September 2018 Manufacturing ISM Report on Business; PMI at 59.8%


Reading time ( words)

Economic activity in the manufacturing sector expanded in September, and the overall economy grew for the 113th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee: “The September PMI registered 59.8%, a decrease of 1.5 percentage points from the August reading of 61.3%. The New Orders Index registered 61.8%, a decrease of 3.3 percentage points from the August reading of 65.1%. The Production Index registered 63.9%, a 0.6 percentage point increase compared to the August reading of 63.3%. The Employment Index registered 58.8%, an increase of 0.3 percentage point from the August reading of 58.5%. The Supplier Deliveries Index registered 61.1%, a 3.4 percentage point decrease from the August reading of 64.5%. The Inventories Index registered 53.3%, a decrease of 2.1 percentage points from the August reading of 55.4%. The Prices Index registered 66.9% in September, a 5.2 percentage point decrease from the August reading of 72.1%, indicating higher raw materials prices for the 31st consecutive month.

“Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60% or above for the 17th straight month, and the Customers’ Inventories Index remaining low. The Backlog of Orders Index continued to expand, but at lower levels compared to the previous month. Consumption improved, with production and employment continuing to expand, at higher levels compared to August, despite shortages in labor and materials. Inputs—expressed as supplier deliveries (decreased), inventories and imports—improved compared to the previous month’s activity. But continued supply chain inefficiencies led to an increased consumption of inventory and a slight expansion of imports, which adequately supported production output. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue to limit potential, but at more manageable levels.

“Export orders expanded, but four major industries are no longer contributing. Price pressure continues, but the index softened for the fourth straight month and dropped below 70 for the first time since December 2017. Demand remains robust, but employment resources and supply chains continue to struggle, but to a lesser degree. Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations,” says Fiore.

September 2018 Manufacturing Index Summaries

PMI

Manufacturing expanded in September as the PMI registered 59.8%, a decrease of 1.5 percentage points from the August reading of 61.3%. “This indicates strong growth in manufacturing for the 25th consecutive month, led by strong production output, continued strength in new orders, improvements in supply chain delivery performance, and better utilization of existing inventory accounts,” says Fiore. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI above 43.2%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the September PMI indicates growth for the 113th consecutive month in the overall economy and the 25th straight month of growth in the manufacturing sector. “The past relationship between the PMI and the overall economy indicates that the PMI for September (59.8%) corresponds to a 5.1 percent increase in real gross domestic product (GDP) on an annualized basis.” 

New Orders

ISM’s New Orders Index registered 61.8% in September, which is a decrease of 3.3 percentage points when compared to the 65.1% reported for August, indicating growth in new orders for the 33rd consecutive month. “Customer demand expansion softened slightly this month but continued to expand at high levels, with the index at or above 60% for the 17th straight month,” says Fiore. A New Orders Index above 52.4%, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

Production

ISM’s Production Index registered 63.9% in September, which is an increase of 0.6 percentage point when compared to the 63.3% reported for August, indicating growth in production for the 25th consecutive month. “Production expansion continued in September, surpassing August expansion and resulting in the strongest gains since January 2018, when the index registered 64.5. Labor constraints throughout the supply chain, impacts due to lead-time expansions and transportation difficulties continue to limit full production potential,” says Fiore. An index above 51.5%, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

Employment

ISM’s Employment Index registered 58.8% in September, an increase of 0.3 percentage point when compared to the August reading of 58.5%. This indicates growth in employment in September for the 24th consecutive month. “Employment continued to expand, supporting production growth. The index achieved its highest level since February 2018, when it registered 59.7. Respondents continued to note labor-market issues as a constraint to their production and, more significantly, their suppliers’ production capability,” says Fiore. An Employment Index above 50.8%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. 

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations slowed in September, as the Supplier Deliveries Index registered 61.1%. This is 3.4 percentage points lower than the 64.5% reported for August. “This is the 24th straight month of slowing supplier deliveries and indicates the supply chain’s difficulty in keeping up with new order and production demand. Lead times continue to extend, supply chain labor issues continue to restrict performance, and transportation issues are limiting supplier execution,” says Fiore. A reading below 50% indicates faster deliveries, while a reading above 50% indicates slower deliveries.

About Institute for Supply Management

Institute for Supply Management (ISM) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business, its highly regarded certification programs and the ISM Mastery Model. 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 website on the first business day of every month after 10:00 a.m. ET.

Share


Suggested Items

Today’s MilAero Options: Outsourcing—‘Everybody’s Doing it’ Not so True Today

06/27/2016 | Marc Carter
There was a time, not so many decades ago, when that most commonly-stated mantra (“lower labor costs”) behind offshoring printed circuit fab (and some assembly) operations, still had some case-by-case validity.

PartnerTech Inks Framework Agreement with Picadeli AB

04/20/2015 | PartnerTech
PartnerTech and Picadeli AB, a company that currently provides self-service salads in more than a thousand grocery shops in Sweden, have signed a framework agreement regarding the industrialization and manufacture of Picadeli’s unique new refrigerated counter.

Drive a Car? You Can Fly a Typhoon!

02/18/2015 | Pete Starkey, I-Connect007
The EIPC conference delegates see Eurofighter assembly at Airbus Defence and Space. The major attraction was the opportunity to see the final assembly line for Eurofighter Typhoon multi-role combat aircraft destined for the German Air Force. Editor Pete Starkey has a post-show review.



Copyright © 2018 I-Connect007. All rights reserved.