Manufacturing ISM Report On Business®, December 2012

jhg business intelligence, purchasing

Manufacturing ISM Report On Business®, December 2012

National report (USA), released by ISM on January 3, 2013.

The report was issued on January 3 by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee.

“The PMI™ registered 50.7 percent, an increase of 1.2 percentage points from November’s reading of 49.5 percent, indicating expansion in manufacturing for only the third time in the last seven months. This month’s PMI™ reading moved manufacturing off its low point for 2012 in November.

The New Orders Index remained at 50.3 percent, the same rate as in November, indicating growth in new orders for the fourth consecutive month.

The Production Index registered 52.6 percent, a decrease of 1.1 percentage points, indicating growth in production for the third consecutive month.

The Employment Index registered 52.7 percent, an increase of 4.3 percentage points, indicating a resumption of growth in employment following only one month of contraction since September 2009.

Both the Exports and Imports Indexes registered 51.5 percent, returning both indexes to growth territory following consecutive periods of contraction of six and four months, respectively.

Comments from the panel this month are mixed, with some indicating a strengthening of demand and others indicating a continuing softness in demand. Additionally, many respondents express uncertainty about government regulations, taxes and global economics in general as we approach 2013.”

PERFORMANCE BY INDUSTRY

Of the 18 manufacturing industries, seven are reporting growth in December in the following order: Furniture & Related Products; Paper Products; Petroleum & Coal Products; Wood Products; Primary Metals; Computer & Electronic Products; and Food, Beverage & Tobacco Products.

The nine industries reporting contraction in December — listed in order — are: Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; and Apparel, Leather & Allied Products.

WHAT RESPONDENTS ARE SAYING …

  • “Many Chinese sources are coming to us with cost reductions to maintain their current business volumes.” (Machinery)
  • “Saw some stronger than expected demand in October and November, but December demand is weak comparatively.” (Food, Beverage & Tobacco Products)
  • “We are seeing stabilization of orders and costs as well as production capacity for the first time in months.” (Miscellaneous Manufacturing)
  • “We are experiencing a mix of results — domestic up year over year for industrial business, down in retail and down in LATAM, EU and Asia. Next year is anyone’s guess — has never been so unpredictable.” (Apparel, Leather & Allied Products)
  • “Black Friday was good, but forward economic visibility is foggy.” (Computer & Electronic Products)
  • “The election is over; unemployment is dropping; consumer confidence is increasing as are home sales prices. We seem to be turning the corner. New car sales are increasing, which affects our customers.” (Fabricated Metal Products)
  • “Business conditions have flattened out since last month. Overall production has leveled off from their previous reduction last month.” (Transportation Equipment)
  • “Business is strengthening.” (Furniture & Related Products)
  • “Prices and orders are staying stronger than normal for December — a pleasant surprise.” (Wood Products)
  • “Uncertainty in additional government regulations and tax climate seems to be slowing orders.” (Chemical Products)

PMI (Purchasing Managers Index) December 2012

Manufacturing expanded in December as the PMI™ registered 50.7 percent, an increase of 1.2 percentage points when compared to November’s reading of 49.5 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 December PMI™ indicates growth for the 43rd consecutive month in the overall economy, and indicates expansion in the manufacturing sector. Over the last six months of 2012, manufacturing registered expansion in three months and contraction in three months, moving back and forth across the 50 percent mark. Holcomb stated, “The past relationship between the PMI™ and the overall economy indicates that the average PMI™ for January through December (51.7 percent) corresponds to a 3.1 percent increase in real gross domestic product (GDP). In addition, if the PMI™ for December (50.7 percent) is annualized, it corresponds to a 2.7 percent increase in real GDP annually.”

Read the full Manufacturing ISM Report On Business…

The data presented in the Manufacturing ISM Report On Business®, is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making. View the Manufacturing ISM Report On Business® »

About the Manufacturing ISM Report On Business

The Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM’s mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The Manufacturing ISM Report On Business® is based on data compiled from purchasing and supply executives nationwide. Membership of the Manufacturing Business Survey Committee is diversified by NAICS, based on each industry’s contribution to gross domestic product (GDP). Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers’ Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).

The resulting single index number for those meeting the criteria for seasonal adjustments (PMI, New Orders, Production, Employment, Supplier Deliveries and Inventories) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The PMI is a composite index based on the seasonally adjusted diffusion indexes for five of the indicators with equal weights: New Orders, Production, Employment, Supplier Deliveries and Inventories.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI in excess of 42.5 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.5 percent, it is generally declining. The distance from 50 percent or 42.5 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.

Responses to Buying Policy reflect the percent reporting the current month’s lead time, the approximate weighted number of days ahead for which commitments are made for Production Materials; Capital Expenditures; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.