October Manufacturing ISM Report On Business®; PMI at 50.8%;

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October Manufacturing ISM Report On Business®; PMI at 50.8%; New Orders, Production and Employment Growing; Supplier Deliveries Slowing; Inventories Contracting

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report’s information reflects the entire United States, while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of October 2011.

TEMPE, Ariz. — (BUSINESS WIRE) — November 1, 2011 — Economic activity in the manufacturing sector expanded in October for the 27th consecutive month, and the overall economy grew for the 29th 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 50.8 percent, a decrease of 0.8 percentage point from September’s reading of 51.6 percent, indicating expansion in the manufacturing sector for the 27th consecutive month. The New Orders Index increased 2.8 percentage points from September to 52.4 percent, indicating a return to growth after three months of contraction. The Prices Index, at 41 percent, dropped 15 percentage points, and is below the 50 percent mark for the first time since May 2009 when it registered 43.5 percent. Inventories decreased to 46.7 percent, which is 5.3 percentage points below the September reading of 52 percent. Comments from respondents are mixed, indicating positive relief from raw materials pricing and continuing strength in a few industries, but there is also more concern and caution about growth in this uncertain economy.”

PERFORMANCE BY INDUSTRY

Of the 18 manufacturing industries, eight are reporting growth in October, in the following order: Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Paper Products; and Machinery. The six industries reporting contraction in October — listed in order — are: Plastics & Rubber Products; Chemical Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing.

WHAT RESPONDENTS ARE SAYING …

“Starting to see some deflation on raw materials.” (Chemical Products)
“Overall industry volumes remain flat vs. previous month. Uncertainty in supply chain is increasing due to lower volumes vs. historical.” (Electrical Equipment, Appliances & Components)
“International: contraction in demand for our products is driving mitigation of excess material on order. Contract manufacturers are adjusting their resources accordingly.” (Machinery)
“Business is very strong, both domestically and internationally.” (Fabricated Metal Products)
“With metal prices declining, we are seeing some short-term forecast strength. If metal pricing increases again, this strength is expected to disappear again.” (Primary Metals)
“Auto industry still strong.” (Transportation Equipment)
“Business is slowing — not crashing — but uncertainty and caution is the order of the day.” (Plastics & Rubber Products)
“Retail branded business is slower than expected due to consumers continuing to move to private label- and store-brand products for price advantage. Raw material supplies are in good shape, but prices are staying stubbornly higher than expected.” (Food, Beverage & Tobacco Products)

MANUFACTURING AT A GLANCE OCTOBER 2011

Index	Series Index Oct	Series Index Sep	Percentage Point Change	Direction	Rate of Change	Trend(a) (Months)

PMI	50.8	51.6	-0.8	Growing	Slower	27
New Orders	52.4	49.6	+2.8	Growing	From Contacting	1
Production	50.1	51.2	-1.1	Growing	Slower	2
Employment	53.5	53.8	-0.3	Growing	Slower	25
Supplier Deliveries	51.3	51.4	-0.1	Slowing	Slower	29
Inventories	46.7	52.0	-5.3	Contracting	From Growing	1
Customers’ Inventories	43.5	49.0	-5.5	Too Low	Faster	31
Prices	41.0	56.0	-15.0	Decreasing	From Increasing	1
Backlog of Orders	47.5	41.5	+6.0	Contracting	Slower	5
Exports	50.0	53.5	-3.5	Unchanged	From Growing	1
Imports	49.5	54.5	-5.0	Contracting	From Growing	1
OVERALL ECONOMY Manufacturing Sector				Growing	Slower	29
OVERALL ECONOMY Manufacturing Sector				Growing	Slower	27

(a) Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum Products(b) (3); Caustic Soda; Copper(b); Steel(b) (14); and Titanium Dioxide (2).

Commodities Down in Price

Alloy Metals; Aluminum (2); Aluminum Products(b) (2); Copper(b) (3); Copper Based Products; Corn; Diesel Fuel; Natural Gas (3); Nickel; Plastic Resins (3); Steel(b) (6); and Steel Products.

Commodities in Short Supply

Castings (2) is the only commodity reported in short supply.

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

(b) Reported as both up and down in price.

OCTOBER 2011 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing continued its growth in October as the PMI registered 50.8 percent, a decrease of 0.8 percentage point when compared to September’s reading of 51.6 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 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 29th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 27th consecutive month. Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (55.7 percent) corresponds to a 4.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for October (50.8 percent) is annualized, it corresponds to a 2.9 percent increase in real GDP annually.”

THE LAST 12 MONTHS

Month	PMI	Month	PMI

Oct 2011	50.8	Apr 2011	60.4
Sep 2011	51.6	Mar 2011	61.2
Aug 2011	50.6	Feb 2011	61.4
Jul 2011	50.9	Jan 2011	60.8
Jun 2011	55.3	Dec 2010	58.5
May 2011	53.5	Nov 2010	58.2
Average for 12 months – 56.1 High – 61.4 Low – 50.6

New Orders

ISM’s New Orders Index registered 52.4 percent in October, which is an increase of 2.8 percentage points when compared to the September reading of 49.6 percent, and represents a return to growth after three consecutive months of contraction. A New Orders Index above 52.1 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 October — listed in order — are: Petroleum & Coal Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Computer & Electronic Products; Primary Metals; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing. The nine industries reporting decreases in new orders in October — listed in order — are: Wood Products; Textile Mills; Chemical Products; Furniture & Related Products; Printing & Related Support Activities; Paper Products; Transportation Equipment; Machinery; and Apparel, Leather & Allied Products.

New Orders	%Better	%Same	%Worse	Net	Index

Oct 2011	22	53	25	-3	52.4
Sep 2011	23	53	24	-1	49.6
Aug 2011	22	53	25	-3	49.6
Jul 2011	24	53	23	+1	49.2

Production

ISM’s Production Index registered 50.1 percent in October, which is a decrease of 1.1 percentage points when compared to the September reading of 51.2 percent, and indicates growth for the second consecutive month. An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The eight industries reporting growth in production during the month of October — listed in order — are: Wood Products; Primary Metals; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Paper Products; Computer & Electronic Products; and Miscellaneous Manufacturing. The nine industries reporting a decrease in production in October — listed in order — are: Plastics & Rubber Products; Textile Mills; Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Chemical Products; Transportation Equipment; Machinery; and Apparel, Leather & Allied Products.

Production	%Better	%Same	%Worse	Net	Index

Oct 2011	21	59	20	+1	50.1
Sep 2011	23	56	21	+2	51.2
Aug 2011	19	62	19	0	48.6
Jul 2011	22	60	18	+4	52.3

Employment

ISM’s Employment Index registered 53.5 percent in October, which is 0.3 percentage point lower than the 53.8 percent reported in September. This is the 25th consecutive month the Employment Index has been above 50 percent. An Employment Index above 50.1 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, eight reported growth in employment in October in the following order: Textile Mills; Primary Metals; Fabricated Metal Products; Petroleum & Coal Products; Transportation Equipment; Paper Products; Machinery; and Computer & Electronic Products. The six industries reporting a decrease in employment in October — listed in order — are: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Chemical Products; Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products.

Employment	%Higher	%Same	%Lower	Net	Index

Oct 2011	22	63	15	+7	53.5
Sep 2011	22	62	16	+6	53.8
Aug 2011	22	63	15	+7	51.8
Jul 2011	24	63	13	+11	53.5

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in October as the Supplier Deliveries Index registered 51.3 percent, which is 0.1 percentage point lower than the 51.4 percent registered in September. This is the 29th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in October are: Furniture & Related Products; Computer & Electronic Products; Transportation Equipment; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The five industries reporting faster deliveries in October are: Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Chemical Products; and Machinery. Eight industries reported no change in supplier deliveries in October compared to September.

Supplier Deliveries	%Slower	%Same	%Faster	Net	Index

Oct 2011	10	81	9	+1	51.3
Sep 2011	12	81	7	+5	51.4
Aug 2011	12	81	7	+5	50.6
Jul 2011	13	80	7	+6	50.4

Inventories

The Inventories Index registered 46.7 percent in October, 5.3 percentage points lower than the 52 percent reported in September. An Inventories Index greater than 42.7 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 October are: Textile Mills; Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery. The 11 industries reporting decreases in inventories in October — listed in order — are: Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Primary Metals; Chemical Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Transportation Equipment; Fabricated Metal Products; Plastics & Rubber Products; and Paper Products.

Inventories	%Higher	%Same	%Lower	Net	Index

Oct 2011	17	59	24	-7	46.7
Sep 2011	23	58	19	+4	52.0
Aug 2011	23	63	14	+9	52.3
Jul 2011	18	60	22	-4	49.3

Customers’ Inventories(c)

The ISM Customers’ Inventories Index registered 43.5 percent in October, 5.5 percentage points lower than in September when the index registered 49 percent. This is the 31st consecutive month the Customers’ Inventories Index has been below 50 percent, indicating that respondents believe their customers’ inventories are too low at this time.

The five manufacturing industries reporting customers’ inventories as being too high during October are: Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Chemical Products. The 11 industries reporting customers’ inventories as too low during October — listed in order — are: Primary Metals; Nonmetallic Mineral Products; Petroleum & Coal Products; Textile Mills; Miscellaneous Manufacturing; Plastics & Rubber Products; Transportation Equipment; Machinery; Paper Products; Computer & Electronic Products; and Fabricated Metal Products.

Customers’ Inventories	% Reporting	%Too High	%About Right	%Too Low	Net	Index

Oct 2011	71	12	63	25	-13	43.5
Sep 2011	73	17	64	19	-2	49.0
Aug 2011	73	15	63	22	-7	46.5
Jul 2011	72	11	66	23	-12	44.0

Prices(c)

The ISM Prices Index registered 41 percent in October, 15 percentage points lower than the 56 percent reported in September. This is the sixth consecutive month the Prices Index has registered below 80 percent since December 2010, and is the first month of contraction since May 2009 when the index registered 43.5 percent. The last time the Prices Index decreased more than 15 percentage points was in June 2010, when it registered 57 percent compared to the prior month’s reading of 77.5 percent. In October, 14 percent of respondents reported paying higher prices, 32 percent reported paying lower prices and 54 percent of supply executives reported paying the same prices as in September. 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, only two report paying increased prices during the month of October: Furniture & Related Products; and Computer & Electronic Products. The 13 industries reporting paying lower prices on average during the month of October — listed in order — are: Plastics & Rubber Products; Primary Metals; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Transportation Equipment; Food, Beverage & Tobacco Products; Machinery; Petroleum & Coal Products; Printing & Related Support Activities; Chemical Products; Paper Products; Miscellaneous Manufacturing; and Fabricated Metal Products.

Prices	%Higher	%Same	%Lower	Net	Index

Oct 2011	14	54	32	-18	41.0
Sep 2011	26	60	14	+12	56.0
Aug 2011	29	53	18	+11	55.5
Jul 2011	35	48	17	+18	59.0

Backlog of Orders(c)

ISM’s Backlog of Orders Index registered 47.5 percent in October, which is 6 percentage points higher than the 41.5 percent reported in September. Of the 82 percent of respondents who reported their backlog of orders, 19 percent reported greater backlogs, 24 percent reported smaller backlogs, and 57 percent reported no change from September.

The two industries reporting increased order backlogs in October are: Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. The eight industries reporting decreases in order backlogs during October — listed in order — are: Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Chemical Products; Fabricated Metal Products; and Apparel, Leather & Allied Products. Seven industries reported no change in backlog of orders in October compared to September.

Backlog of Orders	% Reporting	%Greater	%Same	%Less	Net	Index

Oct 2011	82	19	57	24	-5	47.5
Sep 2011	86	15	53	32	-17	41.5
Aug 2011	86	15	62	23	-8	46.0
Jul 2011	81	16	58	26	-10	45.0

New Export Orders(c)

ISM’s New Export Orders Index registered 50 percent in October, which is 3.5 percentage points lower than the 53.5 percent reported in September. This indicates exports were unchanged from September, and follows 28 consecutive months of growth in the New Export Orders Index.

The five industries reporting growth in new export orders in October are: Plastics & Rubber Products; Fabricated Metal Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The five industries reporting a decrease in new export orders during October are: Furniture & Related Products; Paper Products; Machinery; Food, Beverage & Tobacco Products; and Primary Metals. Eight industries reported no change in exports in October compared to September.

New Export Orders	% Reporting	%Higher	%Same	%Lower	Net	Index

Oct 2011	76	14	72	14	0	50.0
Sep 2011	78	18	71	11	+7	53.5
Aug 2011	76	16	69	15	+1	50.5
Jul 2011	77	19	70	11	+8	54.0

Imports(c)

ISM’s Imports Index registered 49.5 percent in October, which is 5 percentage points lower than the 54.5 percent reported in September. This is the first month of contraction in the index following 25 consecutive months of growth.

The five industries reporting growth in imports during the month of October are: Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Fabricated Metal Products; and Miscellaneous Manufacturing. The eight industries reporting a decrease in imports during October — listed in order — are: Primary Metals; Textile Mills; Computer & Electronic Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; and Apparel, Leather & Allied Products.

Imports	% Reporting	%Higher	%Same	%Lower	Net	Index

Oct 2011	75	13	73	14	-1	49.5
Sep 2011	80	19	71	10	+9	54.5
Aug 2011	77	18	75	7	+11	55.5
Jul 2011	74	17	73	10	+7	53.5

(c) The Backlog of Orders, Prices, Customers’ Inventories, Imports and New Export Orders Indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy

Average commitment leadtime for Capital Expenditures decreased 4 days to 113 days. Average leadtime for Production Materials decreased 2 days to 55 days. Average leadtime for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 25 days.

Percent Reporting

Capital Expenditures	Hand-to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days

Oct 2011	24	8	11	22	24	11	113
Sep 2011	22	10	14	16	26	12	117
Aug 2011	28	8	8	19	25	12	114
Jul 2011	30	9	10	15	23	13	112

Production Materials	Hand-to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days

Oct 2011	16	39	25	13	5	2	55
Sep 2011	15	37	28	13	5	2	57
Aug 2011	14	46	22	13	3	2	52
Jul 2011	16	38	27	12	5	2	55

MRO Supplies	Hand-to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days

Oct 2011	44	40	12	4	0	0	25
Sep 2011	43	37	16	4	0	0	26
Aug 2011	45	39	12	3	1	0	26
Jul 2011	44	43	9	4	0	0	24

About this Report

The data presented herein 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.

Data and Method of Presentation

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.

The Manufacturing ISM Report On Business^® surveys are sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM then compiles the reports for release on the first business day of the following month.

The industries reporting growth, as indicated in the Manufacturing ISM Report On Business^® monthly reports, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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.

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 full text version of the Manufacturing ISM Report On Business^®is posted on ISM’s Web site at www.ism.ws on the first business day of every month after 10:10 a.m. (ET).

The next Manufacturing ISM Report On Business^® featuring the November 2011 data will be released at 10:00 a.m. (ET) on Thursday, December 1, 2011.

Contact:

Institute for Supply Management
Rose Marie Goupil, 800-888-6276, Ext. 3015
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