Economic activity in the manufacturing sector contracted in January for the fourth consecutive month, while the overall economy grew for the 80th 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 Manufacturing Business Survey Committee. "The January PMI registered 48.2 percent, an increase of 0.2 percentage point from the seasonally adjusted December reading of 48 percent. The New Orders Index registered 51.5 percent, an increase of 2.7 percentage points from the seasonally adjusted reading of 48.8 percent in December. The Production Index registered 50.2 percent, 0.3 percentage point higher than the seasonally adjusted December reading of 49.9 percent. The Employment Index registered 45.9 percent, 2.1 percentage points below the seasonally adjusted December reading of 48 percent. Inventories of raw materials registered 43.5 percent, the same reading as in December. The Prices Index registered 33.5 percent, the same reading as in December, indicating lower raw materials prices for the 15th consecutive month. Comments from the panel indicate a mix ranging from strong to soft orders, as eight of our 18 industries report an increase in orders, and seven industries report a decrease in orders."
Of the 18 manufacturing industries, eight are reporting growth in January in the following order: Textile Mills; Wood Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Furniture & Related Products; Computer & Electronic Products; Machinery; and Electrical Equipment, Appliances & Components. The 10 industries reporting contraction in January — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Transportation Equipment; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Primary Metals; and Chemical Products.
WHAT RESPONDENTS ARE SAYING …
"The oil and gas sector continues to be challenged by low oil and gas prices. Risk of suppliers filing for bankruptcy and reducing their workforce is becoming an increasing risk. Our company workforce is also declining." (Petroleum & Coal Products)
"Business this month [is] better than last month and better than this period last year. Reduced oil and basic chemical prices providing favorable margin comparisons." (Chemical Products)
"Huge rollout in wireless in 2016 across all markets. We should be very, very busy." (Computer & Electronic Products)
"We are a bit slower, but staying busy." (Fabricated Metal Products)
"Business is still strong, but slowing." (Transportation Equipment)
"2016 starting off with strong orders." (Primary Metals)
"Market is sluggish to start the year." (Wood Products)
"Medical device continues to be strong." (Miscellaneous Manufacturing)
"Overall demand is higher than expected for post-holiday season." (Plastics & Rubber Products)
"Much worldwide macroeconomic uncertainty affecting our business. Business confidence seems low." (Food, Beverage & Tobacco Products)
MANUFACTURING AT A GLANCE
January 2016
Index
Series Index
Jan
Series Index
Dec
Percentage
Point
Change
Direction
Rate of Change
Trend* (Months)
PMI
48.2
48.0
+0.2
Contracting
Slower
4
New Orders
51.5
48.8
+2.7
Growing
From Contracting
1
Production
50.2
49.9
+0.3
Growing
From Contracting
1
Employment
45.9
48.0
-2.1
Contracting
Faster
2
Supplier Deliveries
50.0
49.8
+0.2
Unchanged
From Faster
1
Inventories
43.5
43.5
0.0
Contracting
Same
7
Customers' Inventories
51.5
51.5
0.0
Too High
Same
6
Prices
33.5
33.5
0.0
Decreasing
Same
15
Backlog of Orders
43.0
41.0
+2.0
Contracting
Slower
8
Exports
47.0
51.0
-4.0
Contracting
From Growing
1
Imports
51.0
45.5
+5.5
Growing
From Contracting
1
OVERALL ECONOMY
Manufacturing Sector
Growing
Faster
80
Contracting
Slower
4
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.
Indexes reflect newly released seasonal adjustment factors.
COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY
Commodities Up in Price
Natural Gas; and Steel*.
Commodities Down in Price
Aluminum (14); Copper (3); Crude Oil (2); Diesel (2); Gasoline (2); HDPE Resin (2); Nickel (7); Oil (2); Resin Based Products; Stainless Steel (15); Steel* (7); Steel – Cold Rolled (4); and Steel – Hot Rolled (4).
Commodities in Short Supply
None (3).
Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.
JANUARY 2016 MANUFACTURING INDEX SUMMARIES
PMI
Manufacturing contracted in January as the PMI® registered 48.2 percent, an increase of 0.2 percentage point from the seasonally adjusted December reading of 48 percent, indicating contraction in manufacturing for the fourth 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 January PMI® indicates growth for the 80th consecutive month in the overall economy, while indicating contraction in the manufacturing sector. Holcomb stated, "The past relationship between the PMI® and the overall economy indicates that the PMI® for January (48.2 percent) corresponds to a 1.6 percent increase in real gross domestic product (GDP) on an annualized basis."
THE LAST 12 MONTHS
Month
PMI®
Month
PMI®
Jan 2016
48.2
Jul 2015
51.9
Dec 2015
48.0
Jun 2015
53.1
Nov 2015
48.4
May 2015
53.1
Oct 2015
49.4
Apr 2015
51.6
Sep 2015
50.0
Mar 2015
52.3
Aug 2015
51.0
Feb 2015
53.3
Average for 12 months – 50.9
High – 53.3
Low – 48.0
New Orders
ISM's New Orders Index registered 51.5 percent in January, an increase of 2.7 percentage points when compared to the seasonally adjusted December reading of 48.8 percent, indicating growth in new orders in January following two consecutive months of contraction in new orders. 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 January — listed in order — are: Wood Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Primary Metals; Machinery; Computer & Electronic Products; and Chemical Products. The seven industries reporting a decrease in new orders during January — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Transportation Equipment; Nonmetallic Mineral Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Fabricated Metal Products.
New Orders
%Better
%Same
%Worse
Net
Index
Jan 2016
26
49
25
+1
51.5
Dec 2015
20
51
29
-9
48.8
Nov 2015
22
53
25
-3
49.0
Oct 2015
24
53
23
+1
50.8
Production
ISM's Production Index registered 50.2 percent in January, which is an increase of 0.3 percentage point when compared to the seasonally adjusted 49.9 percent reported for December, indicating growth in production in January following two consecutive months of contraction in production. An index above 51.3 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.
The six industries reporting growth in production during the month of January — listed in order — are: Textile Mills; Electrical Equipment, Appliances & Components; Primary Metals; Computer & Electronic Products; Miscellaneous Manufacturing; and Machinery. The eight industries reporting a decrease in production during January — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Fabricated Metal Products; Transportation Equipment; Petroleum & Coal Products; Paper Products; Food, Beverage & Tobacco Products; and Chemical Products.
Production
%Better
%Same
%Worse
Net
Index
Jan 2016
22
51
27
-5
50.2
Dec 2015
19
54
27
-8
49.9
Nov 2015
20
57
23
-3
49.8
Oct 2015
23
56
21
+2
52.5
Employment
ISM's Employment Index registered 45.9 percent in January, which is a decrease of 2.1 percentage points when compared to the seasonally adjusted 48 percent reported for December, indicating contraction in employment 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, in January, the four industries reporting employment growth are: Printing & Related Support Activities; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Machinery. The 10 industries reporting a decrease in employment in January — listed in order — are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Chemical Products; Primary Metals; Paper Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Transportation Equipment; Computer & Electronic Products; and Fabricated Metal Products.
Employment
%Higher
%Same
%Lower
Net
Index
Jan 2016
11
67
22
-11
45.9
Dec 2015
10
73
17
-7
48.0
Nov 2015
15
69
16
-1
50.8
Oct 2015
12
68
20
-8
47.7
Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was unchanged in January as the Supplier Deliveries Index registered 50 percent, which is 0.2 percentage point higher than the seasonally adjusted 49.8 percent reported for December. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.
The five industries reporting slower supplier deliveries in January are: Paper Products; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Computer & Electronic Products. The seven industries reporting faster supplier deliveries during January — listed in order — are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Primary Metals; Plastics & Rubber Products; Miscellaneous Manufacturing; Fabricated Metal Products; and Transportation Equipment. Six industries reported no change in supplier deliveries in January compared to December.
Supplier Deliveries
%Slower
%Same
%Faster
Net
Index
Jan 2016
7
87
6
+1
50.0
Dec 2015
7
84
9
-2
49.8
Nov 2015
5
86
9
-4
49.6
Oct 2015
5
88
7
-2
49.7
Inventories*
The Inventories Index registered 43.5 percent in January, the same reading as in December, indicating raw materials inventories are contracting in January for the seventh 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 two industries reporting higher inventories in January are: Computer & Electronic Products; and Miscellaneous Manufacturing. The 11 industries reporting lower inventories in January — listed in order — are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Primary Metals; Furniture & Related Products; Machinery; Fabricated Metal Products; Paper Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; and Transportation Equipment.
Inventories
%Higher
%Same
%Lower
Net
Index
Jan 2016
13
61
26
-13
43.5
Dec 2015
14
59
27
-13
43.5
Nov 2015
13
60
27
-14
43.0
Oct 2015
15
63
22
-7
46.5
Customers' Inventories*
ISM's Customers' Inventories Index registered 51.5 percent in January, the same reading as in December. January's reading indicates that customers' inventories are considered to be too high for the sixth consecutive month.
The seven manufacturing industries reporting customers' inventories as being too high during the month of January — listed in order — are: Paper Products; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The six industries reporting customers' inventories as too low during January — listed in order — are: Textile Mills; Primary Metals; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; and Transportation Equipment.
Customers' Inventories
% Reporting
%Too High
%About Right
%Too Low
Net
Index
Jan 2016
63
17
69
14
+3
51.5
Dec 2015
63
18
67
15
+3
51.5
Nov 2015
64
16
69
15
+1
50.5
Oct 2015
60
15
72
13
+2
51.0
Prices*
The ISM Prices Index registered 33.5 percent in January, the same reading as in December, indicating a decrease in raw materials prices for the 15th consecutive month. In January, 5 percent of respondents reported paying higher prices, 38 percent reported paying lower prices, and 57 percent of supply executives reported paying the same prices as in December. A Prices Index above 52.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics Producer Price Index for Intermediate Materials.
Of the 18 manufacturing industries, no industry reported paying increased prices for their raw materials in January. The 15 industries reporting paying lower prices during the month of January — listed in order — are: Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Primary Metals; Nonmetallic Mineral Products; Chemical Products; Apparel, Leather & Allied Products; Textile Mills; Machinery; Paper Products; Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Computer & Electronic Products.
Prices
%Higher
%Same
%Lower
Net
Index
Jan 2016
5
57
38
-33
33.5
Dec 2015
4
59
37
-33
33.5
Nov 2015
1
69
30
-29
35.5
Oct 2015
9
60
31
-22
39.0
Backlog of Orders*
ISM's Backlog of Orders Index registered 43 percent in January, an increase of 2 percentage points as compared to the December reading of 41 percent, indicating contraction in order backlogs for the eighth consecutive month. Of the 88 percent of respondents who measure their backlog of orders, 17 percent reported greater backlogs, 31 percent reported smaller backlogs, and 52 percent reported no change from December.
The four industries reporting an increase in order backlogs in January are: Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Furniture & Related Products; and Primary Metals. The 12 industries reporting a decrease in order backlogs during January — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Wood Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; and Machinery.
Backlog of Orders
% Reporting
%Greater
%Same
%Less
Net
Index
Jan 2016
88
17
52
31
-14
43.0
Dec 2015
88
12
58
30
-18
41.0
Nov 2015
89
15
56
29
-14
43.0
Oct 2015
88
13
59
28
-15
42.5
New Export Orders*
ISM's New Export Orders Index registered 47 percent in January, which is a decrease of 4 percentage points when compared to the December reading of 51 percent, and indicates contraction in the New Export Orders index.
The four industries reporting growth in new export orders in January are: Wood Products; Furniture & Related Products; Primary Metals; and Chemical Products. The nine industries reporting a decrease in new export orders during January — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Paper Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Transportation Equipment; Machinery; Computer & Electronic Products; and Fabricated Metal Products.
New Export Orders
% Reporting
%Higher
%Same
%Lower
Net
Index
Jan 2016
74
9
76
15
-6
47.0
Dec 2015
78
14
74
12
+2
51.0
Nov 2015
79
9
77
14
-5
47.5
Oct 2015
75
12
71
17
-5
47.5
Imports*
ISM's Imports Index registered 51 percent in January, which is 5.5 percentage points higher than the 45.5 percent reported in December, and indicates growth in imports following three consecutive months of contraction.
The eight industries reporting growth in imports during the month of January — listed in order — are: Furniture & Related Products; Paper Products; Nonmetallic Mineral Products; Primary Metals; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Machinery; and Transportation Equipment. The six industries reporting a decrease in imports during January — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Fabricated Metal Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Chemical Products.
Imports
% Reporting
%Higher
%Same
%Lower
Net
Index
Jan 2016
82
14
74
12
+2
51.0
Dec 2015
81
8
75
17
-9
45.5
Nov 2015
80
12
74
14
-2
49.0
Oct 2015
77
12
70
18
-6
47.0
* 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 by 1 day to 126 days. Average lead time for Production Materials in January increased by 3 days to 60 days. Average lead time for Maintenance, Repair and Operating Supplies remained unchanged at 28 days.
Percent Reporting
Capital Expenditures
Hand-to-Mouth
30 Days
60 Days
90 Days
6 Months
1 Year+
Average Days
Jan 2016
24
6
13
20
20
17
126
Dec 2015
23
9
12
15
25
16
127
Nov 2015
21
6
12
19
24
18
135
Oct 2015
25
8
13
18
21
15
119
Production Materials
Hand-to-Mouth
30 Days
60 Days
90 Days
6 Months
1 Year+
Average Days
Jan 2016
14
37
24
15
9
1
60
Dec 2015
15
39
24
14
6
2
57
Nov 2015
13
39
25
14
6
3
62
Oct 2015
15
38
24
14
5
4
63
MRO Supplies
Hand-to-Mouth
30 Days
60 Days
90 Days
6 Months
1 Year+
Average Days
Jan 2016
41
37
16
6
0
0
28
Dec 2015
42
36
17
5
0
0
28
Nov 2015
35
41
20
4
0
0
30
Oct 2015
39
41
14
6
0
0
28