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Manufacturing Sector Expands in November

December 4, 2017

The report was issued  by Timothy R. Fiore, of the Institute for Supply Management: "The November PMI registered 58.2 percent, a decrease of 0.5 percentage point from the October reading of 58.7 percent. The New Orders Index registered 64 percent, an increase of 0.6 percentage point from the October reading of 63.4 percent. The Production Index registered 63.9 percent, a 2.9 percentage point increase compared to the October reading of 61 percent. The Employment Index registered 59.7 percent, a decrease of 0.1 percentage point from the October reading of 59.8 percent.

The Supplier Deliveries Index registered 56.5 percent, a 4.9 percentage point decrease from the October reading of 61.4 percent. The Inventories Index registered 47 percent, a decrease of 1 percentage point from the October reading of 48 percent. The Prices Index registered 65.5 percent in November, a 3 percentage point decrease from the October level of 68.5, indicating higher raw materials prices for the 21st consecutive month. Comments from the panel reflect expanding business conditions, with new orders and production leading gains, employment expanding at a slower rate, order backlogs stable and expanding, and export orders all continuing to grow in November. Supplier deliveries continued to slow (improving), but at slower rates, and inventories continued to contract during the period. Price increases continued, but at a slower rate. The Customers' Inventories Index improved but remains at low levels."

Of the 18 manufacturing industries, 14 reported growth in November, in the following order: Paper Products; Machinery; Transportation Equipment; Computer & Electronic Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Primary Metals. Two industries reported contraction during the period: Wood Products; and Petroleum & Coal Products.

WHAT RESPONDENTS ARE SAYING

  • "Continuing to see more orders for the next six to 12 months." (Chemical Products)
  • "Strong sales through third and now fourth quarters. Backlog increasing, and capacity at suppliers tightening." (Machinery)
  • "Business has leveled out but remains strong heading into the end of the year." (Computer & Electronic Products)
  • "We are just coming off a record sales year. We expect to continue in 2018 robust activity." (Miscellaneous Manufacturing)
  • "We are seeing steady, consistent demand for end of year. We usually see a slowdown, which we haven't seen yet." (Fabricated Metal Products)
  • "Overall industry demand remains strong. Continue to have a healthy backlog of orders. Local economy is also strong, with a fairly tight labor market." (Transportation Equipment)
  • "Business is strong. Employment is tight. Supplier deliveries have lengthened. A few suppliers are still blaming Hurricane Harvey for the lead times." (Food, Beverage & Tobacco Products)
  • "Strong season demand for products and continued requirements for uptime." (Nonmetallic Mineral Products)
  • "Currently, we have not experienced the typical seasonal slowdown toward the end of Q4. Could be that there is a lot of optimism in the American economy." (Plastics & Rubber Products)

 

MANUFACTURING AT A GLANCE

November 2017

Index

Series Index

Nov

Series Index

Oct

Percentage

Point

Change

Direction

Rate of Change

Trend* (Months)

PMI

58.2

58.7

-0.5

Growing

Slower

15

New Orders

64.0

63.4

+0.6

Growing

Faster

15

Production

63.9

61.0

+2.9

Growing

Faster

15

Employment

59.7

59.8

-0.1

Growing

Slower

14

Supplier Deliveries

56.5

61.4

-4.9

Slowing

Slower

19

Inventories

47.0

48.0

-1.0

Contracting

Faster

2

Customers' Inventories

45.5

43.5

+2.0

Too Low

Slower

5

Prices

65.5

68.5

-3.0

Increasing

Slower

21

Backlog of Orders

55.0

55.0

0.0

Growing

Same

10

New Export Orders

56.0

56.5

-0.5

Growing

Slower

21

Imports

54.5

54.0

+0.5

Growing

Faster

10

OVERALL ECONOMY

Manufacturing Sector

Growing

Slower

102

Growing

Slower

15

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
Aluminum (13); Caustic Soda (5); Copper; Corrugate (14); Nickel Based Metals; Pallets; Plastic Resins (4); Polycarbonate; Polyethylene (3); Polypropylene (3); Resin Based Products; Silicone; Soybean Oil; Steel Hot Rolled (12); Steel Tubing; Titanium Dioxide (2); and Zinc Oxide.

Commodities Down in Price
None.

Commodities in Short Supply
Capacitors (5); Resistors; and Titanium Dioxide.

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

NOVEMBER 2017 MANUFACTURING INDEX SUMMARIES

PMI
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," says Fiore. 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 43.3 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. Fiore says, "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."

THE LAST 12 MONTHS

 

Month

PMI


 

Month

PMI

Nov 2017

58.2


 

May 2017

54.9

Oct 2017

58.7


 

Apr 2017

54.8

Sep 2017

60.8


 

Mar 2017

57.2

Aug 2017

58.8


 

Feb 2017

57.7

Jul 2017

56.3


 

Jan 2017

56.0

Jun 2017

57.8


 

Dec 2016

54.5

Average for 2017 57.4

Average for 12 months 57.1

High 60.8

Low 54.5

New Orders
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," says 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).

Fourteen of 18 industries reported growth in new orders in November, listed in the following order: Electrical Equipment, Appliances & Components; Paper Products; Furniture & Related Products; Plastics & Rubber Products; Machinery; Primary Metals; Printing & Related Support Activities; Computer & Electronic Products; Transportation Equipment; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; and Fabricated Metal Products. Two industries  Wood Products; and Textile Mills  reported a decrease in new orders in November compared to October.

 

New Orders

%Better

%Same

%Worse

Net

Index

Nov 2017

31

60

9

+22

64.0

Oct 2017

35

52

13

+22

63.4

Sep 2017

35

56

9

+26

64.6

Aug 2017

33

52

15

+18

60.3

Production
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 14 industries reporting growth in production during the month of November listed in order are:  Paper Products; Furniture & Related Products; Plastics & Rubber Products; Transportation Equipment; Machinery; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Printing & Related Support Activities; Computer & Electronic Products; Chemical Products; Primary Metals; Miscellaneous Manufacturing; and Nonmetallic Mineral Products. No industry reported a decrease in production in November compared to October.

 

Production

%Better

%Same

%Worse

Net

Index

Nov 2017

33

59

8

+25

63.9

Oct 2017

30

59

11

+19

61.0

Sep 2017

31

59

10

+21

62.2

Aug 2017

32

56

12

+20

61.0

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.

Of the 18 manufacturing industries, the 11 reporting employment growth in November listed in order are: Textile Mills; Machinery; Computer & Electronic Products; Transportation Equipment; Paper Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; Fabricated Metal Products; and Petroleum & Coal Products. Two industries Apparel, Leather & Allied Products; and Electrical Equipment, Appliances & Components    reported a decrease in employment in November.

 

Employment

%Higher

%Same

%Lower

Net

Index

Nov 2017

23

70

7

+16

59.7

Oct 2017

25

68

7

+18

59.8

Sep 2017

24

69

7

+17

60.3

Aug 2017

26

67

7

+19

59.9

Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in November, as the Supplier Deliveries Index registered 56.5 percent. This is 4.9 percentage points lower than the 61.4 percent reported for October. "This is the 19th straight month of slowing supplier deliveries, and reflects delivery performance improvement over the prior month, but still insufficient to maintain raw material inventory levels," says Fiore. 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 November listed in order are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Paper Products; Machinery; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing; and Fabricated Metal Products. Three industries Furniture & Related Products; Primary Metals; and Electrical Equipment, Appliances & Components reported faster deliveries in November compared to October.

 

Supplier Deliveries

%Slower

%Same

%Faster

Net

Index

Nov 2017

21

68

11

+10

56.5

Oct 2017

26

69

5

+21

61.4

Sep 2017

32

64

4

+28

64.4

Aug 2017

18

78

4

+14

57.1

Inventories*
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. "The inventory contraction reflects the continued difficulty of the supply chain to deliver materials and services meeting production schedules," says Fiore. 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).

The five industries reporting higher inventories in November are: Printing & Related Support Activities; Transportation Equipment; Machinery; Chemical Products; and Primary Metals. The 11 industries reporting lower inventories in November listed in order  are: Wood Products; Textile Mills; Paper Products; Furniture & Related Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Computer & Electronic Products; and Nonmetallic Mineral Products.

 

Inventories

%Higher

%Same

%Lower

Net

Index

Nov 2017

16

62

22

-6

47.0

Oct 2017

17

62

21

-4

48.0

Sep 2017

22

61

17

+5

52.5

Aug 2017

22

67

11

+11

55.5

Customers' Inventories*
ISM's Customers' Inventories Index registered 45.5 percent in November, which is 2 percentage points higher than the 43.5 percent reported for October, indicating that customers' inventory levels were still considered too low in November. "The index remains at low levels and continues to contract, but November performance indicates that production output made some improvement in meeting customer inventory requirements," says Fiore.

Three manufacturing industries Furniture & Related Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products reported customers' inventories as being too high during the month of November. The eight industries reporting customers' inventories as too low during November listed in order are: Primary Metals; Electrical Equipment, Appliances & Components; Paper Products; Chemical Products; Computer & Electronic Products; Machinery; Fabricated Metal Products; and Transportation Equipment. Seven industries reported no change in customer inventories in November compared to October.

 

Customers'
Inventories

%
Reporting

%Too
High

%About
Right

%Too
Low

Net

Index

Nov 2017

57

9

73

18

-9

45.5

Oct 2017

54

9

69

22

-13

43.5

Sep 2017

58

6

72

22

-16

42.0

Aug 2017

55

5

72

23

-18

41.0

Prices*
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," says 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.

Fifteen industries reported paying increased prices for raw materials in November, in the following order: Nonmetallic Mineral Products; Plastics & Rubber Products; Textile Mills; Machinery; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components;  Fabricated Metal Products; Transportation Equipment; Petroleum & Coal Products; Furniture & Related Products; Chemical Products; Primary Metals; and Computer & Electronic Products. No industry reported price decreases in November compared to October.

 

Prices

%Higher

%Same

%Lower

Net

Index

Nov 2017

37

57

6

+31

65.5

Oct 2017

43

51

6

+37

68.5

Sep 2017

45

53

2

+43

71.5

Aug 2017

30

64

6

+24

62.0

Backlog of Orders*
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. "Backlog expansion has stabilized during the period, consistent with October and at pre-Hurricane levels. This provides strong support to continued manufacturing expansion," says Fiore. 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.

The 11 industries reporting growth in order backlogs in November listed in order are: Apparel, Leather & Allied Products; Paper Products; Primary Metals; Furniture & Related Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Machinery; Petroleum & Coal Products; Computer & Electronic Products; Transportation Equipment; and Food, Beverage & Tobacco Products. The four industries reporting a decrease in order backlogs during November are: Wood Products; Fabricated Metal Products; Plastics & Rubber Products; and Miscellaneous Manufacturing.

 

Backlog of
Orders

%
Reporting

%Greater

%Same

%Less

Net

Index

Nov 2017

92

25

60

15

+10

55.0

Oct 2017

88

26

58

16

+10

55.0

Sep 2017

89

29

58

13

+16

58.0

Aug 2017

90

28

59

13

+15

57.5

New Export Orders*
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. "All six big industry sectors continued to expand export activity during the period," says Fiore.

The eight industries reporting growth in new export orders in November listed in order are: Paper Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Transportation Equipment; Miscellaneous Manufacturing; Computer & Electronic Products; Machinery; and Chemical Products. One industry Fabricated Metal Products reported a decrease in new export orders. Nine industries reported no change in export orders in November compared to October.

 

New Export
Orders

%
Reporting

%Higher

%Same

%Lower

Net

Index

Nov 2017

80

14

84

2

+12

56.0

Oct 2017

77

17

79

4

+13

56.5

Sep 2017

78

18

78

4

+14

57.0

Aug 2017

81

16

79

5

+11

55.5

Imports*
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 11 industries reporting growth in imports during the month of November listed in order are: Textile Mills; Primary Metals; Printing & Related Support Activities; Nonmetallic Mineral Products; Transportation Equipment; Computer & Electronic Products; Machinery; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; and Paper Products. Two industries Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components reported a decrease in imports during November compared to October.

 

Imports

%
Reporting

%Higher

%Same

%Lower

Net

Index

Nov 2017

82

14

81

5

+9

54.5

Oct 2017

80

16

76

8

+8

54.0

Sep 2017

83

14

80

6

+8

54.0

Aug 2017

83

16

77

7

+9

54.5

*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 decreased in November to 140 days from 145 days. Average lead time for Production Materials decreased by 1 day to 59 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased by 4 days to 37 days.

 

Percent Reporting


 

 

 

 

 

 

 

 

Capital
Expenditures

Hand-to-
Mouth

30
Days

60
Days

90
Days

6
Months

1 Year+

Average
Days

Nov 2017

19

7

10

18

28

18

140

Oct 2017

20

5

13

18

22

22

145

Sep 2017

20

8

11

15

26

20

142

Aug 2017

19

7

12

17

25

20

143


 

 

 

 

 

 

 

 

Production
Materials

Hand-to-
Mouth

30
Days

60
Days

90
Days

6
Months

1 Year+

Average
Days

Nov 2017

11

37

26

19

6

1

59

Oct 2017

13

36

26

17

6

2

60

Sep 2017

11

34

29

18

6

2

62

Aug 2017

12

38

24

18

6

2

61


 

 

 

 

 

 

 

 

MRO Supplies

Hand-to-
Mouth

30
Days

60
Days

90
Days

6
Months

1 Year+

Average
Days

Nov 2017

32

38

19

8

3

0

37

Oct 2017

34

40

19

5

2

0

33

Sep 2017

33

39

19

7

2

0

35

Aug 2017

31

42

18

6

3

0

36

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