead time for Production Materials increased by 4 days to 64 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies remained the same at 31 days.

Percent Reporting
Capital
Expenditures
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Oct 2016 19 11 10 18 23 19 136
Sep 2016 18 12 9 16 30 15 132
Aug 2016 22 6 13 19 24 16 129
Jul 2016 20 8 14 18 22 18 132
Production
Materials
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Oct 2016 12 38 24 16 7 3 64
Sep 2016 15 35 25 16 7 2 60
Aug 2016 15 38 22 15 8 2 60
Jul 2016 12 37 26 15 7 3 64
MRO
Supplies
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Oct 2016 41 34 17 7 1 0 31
Sep 2016 38 35 18 9 0 0 31
Aug 2016 40 39 13 8 0 0 29
Jul 2016 38 40 15 5 2 0 31
About This Report

The data presented herein is obtained from a survey of manufacturing supply executives 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. The data 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 and Supplier Deliveries) 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 subject annually to relatively minor changes when conditions warrant them. The PMI® is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), 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® above 43.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 43.2 percent, it is generally declining. The distance from 50 percent or 43.2 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.

The Manufacturing ISM® Report On Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month.

The industries reporting growth, as indicated in the Manufacturing ISM® Report On Business® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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 Capital Expenditures; Production Materials; 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.

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About Institute for Supply Management®

Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 48,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM® Report On Business® is posted on ISM®‘s website at www.ismrob.org on the first business day* of every month after 10:00 a.m. (ET).

The next Manufacturing ISM® Report On Business® featuring the November 2016 data will be released at 10:00 a.m. (ET) on Thursday, December 1, 2016.

*Unless the NYSE is closed.

August 2016 Manufacturing ISM® Report On Business®

PMI® at 49.4%

New Orders, Production and Employment Contracting
Inventories Contracting
Supplier Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector contracted in August following five consecutive months of expansion, while the overall economy grew for the 87th 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® (ISM®) Manufacturing Business Survey Committee. “The August PMI® registered 49.4 percent, a decrease of 3.2 percentage points from the July reading of 52.6 percent. The New Orders Index registered 49.1 percent, a decrease of 7.8 percentage points from the July reading of 56.9 percent. The Production Index registered 49.6 percent, 5.8 percentage points lower than the July reading of 55.4 percent. The Employment Index registered 48.3 percent, a decrease of 1.1 percentage points from the July reading of 49.4 percent. Inventories of raw materials registered 49 percent, a decrease of 0.5 percentage point from the July reading of 49.5 percent. The Prices Index registered 53 percent, a decrease of 2 percentage points from the July reading of 55 percent, indicating higher raw materials prices for the sixth consecutive month. Manufacturing contracted in August for the first time since February of this year, as only six of our 18 industries reported an increase in new orders in August (down from 12 in July), and only eight of our 18 industries reported an increase in production in August (down from nine in July).”

Of the 18 manufacturing industries, six are reporting growth in August in the following order: Printing & Related Support Activities; Nonmetallic Mineral Products; Computer & Electronic Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products. The 11 industries reporting contraction in August — listed in order — are: Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Plastics & Rubber Products; Furniture & Related Products; Transportation Equipment; Machinery; Textile Mills; Paper Products; Petroleum & Coal Products; Primary Metals; and Fabricated Metal Products.

WHAT RESPONDENTS ARE SAYING …

“We have been getting lots of inquiries, but not a lot of sales order placements.” (Chemical Products)
“Business was flat this month overall.” (Computer & Electronic Products)
“Continued strong market demand for our products related to construction.” (Nonmetallic Mineral Products)
“Commercial construction continues to be strong, and therefore our business is very good.” (Fabricated Metal Products)
“New product distribution is increasing.” (Food, Beverage & Tobacco Products)
“This past month, sales increased over the trend from the first half of the year. There seems to be a general, albeit slight, loosening of capital purse strings.” (Machinery)
“Medical device is still strong.” (Miscellaneous Manufacturing)
“Business conditions are generally flat.” (Transportation Equipment)
“Hard to find production associates. Unemployment in the area is around 4 percent. Can’t get enough employees [which] leads to lots of overtime.” (Plastics & Rubber Products)
“Oil prices continue to seek a ‘footing’; rig count slowly increasing.” (Petroleum & Coal Products)
MANUFACTURING AT A GLANCE
August 2016
Index Series
Index
Aug Series
Index
Jul Percentage
Point
Change

Direction Rate
of
Change
Trend*
(Months)
PMI® 49.4 52.6 -3.2 Contracting From Growing 1
New Orders 49.1 56.9 -7.8 Contracting From Growing 1
Production 49.6 55.4 -5.8 Contracting From Growing 1
Employment 48.3 49.4 -1.1 Contracting Faster 2
Supplier Deliveries 50.9 51.8 -0.9 Slowing Slower 4
Inventories 49.0 49.5 -0.5 Contracting Faster 14
Customers’ Inventories 49.5 51.0 -1.5 Too Low From Too High 1
Prices 53.0 55.0 -2.0 Increasing Slower 6
Backlog of Orders 45.5 48.0 -2.5 Contracting Faster 2
New Export Orders 52.5 52.5 0.0 Growing Same 6
Imports 47.0 52.0 -5.0 Contracting From Growing 1
OVERALL ECONOMY Growing Slower 87
Manufacturing Sector Contracting From Growing 1
Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries indexes.

*Number of months moving in current direction.
COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price

Caustic Soda; Copper (2); Gold (2); Nickel; Plastic Resins; Propylene; Stainless Steel (5); Steel* (8); and Titanium Dioxide.

Commodities Down in Price

Corn (2); Corrugate (2); Diesel; Scrap Steel; Steel* (2); Steel — Cold Rolled; and Steel — Hot Rolled.

Commodities in Short Supply

None (5).

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.

AUGUST 2016 MANUFACTURING INDEX SUMMARIES

PMI®

Manufacturing contracted in August as the PMI® registered 49.4 percent, a decrease of 3.2 percentage points from the July reading of 52.6 percent, indicating contraction in manufacturing for the first time since February 2016 when the PMI registered 49.5. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI® above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the August PMI® indicates growth for the 87th consecutive month in the overall economy, while indicating contraction in the manufacturing sector for the first time since February of this year. Holcomb stated, “The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through August (50.9 percent) corresponds to a 2.4 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for August (49.4 percent) is annualized, it corresponds to a 2 percent increase in real GDP annually.”

THE LAST 12 MONTHS

Month PMI® Month PMI®
Aug 2016 49.4 Feb 2016 49.5
Jul 2016 52.6 Jan 2016 48.2
Jun 2016 53.2 Dec 2015 48.0
May 2016 51.3 Nov 2015 48.4
Apr 2016 50.8 Oct 2015 49.4
Mar 2016 51.8 Sep 2015 50.0
Average for 12 months – 50.2
High – 53.2
Low – 48.0

New Orders

ISM®’s New Orders Index registered 49.1 percent in August, which is a decrease of 7.8 percentage points when compared to the 56.9 percent reported for July, indicating contraction in new orders for first time since December 2015 when the New Orders Index registered 48.8 percent. 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 six industries reporting growth in new orders in August — listed in order — are: Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; and Fabricated Metal Products. The nine industries reporting a decrease in new orders during August — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Transportation Equipment; Plastics & Rubber Products; Machinery; Primary Metals; and Paper Products.

New
Orders %
Better %
Same %
Worse
Net
Index
Aug 2016 22 52 26 -4 49.1
Jul 2016 27 58 15 +12 56.9
Jun 2016 31 51 18 +13 57.0
May 2016 32 51 17 +15 55.7

Production

ISM®’s Production Index registered 49.6 percent in August, which is a decrease of 5.8 percentage points when compared to the 55.4 percent reported for July, indicating contraction in production in August and its lowest reading since August 2012 when the Production Index registered 49.5. An index above 51.3 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The eight industries reporting growth in production during the month of August — listed in order — are: Printing & Related Support Activities; Chemical Products; Primary Metals; Computer & Electronic Products; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Nonmetallic Mineral Products. The eight industries reporting a decrease in production during August — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Transportation Equipment; Furniture & Related Products; Machinery; Paper Products; and Textile Mills.
Production %
Better %
Same %
Worse
Net
Index
Aug 2016 19 59 22 -3 49.6
Jul 2016 25 58 17 +8 55.4
Jun 2016 28 55 17 +11 54.7
May 2016 29 52 19 +10 52.6

Employment

ISM®’s Employment Index registered 48.3 percent in August, a decrease of 1.1 percentage points when compared to the July reading of 49.4 percent, indicating contraction in employment in August for the second consecutive month. An Employment Index above 50.6 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, the five industries reporting employment growth in August are: Printing & Related Support Activities; Paper Products; Primary Metals; Computer & Electronic Products; and Nonmetallic Mineral Products. The nine industries reporting a decrease in employment in August — listed in order — are: Apparel, Leather & Allied Products; Transportation Equipment; Plastics & Rubber Products; Furniture & Related Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; and Textile Mills.
Employment %
Higher %
Same %
Lower
Net
Index
Aug 2016 16 65 19 -3 48.3
Jul 2016 17 68 15 +2 49.4
Jun 2016 22 58 20 +2 50.4
May 2016 20 62 18 +2 49.2

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in August as the Supplier Deliveries Index registered 50.9 percent, which is 0.9 percentage point lower than the 51.8 percent reported for July. 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 August — listed in order — are: Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Machinery; Food, Beverage & Tobacco Products; and Chemical Products. The four industries reporting faster supplier deliveries in August are: Paper Products; Primary Metals; Plastics & Rubber Products; and Fabricated Metal Products. Eight industries reported no change in supplier deliveries in August compared to July.

Supplier
Deliveries %
Slower %
Same %
Faster
Net
Index
Aug 2016 8 86 6 +2 50.9
Jul 2016 10 85 5 +5 51.8
Jun 2016 12 84 4 +8 55.4
May 2016 13 82 5 +8 54.1

Inventories*

The Inventories Index registered 49 percent in August, which is a decrease of 0.5 percentage point when compared to the 49.5 percent reported for July, indicating raw materials inventories are contracting in August for the 14th consecutive month. An Inventories Index greater than 42.8 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: Wood Products; Apparel, Leather & Allied Products; Transportation Equipment; and Nonmetallic Mineral Products. The 11 industries reporting lower inventories in August — listed in order — are: Textile Mills; Chemical Products; Fabricated Metal Products; Primary Metals; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Machinery; Furniture & Related Products; Electrical Equipment, Appliances & Components; and Plastics & Rubber Products.
Inventories %
Higher %
Same %
Lower
Net
Index
Aug 2016 18 62 20 -2 49.0
Jul 2016 19 61 20 -1 49.5
Jun 2016 19 59 22 -3 48.5
May 2016 14 62 24 -10 45.0

Customers’ Inventories*

ISM®’s Customers’ Inventories Index registered 49.5 percent in August, which is 1.5 percentage points lower than the 51 percent reported in July, indicating that customers’ inventory levels are considered too low in August following three consecutive months at 50 or above of customer inventories being considered too high.

The five manufacturing industries reporting customers’ inventories as being too high during the month of August are: Petroleum & Coal Products; Furniture & Related Products; Transportation Equipment; Machinery; and Plastics & Rubber Products. The eight industries reporting customers’ inventories as too low during August — listed in order — are: Textile Mills; Primary Metals; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; and Fabricated Metal Products.

Customers’
Inventories %
Reporting %Too
High %About
Right %Too
Low
Net
Index
Aug 2016 54 16 67 17 -1 49.5
Jul 2016 59 13 76 11 +2 51.0
Jun 2016 57 16 70 14 +2 51.0
May 2016 60 16 68 16 0 50.0

Prices*

The ISM® Prices Index registered 53 percent in August, which is a decrease of 2 percentage points when compared to the 55 percent reported for July, indicating an increase in raw materials prices for the sixth consecutive month. In August, 19 percent of respondents reported paying higher prices, 13 percent reported paying lower prices, and 68 percent of supply executives reported paying the same prices as in July. A Prices Index above 52.4 percent, 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, the nine industries that reported paying increased prices for its raw materials in August — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Transportation Equipment; Petroleum & Coal Products; Machinery; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Nonmetallic Mineral Products. The three industries reporting paying lower prices during the month of August are: Electrical Equipment, Appliances & Components; Furniture & Related Products; and Food, Beverage & Tobacco Products. Six industries listed no change in prices in August compared to July.
Prices %
Higher %
Same %
Lower
Net
Index
Aug 2016 19 68 13 +6 53.0
Jul 2016 22 66 12 +10 55.0
Jun 2016 27 67 6 +21 60.5
May 2016 34 59 7 +27 63.5

Backlog of Orders*

ISM®’s Backlog of Orders Index registered 45.5 percent in August, a decrease of 2.5 percentage points when compared to the July reading of 48 percent, indicating contraction in order backlogs for the second consecutive month. Of the 88 percent of respondents who reported their backlog of orders, 18 percent reported greater backlogs, 27 percent reported smaller backlogs, and 55 percent reported no change from July.

The four industries reporting growth in order backlogs in August are: Printing & Related Support Activities; Petroleum & Coal Products; Computer & Electronic Products; and Fabricated Metal Products. The 12 industries reporting a decrease in order backlogs during August — listed in order — are: Wood Products; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Furniture & Related Products; Transportation Equipment; Primary Metals; Paper Products; Machinery; Plastics & Rubber Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products.

Backlog of
Orders %
Reporting %
Greater %
Same %
Less
Net
Index
Aug 2016 88 18 55 27 -9 45.5
Jul 2016 86 16 64 20 -4 48.0
Jun 2016 89 24 57 19 +5 52.5
May 2016 85 17 60 23 -6 47.0

New Export Orders*

ISM®’s New Export Orders Index registered 52.5 percent in August, the same reading as in July, indicating growth in new export orders for the sixth consecutive month.

The eight industries reporting growth in new export orders in August — listed in order — are: Wood Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; Machinery; and Paper Products. The six industries reporting a decrease in new export orders during August — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Furniture & Related Products; Primary Metals; Plastics & Rubber Products; and Transportation Equipment.

New Export
Orders %
Reporting %
Higher %
Same %
Lower
Net
Index
Aug 2016 78 16 73 11 +5 52.5
Jul 2016 76 14 77 9 +5 52.5
Jun 2016 79 14 79 7 +7 53.5
May 2016 75 15 75 10 +5 52.5

Imports*

ISM®’s Imports Index registered 47 percent in August, which is 5 percentage points below the July reading of 52 percent. This month’s reading indicates contraction in imports following four consecutive months of the Imports Index registering 50 percent or above.

The four industries reporting growth in imports during the month of August are: Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery. The nine industries reporting a decrease in imports during August — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Textile Mills; Primary Metals; Plastics & Rubber Products; Paper Products; Transportation Equipment; Miscellaneous Manufacturing; and Fabricated Metal Products.
Imports %
Reporting %
Higher %
Same %
Lower
Net
Index
Aug 2016 83 8 78 14 -6 47.0
Jul 2016 80 14 76 10 +4 52.0
Jun 2016 84 11 82 7 +4 52.0
May 2016 83 14 72 14 0 50.0
* The Inventories, Customers’ Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.
Buying Policy

Average commitment lead time for Capital Expenditures decreased in August by 3 days to 129 days. Average lead time for Production Materials decreased by 4 days to 60 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased by 2 days to 29 days.

Percent Reporting

Capital
Expenditures Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Aug 2016 22 6 13 19 24 16 129
Jul 2016 20 8 14 18 22 18 132
Jun 2016 23 7 11 15 28 16 131
May 2016 24 8 12 15 25 16 127

Production
Materials Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Aug 2016 15 38 22 15 8 2 60
Jul 2016 12 37 26 15 7 3 64
Jun 2016 15 38 23 15 7 2 59
May 2016 16 35 24 15 7 3 63

MRO
Supplies Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Aug 2016 40 39 13 8 0 0 29
Jul 2016 38 40 15 5 2 0 31
Jun 2016 39 37 17 6 1 0 30
May 2016 41 37 14 7 1 0 30

About This Report

The data presented herein is obtained from a survey of manufacturing supply executives 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. The data 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 and Supplier Deliveries) 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 subject annually to relatively minor changes when conditions warrant them. The PMI® is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), 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® above 43.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 43.2 percent, it is generally declining. The distance from 50 percent or 43.2 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.

The Manufacturing ISM® Report On Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month.

The industries reporting growth, as indicated in the Manufacturing ISM® Report On Business® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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 Capital Expenditures; Production Materials; 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.

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About Institute for Supply Management®

Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 48,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model™. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM® Report On Business® is posted on ISM®’s website at www.ismrob.org on the first business day* of every month after 10:00 a.m. (ET).

The next Manufacturing ISM® Report On Business® featuring the September 2016 data will be released at 10:00 a.m. (ET) on Monday, October 3, 2016.

*Unless the NYSE is closed.

July 2016 Manufacturing ISM® Report On Business®

PMI® at 52.6%

New Orders and Production Growing
Employment and Inventories Contracting
Supplier Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in July for the fifth consecutive month, while the overall economy grew for the 86th 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® (ISM®) Manufacturing Business Survey Committee. “The July PMI® registered 52.6 percent, a decrease of 0.6 percentage point from the June reading of 53.2 percent. The New Orders Index registered 56.9 percent, a decrease of 0.1 percentage point from the June reading of 57 percent. The Production Index registered 55.4 percent, 0.7 percentage point higher than the June reading of 54.7 percent. The Employment Index registered 49.4 percent, a decrease of 1 percentage point from the June reading of 50.4 percent. Inventories of raw materials registered 49.5 percent, an increase of 1 percentage point from the June reading of 48.5 percent. The Prices Index registered 55 percent, a decrease of 5.5 percentage points from the June reading of 60.5 percent, indicating higher raw materials prices for the fifth consecutive month. Manufacturing registered growth in July for the fifth consecutive month, as 12 of our 18 industries reported an increase in new orders in July (same as in June), and nine of our 18 industries reported an increase in production in July (down from 12 in June).”

Of the 18 manufacturing industries, 11 are reporting growth in July in the following order: Textile Mills; Printing & Related Support Activities; Miscellaneous Manufacturing; Wood Products; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; and Computer & Electronic Products. The seven industries reporting contraction in July — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; and Paper Products.

WHAT RESPONDENTS ARE SAYING …
  • “With Brexit, keeping [a] close eye on how this will impact our business.” (Chemical Products)
  • “Stronger than expected end to Q2 (June) saw us beat our forecast which is the first time in five quarters, though we were still below Annual Operation Plan (AOP).” (Computer & Electronic Products)
  • “Strong demand in our market has business in an upswing.” (Nonmetallic Mineral Products)
  • “International capital orders are increasing.” (Fabricated Metal Products)
  • “Brexit has not impacted our business thus far.” (Food, Beverage & Tobacco Products)
  • “Retail sales have really slowed in the last 45 days. Our industry is seeing it everywhere. Steel prices are rising.” (Machinery)
  • “Seems to be a bit more optimism in the markets. But, U.S. Presidential race might dampen the mood.” (Plastics & Rubber Products)
  • “Demand and industry production are both slowing down.” (Transportation Equipment)
  • “Oversupply continues to dominate demand. Poor weather is having a negative impact on building, creating short term slow demand.” (Wood Products)
  • “Oil and gas industry sector continues to realign staff to reflect $40-$50/barrel oil. This price range is seen as the new normal for the foreseeable future.” (Petroleum & Coal Products)
MANUFACTURING AT A GLANCE
JULY 2016
Index Series
Index
Jul
Series
Index
Jun
Percentage
Point
Change
Direction Rate
of
Change
Trend*
(Months)
PMI® 52.6 53.2 -0.6 Growing Slower 5
New Orders 56.9 57.0 -0.1 Growing Slower 7
Production 55.4 54.7 +0.7 Growing Faster 7
Employment 49.4 50.4 -1.0 Contracting From Growing 1
Supplier Deliveries 51.8 55.4 -3.6 Slowing Slower 3
Inventories 49.5 48.5 +1.0 Contracting Slower 13
Customers’ Inventories 51.0 51.0 0.0 Too High Same 2
Prices 55.0 60.5 -5.5 Increasing Slower 5
Backlog of Orders 48.0 52.5 -4.5 Contracting From Growing 1
New Export Orders 52.5 53.5 -1.0 Growing Slower 5
Imports 52.0 52.0 0.0 Growing Same 2
OVERALL ECONOMY Growing Slower 86
Manufacturing Sector Growing Slower 5

Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries indexes.

*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price

Copper*; Corrugate* (2); Dairy; Diesel (4); Gold; Natural Gas (2); Petroleum Based Products; Polyethylene Resins; Stainless Steel (4); Steel (7); Steel — Carbon (2); and Steel — Hot Rolled (6).

Commodities Down in Price

Copper*; Corn; Corrugate*; and Steel.

Commodities in Short Supply

None (4).

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.


JULY 2016 MANUFACTURING INDEX SUMMARIES


PMI®

Manufacturing expanded in July as the PMI® registered 52.6 percent, a decrease of 0.6 percentage point from the June reading of 53.2 percent, indicating growth in manufacturing for the fifth consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI® above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the July PMI® indicates growth for the 86th consecutive month in the overall economy, while indicating growth 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 July (51.1 percent) corresponds to a 2.5 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for July (52.6 percent) is annualized, it corresponds to a 3 percent increase in real GDP annually.”

THE LAST 12 MONTHS
Month PMI® Month PMI®
Jul 2016 52.6 Jan 2016 48.2
Jun 2016 53.2 Dec 2015 48.0
May 2016 51.3 Nov 2015 48.4
Apr 2016 50.8 Oct 2015 49.4
Mar 2016 51.8 Sep 2015 50.0
Feb 2016 49.5 Aug 2015 51.0
Average for 12 months – 50.4
High – 53.2
Low – 48.0
New Orders

ISM®‘s New Orders Index registered 56.9 percent in July, which is a decrease of 0.1 percentage point when compared to the 57 percent reported for June, indicating growth in new orders for the seventh consecutive month. 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 12 industries reporting growth in new orders in July — listed in order — are: Textile Mills; Miscellaneous Manufacturing; Printing & Related Support Activities; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Fabricated Metal Products; Computer & Electronic Products; Petroleum & Coal Products; Primary Metals; and Paper Products. The five industries reporting a decrease in new orders during July are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Machinery; Plastics & Rubber Products; and Transportation Equipment.

New
Orders
%
Better
%
Same
%
Worse
Net Index
Jul 2016 27 58 15 +12 56.9
Jun 2016 31 51 18 +13 57.0
May 2016 32 51 17 +15 55.7
Apr 2016 38 45 17 +21 55.8
Production

ISM®‘s Production Index registered 55.4 percent in July, which is an increase of 0.7 percentage point when compared to the 54.7 percent reported for June, indicating growth in production in July for the seventh consecutive month. An index above 51.3 percent, 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 July — listed in order — are: Printing & Related Support Activities; Miscellaneous Manufacturing; Furniture & Related Products; Food, Beverage & Tobacco Products; Chemical Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Fabricated Metal Products; and Paper Products. The six industries reporting a decrease in production during July — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; Plastics & Rubber Products; and Primary Metals.

Production %
Better
%
Same
%
Worse
Net Index
Jul 2016 25 58 17 +8 55.4
Jun 2016 28 55 17 +11 54.7
May 2016 29 52 19 +10 52.6
Apr 2016 35 52 13 +22 54.2
Employment

ISM®‘s Employment Index registered 49.4 percent in July, a decrease of 1 percentage point when compared to the June reading of 50.4 percent, indicating contraction in employment in July following one month of growth. An Employment Index above 50.6 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, in July, the eight industries reporting employment growth — listed in order — are: Textile Mills; Printing & Related Support Activities; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; and Fabricated Metal Products. The seven industries reporting a decrease in employment in July — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; Petroleum & Coal Products; Transportation Equipment; and Computer & Electronic Products.

Employment %
Higher
%
Same
%
Lower
Net Index
Jul 2016 17 68 15 +2 49.4
Jun 2016 22 58 20 +2 50.4
May 2016 20 62 18 +2 49.2
Apr 2016 24 57 19 +5 49.2
Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in July as the Supplier Deliveries Index registered 51.8 percent, which is 3.6 percentage points lower than the 55.4 percent reported for June. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The 10 industries reporting slower supplier deliveries in July — listed in order — are: Textile Mills; Fabricated Metal Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Chemical Products; Machinery; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment. The only industry reporting faster supplier deliveries in July is Primary Metals. Seven industries reported no change in supplier deliveries in July compared to June.

Supplier
Deliveries
%
Slower
%
Same
%
Faster
Net Index
Jul 2016 10 85 5 +5 51.8
Jun 2016 12 84 4 +8 55.4
May 2016 13 82 5 +8 54.1
Apr 2016 8 85 7 +1 49.1
Inventories*

The Inventories Index registered 49.5 percent in July, which is an increase of 1 percentage point when compared to the 48.5 percent reported for June, indicating raw materials inventories are contracting in July for the 13th consecutive month. An Inventories Index greater than 42.8 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 eight industries reporting higher inventories in July — listed in order — are: Apparel, Leather & Allied Products; Wood Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Machinery; Transportation Equipment; and Furniture & Related Products. The eight industries reporting lower inventories in July — listed in order — are: Primary Metals; Printing & Related Support Activities; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Paper Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; and Plastics & Rubber Products.

Inventories %
Higher
%
Same
%
Lower
Net Index
Jul 2016 19 61 20 -1 49.5
Jun 2016 19 59 22 -3 48.5
May 2016 14 62 24 -10 45.0
Apr 2016 15 61 24 -9 45.5
Customers’ Inventories*

ISM®‘s Customers’ Inventories Index registered 51 percent in July, which was the same reading reported in June, indicating that customers’ inventory levels are still considered too high in July.

The six manufacturing industries reporting customers’ inventories as being too high during the month of July — listed in order — are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Paper Products; Chemical Products; Fabricated Metal Products; and Transportation Equipment. The six industries reporting customers’ inventories as too low during July — listed in order — are: Furniture & Related Products; Primary Metals; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Machinery. Six industries reported no change in customer inventories in July compared to June.

Customers’
Inventories
%
Reporting
%Too
High
%About
Right
%Too
Low
Net Index
Jul 2016 59 13 76 11 +2 51.0
Jun 2016 57 16 70 14 +2 51.0
May 2016 60 16 68 16 0 50.0
Apr 2016 57 12 68 20 -8 46.0
Prices*

The ISM® Prices Index registered 55 percent in July, which is a decrease of 5.5 percentage points when compared to the 60.5 percent reported for June, indicating an increase in raw materials prices for the fifth consecutive month. In July, 22 percent of respondents reported paying higher prices, 12 percent reported paying lower prices, and 66 percent of supply executives reported paying the same prices as in June. A Prices Index above 52.4 percent, 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, the 12 industries that reported paying increased prices for its raw materials in July — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Plastics & Rubber Products; Machinery; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Paper Products; Fabricated Metal Products; Chemical Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Furniture & Related Products. The three industries reporting paying lower prices during the month of July are: Textile Mills; Miscellaneous Manufacturing; and Computer & Electronic Products.

Prices %
Higher
%
Same
%
Lower
Net Index
Jul 2016 22 66 12 +10 55.0
Jun 2016 27 67 6 +21 60.5
May 2016 34 59 7 +27 63.5
Apr 2016 28 62 10 +18 59.0
Backlog of Orders*

ISM®‘s Backlog of Orders Index registered 48 percent in July, a decrease of 4.5 percentage points when compared to the June reading of 52.5 percent, indicating contraction in order backlogs. Of the 86 percent of respondents who reported their backlog of orders, 16 percent reported greater backlogs, 20 percent reported smaller backlogs, and 64 percent reported no change from June.

The six industries reporting growth in order backlogs in July — listed in order — are: Textile Mills; Printing & Related Support Activities; Chemical Products; Paper Products; Miscellaneous Manufacturing; and Fabricated Metal Products. The 10 industries reporting a decrease in order backlogs during July — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Primary Metals; Furniture & Related Products; Transportation Equipment; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Machinery; and Computer & Electronic Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less
Net Index
Jul 2016 86 16 64 20 -4 48.0
Jun 2016 89 24 57 19 +5 52.5
May 2016 85 17 60 23 -6 47.0
Apr 2016 87 24 53 23 +1 50.5
New Export Orders*

ISM®‘s New Export Orders Index registered 52.5 percent in July, a decrease of 1 percentage point over the June reading of 53.5 percent. This month’s reading indicates growth in new export orders for the fifth consecutive month.

The eight industries reporting growth in new export orders in July — listed in order — are: Printing & Related Support Activities; Miscellaneous Manufacturing; Paper Products; Computer & Electronic Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Chemical Products. The six industries reporting a decrease in new export orders during July — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Electrical Equipment, Appliances & Components; Machinery; and Plastics & Rubber Products.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower
Net Index
Jul 2016 76 14 77 9 +5 52.5
Jun 2016 79 14 79 7 +7 53.5
May 2016 75 15 75 10 +5 52.5
Apr 2016 78 16 73 11 +5 52.5
Imports*

ISM®‘s Imports Index registered 52 percent in July, which was the same reading in June. This month’s reading indicates growth in imports for the second consecutive month after two months of no change and two months of contraction.

The six industries reporting growth in imports during the month of July — listed in order — are: Computer & Electronic Products; Fabricated Metal Products; Machinery; Chemical Products; Food, Beverage & Tobacco Products; and Furniture & Related Products. The four industries reporting a decrease in imports during July are: Nonmetallic Mineral Products; Miscellaneous Manufacturing; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. Seven industries reported no change in imports in July compared to June.

Imports %
Reporting
%
Higher
%
Same
%
Lower
Net Index
Jul 2016 80 14 76 10 +4 52.0
Jun 2016 84 11 82 7 +4 52.0
May 2016 83 14 72 14 0 50.0
Apr 2016 79 14 72 14 0 50.0

* The Inventories, Customers’ Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy

Average commitment lead time for Capital Expenditures increased in July by 1 day to 132 days. Average lead time for Production Materials increased by 5 days to 64 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased by 1 day to 31 days.

Percent Reporting
Capital
Expenditures
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Jul 2016 20 8 14 18 22 18 132
Jun 2016 23 7 11 15 28 16 131
May 2016 24 8 12 15 25 16 127
Apr 2016 23 8 9 23 24 13 120
Production
Materials
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Jul 2016 12 37 26 15 7 3 64
Jun 2016 15 38 23 15 7 2 59
May 2016 16 35 24 15 7 3 63
Apr 2016 15 37 21 18 8 1 59
MRO
Supplies
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Jul 2016 38 40 15 5 2 0 31
Jun 2016 39 37 17 6 1 0 30
May 2016 41 37 14 7 1 0 30
Apr 2016 37 41 15 7 0 0 29
About This Report

The data presented herein is obtained from a survey of manufacturing supply executives 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. The data 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 and Supplier Deliveries) 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 subject annually to relatively minor changes when conditions warrant them. The PMI® is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), 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® above 43.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 43.2 percent, it is generally declining. The distance from 50 percent or 43.2 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.

The Manufacturing ISM® Report On Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month.

The industries reporting growth, as indicated in the Manufacturing ISM® Report On Business®monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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 Capital Expenditures; Production Materials; 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.

ISM ROB Content

The Institute for Supply Management® (“ISM”) Report On Business® (both Manufacturing and Non-Manufacturing) (“ISM ROB”) contains information, text, files, images, video, sounds, musical works, works of authorship, applications, and any other materials or content (collectively, “Content”) of ISM (“ISM ROB Content”). ISM ROB Content is protected by copyright, trademark, trade secret, and other laws, and as between you and ISM, ISM owns and retains all rights in the ISM ROB Content. ISM hereby grants you a limited, revocable, nonsublicensable license to access and display on your individual device the ISM ROB Content (excluding any software code) solely for your personal, non-commercial use. The ISM ROB Content may also contain Content of users and other ISM licensors. Except as provided herein or as explicitly allowed in writing by ISM, you may not copy, download, stream, capture, reproduce, duplicate, archive, upload, modify, translate, publish, broadcast, transmit, retransmit, distribute, perform, display, sell, or otherwise use any ISM ROB Content.

Except as explicitly and expressly permitted by ISM, you are strictly prohibited from creating works or materials (including but not limited to tables, charts, datastreams, timeseries variables, fonts, icons, link buttons, wallpaper, desktop themes, on-line postcards, montages, mash-ups and similar videos, greeting cards, and unlicensed merchandise) that derive from or are based on the ISM ROB Content. This prohibition applies regardless of whether the derivative works or materials are sold, bartered, or given away. You may not either directly or through the use of any device, software, internet site, web-based service, or other means remove, alter, bypass, avoid, interfere with, or circumvent any copyright, trademark, or other proprietary notices marked on the Content or any digital rights management mechanism, device, or other content protection or access control measure associated with the Content including geo-filtering mechanisms. Without prior written authorization from ISM, you may not build a business utilizing the Content, whether or not for profit.

You may not create, recreate, distribute, incorporate in other work, or advertise an index of any portion of the Content unless you receive prior written authorization from ISM. Requests for permission to reproduce or distribute ISM ROB Content can be made by contacting in writing at: ISM Research, Institute for Supply Management, 2055 East Centennial Circle, Tempe, Arizona 85284-1802, or by emailingkcahill@instituteforsupplymanagement.org, Subject: Content Request.

ISM shall not have any liability, duty, or obligation for or relating to the ISM ROB Content or other information contained herein, any errors, inaccuracies, omissions or delays in providing any ISM ROB Content, or for any actions taken in reliance thereon. In no event shall ISM be liable for any special, incidental, or consequential damages, arising out of the use of the ISM ROB. Report On Business®, PMI®, and NMI® are registered trademarks of Institute for Supply Management®. Institute for Supply Management® and ISM® are registered trademarks of Institute for Supply Management, Inc.

About Institute for Supply Management®

Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 48,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM® Report On Business® is posted on ISM®‘s website at www.ismrob.org on the first business day* of every month after 10:00 a.m. (ET).

The next Manufacturing ISM® Report On Business® featuring the August 2016 data will be released at 10:00 a.m. (ET) on Thursday, September 1, 2016.

*Unless the NYSE is closed.

Supplemental ISM Report On Business® Brexit Report

Supplemental ISM Report On Business® Brexit Report

FOR RELEASE: July 1, 2016

Contact:   Kristina Cahill
Report On Business® Analyst
ISM®, ROB/Research Manager
Tempe, Arizona
800/888-6276, Ext. 3015
E-mail: kcahill@instituteforsupplymanagement.org

 

ISM Addresses Economic Concerns on Historic Brexit Event through ISM Report On Business® Brexit Report to Be Released on July 1, 2016.

TEMPE (July 1, 2016) – Last Thursday, June 23, 2016, the electorate of the United Kingdom voted to withdraw from the European Union. The final tally was 52 percent voting to leave the European Union and 48 percent voting to remain a member of the European Union. This largely unexpected result rattled markets. The next trading day, Friday, June 24, saw the Dow Jones Industrial Average open lower and close down almost 600 points. Although markets have recovered somewhat since Monday, a sense of unease persists.

 

“Great Britain’s vote to leave the European Union is historic,” said Thomas W. Derry, Chief Executive Officer of Institute for Supply Management. “We saw that polling our manufacturing and non-manufacturing Business Survey Committees might provide important information to the markets with regard to how procurement executives view their business prospects for the remainder of the year.”

 

The survey found that, while most procurement executives do not foresee major disruptions, many are cautiously watching the situation closely and believe Brexit will hamper growth.

 

When asked to project what could be the net financial impact of Brexit on their organization, a majority believed Brexit would have a negligible impact on their firm. About one in three surveyed thought their firm would be negatively or slightly negatively impacted. Only a small proportion (less than 10 percent) felt their business would be positively or at least slightly positively impacted by Brexit.

 

For the remainder of 2016, due to Brexit, what do you expect to be the net financial impact on your organization?

Composite

Manufacturing

Non-Manufacturing

Negative impact

6%

7%

6%

Slightly negative impact

27%

31%

26%

Negligible impact

61%

58%

61%

Slightly positive impact

4%

4%

4%

Positive impact

2%

0%

2%

 

Among those projecting a negative impact, it was reported that changes in the exchange value of the dollar could be the most direct cause of their challenges. Changes in global demand is seen as a secondary cause and a change in demand for goods and services by their customers in the United Kingdom is seen as a possible, though somewhat unlikely, reason for not meeting expectations.

 

Do you expect the net negative financial impact to largely result from …
Rank each item. “1” is most impactful. “4” is least impactful.

Manufacturing

Non-Manufacturing

% Rank 1

Average
Rank

% Rank 1

Average
Rank

Changes in the exchange value of the dollar

51%

1.7

43%

1.8

Changes in demand globally

30%

2.1

27%

2.1

Changes in demand by customers in the United Kingdom

14%

2.4

20%

2.6

 

For the remainder of 2016, procurement executives indicated that they were most concerned about financial market uncertainty and currency movements. Secondarily, they were concerned about global growth overall. Supply management executives were least concerned about their firm’s trade links with the U.K. and EU.

 

For the remainder of 2016, is your firm concerned about the impact of Brexit on …

Financial market uncertainty

Composite

Manufacturing

Non-Manufacturing

Not concerned

12%

10%

12%

Somewhat concerned

62%

65%

61%

Very concerned

27%

25%

27%

Currency movements

Composite

Manufacturing

Non-Manufacturing

Not concerned

29%

19%

31%

Somewhat concerned

48%

55%

46%

Very concerned

23%

26%

23%

Global growth

Composite

Manufacturing

Non-Manufacturing

Not concerned

33%

28%

33%

Somewhat concerned

51%

57%

49%

Very concerned

17%

15%

17%

Your firm’s trade links with
the U.K. and EU

Composite

Manufacturing

Non-Manufacturing

Not concerned

55%

44%

58%

Somewhat concerned

34%

45%

32%

Very concerned

11%

11%

11%

 

A strong majority of those queried believed Brexit would have a negligible impact on their capital spending plans. Fewer than one in five respondents expected that their capital budgets would be negatively impacted. Only a very small proportion of respondents saw Brexit as spurring their capital budget.

 

For the remainder of 2016, due to Brexit, what do you expect to be the net financial impact on your organization’s capital spending?

Composite

Manufacturing

Non-Manufacturing

Negative impact

4%

4%

3%

Slightly negative impact

13%

10%

13%

Negligible impact

81%

84%

81%

Slightly positive impact

1%

2%

1%

Positive impact

1%

0%

1%

 

Supply management executives were asked if their firms were likely to respond to the vote by employing various tactics to slim down or downwardly management their workforce. Overwhelmingly, respondents reported that would not or probably would not take such measures. Only a small proportion of panelists reported that their firms would or probably would hire fewer workers or more frequently utilize short-term labor contracts. Even fewer indicated they might make more use of third-party contingent labor. Less than 10 percent thought their firm might or would reduce the size of their workforce.

Given the vote on Brexit, due to heightened uncertainty, for the remainder of 2016, does your firm anticipate …

Hiring fewer workers

Composite

Manufacturing

Non-Manufacturing

Yes

5%

3%

5%

Probably yes

10%

11%

10%

Probably no

25%

19%

26%

No

60%

67%

59%

Using more short-term labor contracts

Composite

Manufacturing

Non-Manufacturing

Yes

1%

1%

1%

Probably yes

14%

12%

14%

Probably no

20%

19%

20%

No

65%

68%

65%

Using more third-party contingent labor
the U.K. and EU

Composite

Manufacturing

Non-Manufacturing

Yes

2%

1%

2%

Probably yes

11%

13%

10%

Probably no

20%

15%

21%

No

67%

71%

67%

Reducing the labor force

Composite

Manufacturing

Non-Manufacturing

Yes

1%

3%

1%

Probably yes

8%

5%

8%

Probably no

24%

22%

24%

No

67%

70%

67%

 

About This Report

The data presented herein is obtained from a survey of manufacturing and non-manufacturing supply executives 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. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

The Manufacturing and Non-Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide. Membership of the Non-Manufacturing Business Survey Committee is diversified by NAICS, based on each industry’s contribution to gross domestic product (GDP). The Non-Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services). 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).

The ISM® Report On Business® surveys are sent out to Manufacturing and Non-Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first and third business day of the following month.

ISM ROB Content The Institute for Supply Management® (“ISM”) Report On Business® (both Manufacturing and Non-Manufacturing) (“ISM ROB”) contains information, text, files, images, video, sounds, musical works, works of authorship, applications, and any other materials or content (collectively, “Content”) of ISM (“ISM ROB Content”). ISM ROB Content is protected by copyright, trademark, trade secret, and other laws, and as between you and ISM, ISM owns and retains all rights in the ISM ROB Content. ISM hereby grants you a limited, revocable, nonsublicensable license to access and display on your individual device the ISM ROB Content (excluding any software code) solely for your personal, non-commercial use. The ISM ROB Content may also contain Content of users and other ISM licensors. Except as provided herein or as explicitly allowed in writing by ISM, you may not copy, download, stream, capture, reproduce, duplicate, archive, upload, modify, translate, publish, broadcast, transmit, retransmit, distribute, perform, display, sell, or otherwise use any ISM ROB Content.

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About Institute for Supply Management®
Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 48,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

June 2016 Manufacturing ISM® Report On Business®

PMI® at 53.2%

New Orders, Production and Employment Growing
Inventories Contracting
Supplier Deliveries Slower

Supplemental ISM Report On Business® Brexit Report

“The remarkable Brexit vote in which Britain elected to withdraw from the EU created immediate, massive political and financial shockwaves. ISM immediately began work to determine how an event of this stature would ultimately impact U.S. companies. As we have analyzed the data collected directly from U.S. firms the overall response was clear – the sky is not falling; however, while most procurement executives do not foresee major disruptions, many are cautiously watching the situation closely and believe Brexit will hamper growth. Please refer to the ISM Report On Business® Brexit Report for full details.” – Thomas W. Derry, CEO, ISM. Click Here for the Supplemental Report.

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in June for the fourth consecutive month, while the overall economy grew for the 85th 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® (ISM®) Manufacturing Business Survey Committee. “The June PMI® registered 53.2 percent, an increase of 1.9 percentage points from the May reading of 51.3 percent. The New Orders Index registered 57 percent, an increase of 1.3 percentage points from the May reading of 55.7 percent. The Production Index registered 54.7 percent, 2.1 percentage points higher than the May reading of 52.6 percent. The Employment Index registered 50.4 percent, an increase of 1.2 percentage points from the May reading of 49.2 percent. Inventories of raw materials registered 48.5 percent, an increase of 3.5 percentage points from the May reading of 45 percent. The Prices Index registered 60.5 percent, a decrease of 3 percentage points from the May reading of 63.5 percent, indicating higher raw materials prices for the fourth consecutive month. Manufacturing registered growth in June for the fourth consecutive month, as 12 of our 18 industries reported an increase in new orders in June (down from 14 in May), and 12 of our 18 industries reported an increase in production in June (same as in May).”

Of the 18 manufacturing industries, 13 are reporting growth in June in the following order: Printing & Related Support Activities; Textile Mills; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Primary Metals; Machinery; and Nonmetallic Mineral Products. The three industries reporting contraction in June are: Electrical Equipment, Appliances & Components; Transportation Equipment; and Plastics & Rubber Products.

 

WHAT RESPONDENTS ARE SAYING …
  • “We are gaining new customers through better sales management.” (Food, Beverage & Tobacco Products)
  • “Slower shipments because of weather related flooding.” (Chemical Products)
  • “Conditions have remained steady from [the] past month and are in line with our forecast.” (Computer & Electronic Products)
  • “Very good start of summer for business levels/orders.” (Fabricated Metal Products)
  • “Business is steady with some signs of increase.” (Machinery)
  • “Business is still strong, but slowing slightly.” (Transportation Equipment)
  • “Business conditions are good, production and demand are stable.” (Miscellaneous Manufacturing)
  • “Orders are slowing from China. American customers still steady.” (Primary Metals)
  • “Demand continues to be robust.” (Plastics & Rubber Products)
  • “Business is still slower than expected.” (Nonmetallic Mineral Products)
MANUFACTURING AT A GLANCE
JUNE 2016
Index Series
Index
Jun
Series
Index
May
Percentage
Point
Change
Direction Rate
of
Change
Trend*
(Months)
PMI® 53.2 51.3 +1.9 Growing Faster 4
New Orders 57.0 55.7 +1.3 Growing Faster 6
Production 54.7 52.6 +2.1 Growing Faster 6
Employment 50.4 49.2 +1.2 Growing From Contracting 1
Supplier Deliveries 55.4 54.1 +1.3 Slowing Faster 2
Inventories 48.5 45.0 +3.5 Contracting Slower 12
Customers’ Inventories 51.0 50.0 +1.0 Too High From Unchanged 1
Prices 60.5 63.5 -3.0 Increasing Slower 4
Backlog of Orders 52.5 47.0 +5.5 Growing From Contracting 1
New Export Orders 53.5 52.5 +1.0 Growing Faster 4
Imports 52.0 50.0 +2.0 Growing From Unchanged 1
OVERALL ECONOMY Growing Faster 85
Manufacturing Sector Growing Faster 4

Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries indexes.

*Number of months moving in current direction.

 

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

 

Commodities Up in Price

Aluminum* (5); Corn (2); Corrugate; Diesel (3); Fuel Oil; Gasoline (2); Natural Gas; Oil (3); Stainless Steel (3); Steel (6); Steel — Carbon; Steel — Cold Rolled (3); and Steel — Hot Rolled* (5).

 

Commodities Down in Price

Aluminum*; and Steel — Hot Rolled*.

 

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.

 


JUNE 2016 MANUFACTURING INDEX SUMMARIES


PMI®

Manufacturing expanded in June as the PMI® registered 53.2 percent, an increase of 1.9 percentage points from the May reading of 51.3 percent, indicating growth in manufacturing for the fourth consecutive month, and is the highest reading since February 2015 when the PMI registered 53.3 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® above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the June PMI® indicates growth for the 85th consecutive month in the overall economy, while indicating growth in the manufacturing sector for the fourth consecutive month. Holcomb stated, “The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through June (50.8 percent) corresponds to a 2.4 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for June (53.2 percent) is annualized, it corresponds to a 3.2 percent increase in real GDP annually.”

 

THE LAST 12 MONTHS
Month PMI® Month PMI®
Jun 2016  53.2 Dec 2015  48.0
May 2016  51.3 Nov 2015  48.4
Apr 2016  50.8 Oct 2015  49.4
Mar 2016  51.8 Sep 2015  50.0
Feb 2016  49.5 Aug 2015  51.0
Jan 2016  48.2 Jul 2015  51.9
Average for 12 months – 50.3
High – 53.2
Low – 48.0

 

New Orders

ISM®’s New Orders Index registered 57 percent in June, which is an increase of 1.3 percentage points when compared to the 55.7 percent reported for May, indicating growth in new orders for the sixth consecutive month. 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 12 industries reporting growth in new orders in June — listed in order — are: Textile Mills; Printing & Related Support Activities; Petroleum & Coal Products; Apparel, Leather & Allied Products; Fabricated Metal Products; Nonmetallic Mineral Products; Chemical Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Paper Products. The five industries reporting a decrease in new orders during June are: Wood Products; Electrical Equipment, Appliances & Components; Primary Metals; Plastics & Rubber Products; and Transportation Equipment.

New
Orders
%
Better
%
Same
%
Worse
Net Index
Jun 2016 31 51 18 +13 57.0
May 2016 32 51 17 +15 55.7
Apr 2016 38 45 17 +21 55.8
Mar 2016 32 56 12 +20 58.3

 

Production

ISM®’s Production Index registered 54.7 percent in June, which is an increase of 2.1 percentage points when compared to the 52.6 percent reported for May, indicating growth in production in June for the sixth consecutive month. An index above 51.3 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 June — listed in order — are: Printing & Related Support Activities; Wood Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Primary Metals; Paper Products; Chemical Products; Nonmetallic Mineral Products; and Electrical Equipment, Appliances & Components. The three industries reporting a decrease in production during June are: Transportation Equipment; Plastics & Rubber Products; and Machinery.

Production %
Better
%
Same
%
Worse
Net Index
Jun 2016 28 55 17 +11 54.7
May 2016 29 52 19 +10 52.6
Apr 2016 35 52 13 +22 54.2
Mar 2016 28 61 11 +17 55.3

 

Employment

ISM®’s Employment Index registered 50.4 percent in June, an increase of 1.2 percentage points when compared to the May reading of 49.2 percent, indicating growth in employment in June following six consecutive months of employment contraction. An Employment Index above 50.6 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, in June, the seven industries reporting employment growth — listed in order — are: Textile Mills; Printing & Related Support Activities; Furniture & Related Products; Primary Metals; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The six industries reporting a decrease in employment in June — listed in order — are: Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Machinery; Fabricated Metal Products; Plastics & Rubber Products; and Food, Beverage & Tobacco Products.

Employment %
Higher
%
Same
%
Lower
Net Index
Jun 2016 22 58 20 +2 50.4
May 2016 20 62 18 +2 49.2
Apr 2016 24 57 19 +5 49.2
Mar 2016 15 66 19 -4 48.1

 

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in June as the Supplier Deliveries Index registered 55.4 percent, which is 1.3 percentage points higher than the 54.1 percent reported for May. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The eight industries reporting slower supplier deliveries in June — listed in order — are: Fabricated Metal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Machinery; Plastics & Rubber Products; Transportation Equipment; and Computer & Electronic Products. The three industries reporting faster supplier deliveries during June are: Furniture & Related Products; Primary Metals; and Miscellaneous Manufacturing. Seven industries reported no change in supplier deliveries in June compared to May.

Supplier
Deliveries
%
Slower
%
Same
%
Faster
Net Index
Jun 2016 12 84 4 +8 55.4
May 2016 13 82 5 +8 54.1
Apr 2016 8 85 7 +1 49.1
Mar 2016 6 90 4 +2 50.2

 

Inventories*

The Inventories Index registered 48.5 percent in June, which is an increase of 3.5 percentage points when compared to the 45 percent reported for May, indicating raw materials inventories are contracting in June for the 12th consecutive month, but at a slower rate than in May. An Inventories Index greater than 42.8 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 eight industries reporting higher inventories in June — listed in order — are: Wood Products; Printing & Related Support Activities; Plastics & Rubber Products; Machinery; Paper Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Primary Metals. The seven industries reporting lower inventories in June — listed in order — are: Furniture & Related Products; Fabricated Metal Products; Computer & Electronic Products; Chemical Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; and Electrical Equipment, Appliances & Components.

Inventories %
Higher
%
Same
%
Lower
Net Index
Jun 2016 19 59 22 -3 48.5
May 2016 14 62 24 -10 45.0
Apr 2016 15 61 24 -9 45.5
Mar 2016 15 64 21 -6 47.0

 

Customers’ Inventories*

ISM®’s Customers’ Inventories Index registered 51 percent in June, which is an increase of 1 percentage point when compared to the 50 percent reported for May, indicating that customers’ inventory levels are considered too high in June.

The five manufacturing industries reporting customers’ inventories as being too high during the month of June are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Fabricated Metal Products; Furniture & Related Products; and Transportation Equipment. The six industries reporting customers’ inventories as too low during June — listed in order — are: Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Plastics & Rubber Products; Machinery; Chemical Products; and Food, Beverage & Tobacco Products. Six industries reported no change in customer inventories in June compared to May.

Customers’
Inventories
%
Reporting
%Too
High
%About
Right
%Too
Low
Net Index
Jun 2016 57 16 70 14 +2 51.0
May 2016 60 16 68 16 0 50.0
Apr 2016 57 12 68 20 -8 46.0
Mar 2016 59 15 68 17 -2 49.0

 

Prices*

The ISM® Prices Index registered 60.5 percent in June, which is a decrease of 3 percentage points when compared to the 63.5 percent reported for May, indicating an increase in raw materials prices for the fourth consecutive month. In June, 27 percent of respondents reported paying higher prices, 6 percent reported paying lower prices, and 67 percent of supply executives reported paying the same prices as in May. A Prices Index above 52.4 percent, 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, the 12 industries that reported paying increased prices for its raw materials in June — listed in order — are: Fabricated Metal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; Nonmetallic Mineral Products; Primary Metals; Machinery; Transportation Equipment; Plastics & Rubber Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The three industries reporting paying lower prices during the month of June are: Wood Products; Petroleum & Coal Products; and Paper Products.

Prices %
Higher
%
Same
%
Lower
Net Index
Jun 2016 27 67 6 +21 60.5
May 2016 34 59 7 +27 63.5
Apr 2016 28 62 10 +18 59.0
Mar 2016 16 71 13 +3 51.5

 

Backlog of Orders*

ISM®’s Backlog of Orders Index registered 52.5 percent in June, an increase of 5.5 percentage points when compared to the May reading of 47 percent, indicating growth in order backlogs. Of the 89 percent of respondents who reported their backlog of orders, 24 percent reported greater backlogs, 19 percent reported smaller backlogs, and 57 percent reported no change from May.

The seven industries reporting growth in order backlogs in June — listed in order — are: Textile Mills; Fabricated Metal Products; Printing & Related Support Activities; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Chemical Products. The six industries reporting a decrease in order backlogs during June — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Primary Metals; Transportation Equipment; Machinery; and Paper Products.

Backlog of
Orders
%
Reporting
%
Greater
%
Same
%
Less
Net Index
Jun 2016 89 24 57 19 +5 52.5
May 2016 85 17 60 23 -6 47.0
Apr 2016 87 24 53 23 +1 50.5
Mar 2016 89 21 60 19 +2 51.0

 

New Export Orders*

ISM®’s New Export Orders Index registered 53.5 percent in June, an increase of 1 percentage point over the May reading of 52.5 percent. This month’s reading indicates growth in new export orders for the fourth consecutive month.

The 10 industries reporting growth in new export orders in June — listed in order — are: Petroleum & Coal Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; Miscellaneous Manufacturing; Machinery; Computer & Electronic Products; and Paper Products. The three industries reporting a decrease in new export orders during June are: Primary Metals; Nonmetallic Mineral Products; and Electrical Equipment, Appliances & Components.

New Export
Orders
%
Reporting
%
Higher
%
Same
%
Lower
Net Index
Jun 2016 79 14 79 7 +7 53.5
May 2016 75 15 75 10 +5 52.5
Apr 2016 78 16 73 11 +5 52.5
Mar 2016 77 15 74 11 +4 52.0

 

Imports*

ISM®’s Imports Index registered 52 percent in June, an increase of 2 percentage points over the May reading of 50 percent, indicating growth in imports in June.

The seven industries reporting growth in imports during the month of June — listed in order — are: Nonmetallic Mineral Products; Machinery; Miscellaneous Manufacturing; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Fabricated Metal Products. The two industries reporting a decrease in imports during June are: Chemical Products; and Transportation Equipment. Eight industries reported no change in imports in June compared to May.

Imports %
Reporting
%
Higher
%
Same
%
Lower
Net Index
Jun 2016 84 11 82 7 +4 52.0
May 2016 83 14 72 14 0 50.0
Apr 2016 79 14 72 14 0 50.0
Mar 2016 81 10 79 11 -1 49.5

 

* The Inventories, Customers’ Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

 

Buying Policy

Average commitment lead time for Capital Expenditures increased in June by 4 days to 131 days. Average lead time for Production Materials decreased by 4 days to 59 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies remained the same at 30 days.

Percent Reporting
Capital
Expenditures
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Jun 2016 23 7 11 15 28 16 131
May 2016 24 8 12 15 25 16 127
Apr 2016 23 8 9 23 24 13 120
Mar 2016 26 5 14 16 25 14 121
Production
Materials
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Jun 2016 15 38 23 15 7 2 59
May 2016 16 35 24 15 7 3 63
Apr 2016 15 37 21 18 8 1 59
Mar 2016 15 34 25 16 8 2 62
MRO
Supplies
Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Jun 2016 39 37 17 6 1 0 30
May 2016 41 37 14 7 1 0 30
Apr 2016 37 41 15 7 0 0 29
Mar 2016 42 37 15 5 1 0 29

 

About This Report

The data presented herein is obtained from a survey of manufacturing supply executives 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. The data 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 and Supplier Deliveries) 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 subject annually to relatively minor changes when conditions warrant them. The PMI® is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), 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® above 43.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 43.2 percent, it is generally declining. The distance from 50 percent or 43.2 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.

The Manufacturing ISM® Report On Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month.

The industries reporting growth, as indicated in the Manufacturing ISM® Report On Business®monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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 Capital Expenditures; Production Materials; 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.

ISM ROB Content

The Institute for Supply Management® (“ISM”) Report On Business® (both Manufacturing and Non-Manufacturing) (“ISM ROB”) contains information, text, files, images, video, sounds, musical works, works of authorship, applications, and any other materials or content (collectively, “Content”) of ISM (“ISM ROB Content”). ISM ROB Content is protected by copyright, trademark, trade secret, and other laws, and as between you and ISM, ISM owns and retains all rights in the ISM ROB Content. ISM hereby grants you a limited, revocable, nonsublicensable license to access and display on your individual device the ISM ROB Content (excluding any software code) solely for your personal, non-commercial use. The ISM ROB Content may also contain Content of users and other ISM licensors. Except as provided herein or as explicitly allowed in writing by ISM, you may not copy, download, stream, capture, reproduce, duplicate, archive, upload, modify, translate, publish, broadcast, transmit, retransmit, distribute, perform, display, sell, or otherwise use any ISM ROB Content.

Except as explicitly and expressly permitted by ISM, you are strictly prohibited from creating works or materials (including but not limited to tables, charts, datastreams, timeseries variables, fonts, icons, link buttons, wallpaper, desktop themes, on-line postcards, montages, mash-ups and similar videos, greeting cards, and unlicensed merchandise) that derive from or are based on the ISM ROB Content. This prohibition applies regardless of whether the derivative works or materials are sold, bartered, or given away. You may not either directly or through the use of any device, software, internet site, web-based service, or other means remove, alter, bypass, avoid, interfere with, or circumvent any copyright, trademark, or other proprietary notices marked on the Content or any digital rights management mechanism, device, or other content protection or access control measure associated with the Content including geo-filtering mechanisms. Without prior written authorization from ISM, you may not build a business utilizing the Content, whether or not for profit.

You may not create, recreate, distribute, incorporate in other work, or advertise an index of any portion of the Content unless you receive prior written authorization from ISM. Requests for permission to reproduce or distribute ISM ROB Content can be made by contacting in writing at: ISM Research, Institute for Supply Management, 2055 East Centennial Circle, Tempe, Arizona 85284-1802, or by emailingkcahill@instituteforsupplymanagement.org, Subject: Content Request.

ISM shall not have any liability, duty, or obligation for or relating to the ISM ROB Content or other information contained herein, any errors, inaccuracies, omissions or delays in providing any ISM ROB Content, or for any actions taken in reliance thereon. In no event shall ISM be liable for any special, incidental, or consequential damages, arising out of the use of the ISM ROB. Report On Business®, PMI®, and NMI® are registered trademarks of Institute for Supply Management®. Institute for Supply Management® and ISM® are registered trademarks of Institute for Supply Management, Inc.

About Institute for Supply Management®

Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 48,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM® Report On Business® is posted on ISM®‘s website at www.instituteforsupplymanagement.org on the first business day* of every month after 10:00 a.m. (ET).

The next Manufacturing ISM® Report On Business® featuring the July 2016 data will be released at 10:00 a.m. (ET) on Monday, August 1, 2016.

*Unless the NYSE is closed.

 

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IV. Manufacturing Talk Radio

Topics tackled in September were the Baby Boomer’s decision of what to do with their business – sell, merge, or shut it down, the growing positive impact of Women in Manufacturing who now only represent 25% of that workforce when they represent 50% of the general population, MAPI’s quarterly manufacturing economic outlook and all the events of Manufacturing Day…

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V. Euro Zone

Markit’s eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for September was 52.0, a five-month low, and slightly down from August’s 52.3 reading. The manufacturing sector showed steady progress at the end of the third quarter with both production and new orders showing modest expansion…

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VI. Asia Outlook

China produced 66.94Mt of crude steel in August 2015. down 3.5 percent y-o-y; Japan 8.8Mt down 5.9 percent y-o-y; India 7.66Mt, up 2.7 percent y-o-y and South Korea 5.92Mt, up 4.8 percent y-o-y. Taiwan produced 1.85Mt in August, down 5.7 percent y-o-y…

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VII. South America

Brazil’s crude steel production for the month of August 2015 was 2.8Mt, a 5.4 percent y-o-y decrease. The manufacturing PMI in Brazil in September recovered slightly to 47.0 from August’s 45.8 figure, but things are still not good in Brazil’s manufacturing sector, and a few more months of better stuff are required before we even start to think of the word recovery…

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VIII. THE MANUFACTURING SCENE

The automotive business is said to be, after, ironically enough, the oil and gas business, the second largest business in the world. There are, for example, about one billion cars currently in use on the world’s roads, and approximately 165,000 new vehicles are produced every day..

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IX. GLOBAL SUMMARY

Global growth remains positive for September 2015 in business surveys. The global business surveys measure change from month to month and have historically provided the earliest look at economic performance. Of the 18 surveys that we follow, 10 are…

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X. The Final Word

We consumers are ever at the mercy of those who supply us. What just happened in the car industry will affect some of us for quite some time, but it is more than likely that good will come out of it. Those who are guilty should be rooted out, not just the companies but also the individuals…

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ALL METALS & FORGE GROUP ISO CERTIFIED FOR 21 YEARS

Manufacturer Maintains Longest ISO9001 AS/EN9100 Certification in U.S. Metals Industry

Perry Johnson Registrars

Perry Johnson Registrars

Fairfield, New Jersey: July 6, 2015 – All Metals & Forge Group, a manufacturer of open die forgings and seamless rolled rings made of alloy, carbon, stainless and tool steel, nickel, titanium, copper and aluminum has received its seventh consecutive three-year ISO9001, AS/EN 9100 certification that was originally issued in 1994 as the first such certification of a metal forging manufacturer serving the aerospace, aviation, chemical, defense, energy & power generation, engine and turbine, food processing, gear and gear blank, machinery, metalworking, mining and tunnel boring, oil and gas exploration, petroleum, service center, shipbuilding, transportation, valve and pump industries.  The company can also produce restricted goods for the U.S. government under DFARS and/or ITARS.

All Metals & Forge Group, headquartered in Fairfield, New Jersey, manufactures simple to complex custom shaped metal forgings including blanks, cylinders, discs, gear and gear blanks, hollows, hubs, pipeline subs, rolled rings, shafts, step shafts, and many finish parts from customer-supplied prints.  The company, originally founded in 1972 by Mr. Lew Weiss as Aeromet, has expanded its product mix and markets from the  U.S. to more than 47 countries and territories around the

world.  It has produced small forgings weighing less than 4 pounds to some of the largest rings and forged parts producible using the open die or seamless rolled ring forging methods weighing more than 80,000 pounds.

As an ISO registered and certified company, All Metals & Forge Group is able to manufacture forged or finished parts for major OEMs like GE, Boeing, Caterpillar, Chevron,  Dow Chemical, Marathon Petroleum, Safran, Sikorsky, and many of their divisions, subsidiaries and subcontractors, as well as mid-size metalworking companies, service centers and even other forging manufacturers.  In addition to sales in the U.S., the company is exporting forgings to Canada, Mexico, Central America, South America and Europe.

Mr. Lewis A. Weiss, founder and president of All Metals & Forge Group, has over 40 years of experience in the forged metal industry and has taken the company through several transformative phases to expand its product mix, markets and customer base.  The company is widely known through its online advertising at its website steelforge.com, the Metals & Manufacturing Outlook monthly newsletter send to more than 60,000 industry subscribers, and its creation and sponsorship of an innovative live broadcast radio show called Manufacturing Talk Radio (www.mfgtalkradio.com)  that is heard globally each Tuesday from 1:00 – 2:00 p.m. ET.  All previous shows can be listened to at http://mfgtalkradio.com/category/radio-shows/.

AISI / Alloy Steel 8750

Chemical Analysis
C% Carbon
0.48 – 0.53
Mn% Manganese
0.75 – 1.00
P% Phosphorus
0.040 max
S% Sulfur
0.040 max
Si% Silicon
0.20 – 0.35
Ni% Nickel
0.40 – 0.70
Cr% Chromium
0.40 – 0.60
Mo% Molybdenum
0.20 – 0.30

General characteristics of Alloy Steel 8750

Alloy steel 8750 is a low-alloy steel containing nickel, chromium and molybdenum as alloying elements. The alloy has excellent hardenability, and good strength and toughness properties.

Applications

This alloy finds its uses in applications where excellent strength, toughness and wear resistance are of prime importance, and is widely used for high-strength, forged fasteners

Forging

This alloy is forged at a start temperature of around 2150ºF (1175ºC) and could be forged down to approximately 1700ºF(925ºC.) The alloy is best slow cooled after forging, but may also be transferred to a furnace held at a temperature approximating the forging finishing temperature, soaked then air cooled.

Heat treatment

Annealing: For optimum machinabilty of this alloy, a microstructure consisting of coarse lamellar pearlite to coarse spheroidite is considered to be optimum. Such a structure can be obtained by austenitizing at 1525ºF (830ºC), furnace cooling to 1310ºF (710ºC) then to 1200ºF (640º) at 20ºF/hr. An alternative is an iso-anneal at 1225ºF (650ºC)

Normalizing: 1600ºF (870ºC) and air cool.

Hardening: The alloy will be austenitized at around 1500 – 1575ºF (815 – 855ºC) and oil or water quenched depending upon section size and intricacy.

Tempering: to desired hardness, using temperatures based on past experience, following water or oil quench.

Machinability: This grade of alloy is readily machined following suitable heat treatment.

Weldability: This steel may be welded by normal fusion methods, but prior to hardening and tempering. Pre heat and post heat are recommended.

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