PMI® at 51.5%; September Manufacturing ISM® Report On Business®; New Orders and Production Growing; Employment and Inventories Contracting; Supplier Deliveries Slowing

TEMPE, Ariz., Oct. 3, 2016 /PRNewswire/ -- Economic activity in the manufacturing sector expanded in September following one month of contraction in August, and the overall economy grew for the 88th 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 September PMI^® registered 51.5 percent, an increase of 2.1 percentage points from the August reading of 49.4 percent. The New Orders Index registered 55.1 percent, an increase of 6 percentage points from the August reading of 49.1 percent. The Production Index registered 52.8 percent, 3.2 percentage points higher than the August reading of 49.6 percent. The Employment Index registered 49.7 percent, an increase of 1.4 percentage points from the August reading of 48.3 percent. Inventories of raw materials registered 49.5 percent, an increase of 0.5 percentage point from the August reading of 49 percent. The Prices Index registered 53 percent in September, the same reading as in August, indicating higher raw materials prices for the seventh consecutive month. Manufacturing expanded in September following one month of contraction in August, with nine of the 18 industries reporting an increase in new orders in September (up from six in August), and 10 of the 18 industries reporting an increase in production in September (up from eight in August)."

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

WHAT RESPONDENTS ARE SAYING …

• "Domestic and international sales moving up slightly." (Chemical Products)
• "Negotiating prices down on all metals." (Computer & Electronic Products)
• "Business is still strong, but we are seeing some pushouts from certain consumer market products." (Primary Metals)
• "Sales on the increase and positive outlook for the remainder of 2016." (Fabricated Metal Products)
• "Good growing conditions for this year's corn and soybean crop has the protein market anticipating large supplies and lower cost of goods for 2017." (Food, Beverage & Tobacco Products)
• "General business conditions are slowly improving with increased sales and sales leads." (Machinery)
• "Furniture sales are increasing." (Furniture & Related Products)
• "Some concern about fallout from the Hanjin Shipping bankruptcy. Spending time tracking containers — alternatives. Also, predicated on the impact to worldwide rates, there is some concern around both capacity and ocean rates in the near — to midterm future." (Transportation Equipment)
• "Demand increase after previous lackluster month. Some pre-buying activity underway by customers in advance of expected price increases." (Plastics & Rubber Products)
• "Oil prices have increased with respect to the first quarter but they remain at low levels affecting our revenue and purchasing power." (Petroleum & Coal Products)

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
Caustic Soda (2); Garlic – Dehydrated; HDPE; Petroleum; Plastic Resins (2); Polyethylene; Polypropylene; Propylene (2); Stainless Steel (6); Steel* (9); and Titanium Dioxide (2).

Commodities Down in Price
Copper; Corn (3); Electric Components; Scrap Steel (2); Steel* (3); Steel – Cold Rolled (2); and Steel – Hot Rolled (2).

Commodities in Short Supply
Electronic Components.

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

SEPTEMBER 2016 MANUFACTURING INDEX SUMMARIES

PMI^®
Manufacturing expanded in September as the PMI^® registered 51.5 percent, an increase of 2.1 percentage points from the August reading of 49.4 percent, indicating growth in manufacturing following one month of contraction. 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 September PMI^® indicates growth for the 88th consecutive month in the overall economy, and indicates growth in the manufacturing sector following one month of contraction. Holcomb stated, "The past relationship between the PMI^® and the overall economy indicates that the average PMI^® for January through September (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 September (51.5 percent) is annualized, it corresponds to a 2.6 percent increase in real GDP annually."

THE LAST 12 MONTHS

New Orders
ISM^®'s New Orders Index registered 55.1 percent in September, which is an increase of 6 percentage points when compared to the 49.1 percent reported for August, indicating growth in new orders following one month of contraction. 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 nine industries reporting growth in new orders in September — listed in order — are: Wood Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Computer & Electronic Products; Furniture & Related Products; Fabricated Metal Products; Paper Products; and Machinery. The six industries reporting a decrease in new orders during September — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Transportation Equipment; Electrical Equipment, Appliances & Components; Chemical Products; and Textile Mills.

Production
ISM^®'s Production Index registered 52.8 percent in September, which is an increase of 3.2 percentage points when compared to the 49.6 percent reported for August, indicating growth in production in September following one month of contraction. An index above 51.3 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

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

Employment
ISM^®'s Employment Index registered 49.7 percent in September, an increase of 1.4 percentage points when compared to the August reading of 48.3 percent, indicating contraction in employment in September for the third 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 seven industries reporting employment growth in September — listed in order — are: Textile Mills; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Food, Beverage & Tobacco Products; Paper Products; and Computer & Electronic Products. The eight industries reporting a decrease in employment in September — listed in order — are: Petroleum & Coal Products; Transportation Equipment; Primary Metals; Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Machinery; and Printing & Related Support Activities.

Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in September as the Supplier Deliveries Index registered 50.3 percent, which is 0.6 percentage point lower than the 50.9 percent reported for August. 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 September — listed in order — are: Nonmetallic Mineral Products; Furniture & Related Products; Paper Products; Machinery; Food, Beverage & Tobacco Products; Chemical Products; and Primary Metals. The four industries reporting faster supplier deliveries in September are: Petroleum & Coal Products; Fabricated Metal Products; Plastics & Rubber Products; and Computer & Electronic Products. Seven industries reported no change in supplier deliveries in September compared to August.

Inventories*
The Inventories Index registered 49.5 percent in September, which is an increase of 0.5 percentage point when compared to the 49 percent reported for August, indicating raw materials inventories are contracting in September for the 15th 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 September — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Computer & Electronic Products; Furniture & Related Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Chemical Products. The nine industries reporting lower inventories in September — listed in order — are: Wood Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Machinery; Primary Metals; Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; and Petroleum & Coal Products.

Customers' Inventories*
ISM^®'s Customers' Inventories Index registered 53 percent in September, which is 3.5 percentage points higher than the 49.5 percent reported in August, indicating that customers' inventory levels are considered too high in September.

The eight manufacturing industries reporting customers' inventories as being too high during the month of September — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Furniture & Related Products; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; and Fabricated Metal Products. The three industries reporting customers' inventories as too low during September are: Printing & Related Support Activities; Paper Products; and Electrical Equipment, Appliances & Components. Six industries reported no change in customer inventories in September compared to August.

Prices*
The ISM^® Prices Index registered 53 percent in September, the same reading as reported for August, indicating an increase in raw materials prices for the seventh consecutive month. In September, 20 percent of respondents reported paying higher prices, 14 percent reported paying lower prices, and 66 percent of supply executives reported paying the same prices as in August. 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 10 industries that reported paying increased prices for its raw materials in September — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; Chemical Products; Petroleum & Coal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing. The four industries reporting paying lower prices during the month of September are: Primary Metals; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Computer & Electronic Products.

Backlog of Orders*
ISM^®'s Backlog of Orders Index registered 49.5 percent in September, an increase of 4 percentage points when compared to the August reading of 45.5 percent, indicating contraction in order backlogs for the third consecutive month. Of the 87 percent of respondents who reported their backlog of orders, 19 percent reported greater backlogs, 20 percent reported smaller backlogs, and 61 percent reported no change from August.

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

New Export Orders*
ISM^®'s New Export Orders Index registered 52 percent in September, a decrease of 0.5 percentage point when compared to the 52.5 percent reported for August, indicating growth in new export orders for the seventh consecutive month.

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

Imports*
ISM^®'s Imports Index registered 49 percent in September, which is 2 percentage points above the August reading of 47 percent. This month's reading indicates contraction in imports for the second consecutive month.

The four industries reporting growth in imports during the month of September are: Computer & Electronic Products; Furniture & Related Products; Transportation Equipment; and Fabricated Metal Products. The 10 industries reporting a decrease in imports during September — listed in order — are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Primary Metals; Miscellaneous Manufacturing; Paper Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Food, Beverage & Tobacco Products; and Chemical Products.

* 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 September by 3 days to 132 days. Average lead time for Production Materials remained the same at 60 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased by 2 days to 31 days.