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Tuesday, December 12, 2017
Memory Industry News
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Manufacturing index decreased due to material and inventory


Thursday, December 07, 2017

Economic activity in the manufacturing sector expanded in November, and the overall economy grew for the 102nd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

U.S. manufacturing expanded in November as the PMI registered 58.2 percent, a decrease of 0.5 percentage point from the October reading of 58.7 percent. This indicates growth in manufacturing for the 15th consecutive month led by expansion in new orders and production, offset by supplier delivery improvement and declines in raw material inventory. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee states, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (57.4 percent) corresponds to a 4.5 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for November (58.2 percent) is annualized, it corresponds to a 4.7 percent increase in real GDP annually.”

A PMI above 43.3 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the November PMI indicates growth for the 102nd consecutive month in the overall economy and the 15th straight month of growth in the manufacturing sector.

Orders, Production and Inventory

ISM’s New Orders Index registered 64 percent in November, which is an increase of 0.6 percentage point when compared to the 63.4 percent reported for October, indicating growth in new orders for the 15th consecutive month.

“New Order expansion continues at a strong pace with the index at six straight months of levels above 60 percent,” indicates Fiore. A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

ISM’s Production Index registered 63.9 percent in November, which is an increase of 2.9 percentage points when compared to the 61 percent reported for October, indicating growth in production for the 15th consecutive month. This is the highest reading since March 2011, when the index registered 64.2 percent.

“Production expansion continues at levels that kept pace with new orders, consumed raw material inventory and positively impacted customer inventory,” says Fiore. An index above 51.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The Inventories Index registered 47 percent in November, which is a decrease of 1 percentage point when compared to the 48 percent reported for October, indicating raw materials inventories contracted in November. An Inventories Index greater than 42.9 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

ISM’s Backlog of Orders Index registered 55 percent in November, the same level of expansion as the 55 percent reported for October, indicating growth in order backlogs for the 10th consecutive month. Of the 92 percent of respondents who reported their backlog of orders, 25 percent reported greater backlogs, 15 percent reported smaller backlogs, and 60 percent reported no change from October.

“Backlog expansion has stabilized during the period, consistent with October and at pre-Hurricane levels. This provides strong support to continued manufacturing expansion,” adds Fiore.

Exports, Imports and Prices

ISM’s New Export Orders Index registered 56 percent in November, a decrease of 0.5 percentage point when compared to the 56.5 percent reported for October, indicating growth in new export orders for the 21st consecutive month.

ISM’s Imports Index registered 54.5 percent in November, an increase of 0.5 percentage point when compared to the 54 percent reported for October, indicating that imports grew in November for the 10th consecutive month.

The ISM Prices Index registered 65.5 percent in November, a decrease of 3 percentage points from the October level of 68.5 percent, indicating an increase in raw materials prices for the 21st consecutive month. In November, 37 percent of respondents reported paying higher prices, 6 percent reported paying lower prices, and 57 percent of supply executives reported paying the same prices as in October.

“The Business Survey Committee noted price increases continue most notably in primary materials, including metals (steel, aluminum, copper, nickel based metals); basic and intermediate chemicals; corrugate, plastic resins and parts made from plastic resins,” reports Fiore.

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.

Employment

ISM’s Employment Index registered 59.7 percent in November, a decrease of 0.1 percentage point when compared to the October reading of 59.8 percent. This indicates growth in employment in November for the 14th consecutive month.

“Employment expansion remains strong in spite of signs of labor market tightening,” says Fiore.

An Employment Index above 50.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

By: DocMemory
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