Economic activity in the manufacturing sector expanded in February for the 31st consecutive month, and the overall economy grew for the 33rd 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 PMI registered 52.4 percent, a decrease of 1.7 percentage points from January's reading of 54.1 percent, indicating expansion in the manufacturing sector for the 31st consecutive month. The New Orders Index registered 54.9 percent, a decrease of 2.7 percentage points from January's reading of 57.6 percent, reflecting the 34th consecutive month of growth in new orders. Prices of raw materials increased for the second consecutive month, with the Prices Index registering 61.5 percent. As was the case in January, new orders, production and employment all grew in February — although at somewhat slower rates than in January. Comments from the panel continue to reflect a generally positive outlook for the next few months."

Performance By Industry

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

What Respondents Are Saying ...

• "Business is holding steady. Concern over commodity prices ongoing." (Chemical Products)
• "Still somewhat cautious about recovery. Expecting a good year, but not seeing orders yet." (Machinery)
• "Demand remains consistent to strong on all levels." (Paper Products)
• "Demand from auto makers is getting stronger." (Fabricated Metal Products)
• "Manufacturing is busy. Spending money on new equipment to accommodate customer demands. Material prices are staying in check." (Food, Beverage & Tobacco Products)
• "There seems to be a much more positive outlook for the economy. Customers are ordering material for stock rather than just working hand-to-mouth." (Fabricated Metal Products)
• "Global GDP softening and beginning to impact the demand chain." (Computer & Electronic Products)
• "Production is busy — several new large projects." (Primary Metals)
• "Customers [are] lowering inventory levels, anticipating price decrease due to third-party published reports on materials." (Plastics & Metal Products)
• "We are optimistic about the U.S. market this year, a little hesitant about what may happen in Europe and unsure about China." (Transportation Equipment)
• "Shipments are increasing over last year. Waiting to see if the trend continues." (Wood Products)COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum Products; Caustic Soda (2); Copper Products; Ethylene; Forgings; #2 Fuel Oil; HDPE Products; Plastic Resins; Polypropylene; Propylene; Stainless Steel (2); Steel (3); Steel Bar; Steel — Cold Rolled (2); Steel — Hot Rolled; Scrap Metal; and Titanium Dioxide (2).

Commodities Down in Price

Natural Gas (7) is the only commodity reported down in price.

Commodities in Short Supply

Hard Drives (3) is the only commodity reported in short supply.

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

FEBRUARY 2012 MANUFACTURING INDEX SUMMARIES

PMI 

Manufacturing continued its growth in February as the PMI registered 52.4 percent, a decrease of 1.7 percentage points when compared to January's reading of 54.1 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 in excess of 42.6 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 33rd consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 31st consecutive month. Holcomb stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January and February (53.3 percent) corresponds to a 3.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for February (52.4 percent) is annualized, it corresponds to a 3.3 percent increase in real GDP annually." 

New Orders

ISM's New Orders Index registered 54.9 percent in February, which is a decrease of 2.7 percentage points when compared to the January reading of 57.6 percent. This represents a continuation of growth for the 34th consecutive month. 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).

The 10 industries reporting growth in new orders in February — listed in order — are: Primary Metals; Apparel, Leather & Allied Products; Petroleum & Coal Products; Machinery; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; Paper Products; and Computer & Electronic Products. The four industries reporting decreases in new orders in February are: Nonmetallic Mineral Products; Furniture & Related Products; Printing & Related Support Activities; and Plastics & Rubber Products.

Production

The 10 industries reporting growth in production during the month of February — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Transportation Equipment; Machinery; Paper Products; Primary Metals; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The three industries reporting a decrease in production in February are: Furniture & Related Products; Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.

Employment 

ISM's Employment Index registered 53.2 percent in February, which is 1.1 percentage points lower than the 54.3 percent reported in January. This is the 29th consecutive month of growth in the Employment Index. 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, nine reported growth in employment in February in the following order: Apparel, Leather & Allied Products; Paper Products; Primary Metals; Machinery; Transportation Equipment; Petroleum & Coal Products; Miscellaneous Manufacturing; Fabricated Metal Products; and Computer & Electronic Products. The five industries reporting a decrease in employment in February are: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Chemical Products; Food, Beverage & Tobacco Products; and Nonmetallic Mineral Products.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was faster in February as the Supplier Deliveries Index registered 49 percent, which is 4.6 percentage points lower than the 53.6 percent reported in January. This is the first month supplier deliveries have been faster than the previous month, following 31 consecutive months in which supplier deliveries slowed. A reading above 50 percent indicates slower deliveries.

The four industries reporting slower supplier deliveries in February are: Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; and Machinery. The six industries reporting faster deliveries in February — listed in order — are: Primary Metals; Plastics & Rubber Products; Petroleum & Coal Products; Chemical Products; Paper Products; and Miscellaneous Manufacturing. Eight industries reported no change in supplier deliveries in February compared to January. 

Inventories

The Inventories Index registered 49.5 percent in February, which is the same percentage reported for January. 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 February — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Primary Metals; Machinery; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Transportation Equipment; and Computer & Electronic Products. The six industries reporting decreases in inventories in February — listed in order — are: Paper Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Fabricated Metal Products; and Miscellaneous Manufacturing.

Customers' Inventories

The ISM Customers' Inventories Index registered 46 percent in February, which is 1.5 percentage points lower than in January when the index registered 47.5 percent. Customers' inventories have registered at or below 50 percent for 35 consecutive months. A reading below 50 percent indicates customers' inventories are considered too low.

The five manufacturing industries reporting customers' inventories as being too high during February are: Apparel, Leather & Allied Products; Primary Metals; Chemical Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The seven industries reporting customers' inventories as too low during February — listed in order — are: Nonmetallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; Paper Products; Computer & Electronic Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components. 

Prices

The ISM Prices Index registered 61.5 percent in February, 6 percentage points higher than the 55.5 percent reported in January. This is the second consecutive month this index has reflected an increase in the price of raw materials since September 2011, when the index registered 56 percent. In February, 31 percent of respondents reported paying higher prices, 8 percent reported paying lower prices and 61 percent of supply executives reported paying the same prices as in January. A Prices Index above 49.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

Of the 18 manufacturing industries, 13 industries report paying increased prices during the month of February in the following order: Nonmetallic Mineral Products; Fabricated Metal Products; Plastics & Rubber Products; Primary Metals; Machinery; Chemical Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Furniture & Related Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Computer & Electronic Products; and Food, Beverage & Tobacco Products. The only industry reporting paying lower prices on average during the month of February is Paper Products.

Backlog of Orders

ISM's Backlog of Orders Index registered 52 percent in February, which is 0.5 percentage point lower than the 52.5 percent reported in January. Of the 84 percent of respondents who reported their backlog of orders, 25 percent reported greater backlogs, 21 percent reported smaller backlogs, and 54 percent reported no change from January.

The eight industries reporting increased order backlogs in February — listed in order — are: Petroleum & Coal Products; Primary Metals; Paper Products; Printing & Related Support Activities; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; and Chemical Products. The six industries reporting decreases in order backlogs during February — listed in order — are: Nonmetallic Mineral Products; Plastics & Rubber Products; Furniture & Related Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products.

New Export Orders

ISM's New Export Orders Index registered 59.5 percent in February, which is 4.5 percentage points higher than the 55 percent reported in January. The New Export Orders Index has registered 50 percent or above for the past 32 consecutive months.

The 12 industries reporting growth in new export orders in February — listed in order — are: Primary Metals; Miscellaneous Manufacturing; Apparel, Leather & Allied Products; Paper Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; Transportation Equipment; Machinery; and Electrical Equipment, Appliances & Components. The only industry reporting a decrease in new export orders during February is Nonmetallic Mineral Products.

Imports

ISM's Imports Index registered 54 percent in February, which is 1.5 percentage points higher than the 52.5 percent reported in January. The Imports Index reflects three consecutive months of growth after two months of contraction in the past 30 months.

The seven industries reporting growth in imports during the month of February — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Transportation Equipment; Fabricated Metal Products; and Computer & Electronic Products. The four industries reporting a decrease in imports during February are: Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Machinery. Seven industries reported no change in imports in February compared to January. 

Buying Policy

Average commitment lead time for Capital Expenditures increased by 4 days to 120 days. Average lead time for Production Materials increased 1 day to 58 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 26 days.

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