TEMPE, Ariz.--(BUSINESS WIRE)--Economic activity in the manufacturing sector failed to grow in August, while the overall economy grew for the 82nd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business^®.

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The PMI indicates a slight decline in manufacturing during August. This continues the 2008 trend toward negligible growth or contraction each month, but ultimately results in very little overall change in the sector. This month’s report is showing the first signs of lower prices as the Prices Index fell significantly, though it is still at an inflationary level. Export orders picked up additional momentum, and that is important to manufacturers as domestic demand remains soft for most industries.”

PERFORMANCE BY INDUSTRY

The five industries reporting growth in August — listed in order — are: Paper Products; Computer & Electronic Products; Miscellaneous Manufacturing; Apparel, Leather & Allied Products; and Chemical Products. The industries reporting contraction in August are: Wood Products; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Furniture & Related Products; Machinery; and Primary Metals.

WHAT RESPONDENTS ARE SAYING …

• “Business is picking up and continues to improve for projects to be constructed in third and fourth quarters 2008.” (Electrical Equipment, Appliances & Components)
• “The lower oil prices and stronger dollar are good news.” (Fabricated Metal Products)
• “We are contracting our manufacturing skills to companies involved in wind power, coal mining and other energy fields in order to ride the recessionary wave in the rust belt.” (Machinery)
• “Material prices continue to rise; however, selling prices of our products have risen as well.” (Paper Products)
• “Prices remain predictable … they keep going up.” (Food, Beverage & Tobacco Products)

MANUFACTURING AT A GLANCE AUGUST 2008
Index		Series Index Aug.		Series Index July		Percentage Point Change		Direction		Rate of Change		Trend(a) (Months)
PMI		49.9		50.0		-0.1		Contracting		From Unchanged		1
New Orders		48.3		45.0		+3.3		Contracting		Slower		9
Production		52.1		52.9		-0.8		Growing		Slower		4
Employment		49.7		51.9		-2.2		Contracting		From Growing		1
Supplier Deliveries		50.3		55.1		-4.8		Slowing		Slower		14
Inventories		49.3		45.0		+4.3		Contracting		Slower		2
Customers’ Inventories		54.5		47.0		+7.5		Too High		From Too Low		1
Prices		77.0		88.5		-11.5		Increasing		Slower		20
Backlog of Orders		43.5		43.0		+0.5		Contracting		Slower		4
Exports		57.0		54.0		+3.0		Growing		Faster		69
Imports		48.5		46.5		+2.0		Contracting		Slower		7
OVERALL ECONOMY   Manufacturing Sector								Growing		Slower		82
								Contracting		From Unchanged		1

(a) Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Acrylics; Aluminum (7); Aluminum Extrusions (6); Caustic Soda (6); Chemicals (4); Corrugated Containers (4); Diesel Fuel(b) (6); Freight (4); Fuel Surcharges (6); Petroleum Based Products (4); Petrochemicals; Plastics (3); Plastic Resins; Polyethylene; Polyethylene — High Density; Polypropylene Resins; PVC; Steel (8); and Sulfuric Acid (2).

Commodities Down in Price

Copper; Corn; Diesel Fuel(b); Fuel Oil; Natural Gas; and Soybean Oil.

Commodities in Short Supply

Caustic Soda (6) 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

AUGUST 2008 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing contracted in August as the PMI registered 49.9 percent, 0.1 percentage point lower than the 50 percent reported in July. 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 41.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates the overall economy is growing and the manufacturing sector is contracting. Ore stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (49.5 percent) corresponds to a 2.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for August (49.9 percent) is annualized, it corresponds to a 2.8 percent increase in real GDP annually."

THE LAST 12 MONTHS

					Month											PMI																Month											PMI
					Aug 2008											49.9																Feb 2008											48.3
					Jul 2008											50.0																Jan 2008											50.7
					Jun 2008											50.2																Dec 2007											48.4
					May 2008											49.6																Nov 2007											50.0
					Apr 2008											48.6																Oct 2007											50.4
					Mar 2008											48.6																Sep 2007											50.5
					Average for 12 months – 49.6 High – 50.7 Low – 48.3

New Orders

ISM’s New Orders Index registered 48.3 percent in August, 3.3 percentage points higher than the 45 percentage points registered in July. A New Orders Index above 51.6 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

Five industries reported increases during August: Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The industries failing to grow in August are: Wood Products; Fabricated Metal Products; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; and Primary Metals.

New Orders						%Better					%Same					%Worse					Net					Index
Aug 2008						23					48					29					-6					48.3
Jul 2008						18					54					28					-10					45.0
Jun 2008						29					46					25					+4					49.6
May 2008						25					52					23					+2					49.7

Production

ISM’s Production Index decreased to 52.1 percent in August, a decrease of 0.8 percentage point from the 52.9 percent reported in July. An index above 49.9 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

Of the industries reporting in August, four registered growth: Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The industries failing to grow in August are: Printing & Related Support Activities; Wood Products; Furniture & Related Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; and Fabricated Metal Products.

Production						%Better					%Same					%Worse					Net					Index
Aug 2008						21					61					18					+3					52.1
Jul 2008						21					62					17					+4					52.9
Jun 2008						25					54					21					+4					51.5
May 2008						24					59					17					+7					51.2

Employment

ISM’s Employment Index registered 49.7 percent in August, which is a decrease of 2.2 percentage points when compared to the 51.9 percent reported in July. An Employment Index above 49.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The seven industries reporting growth in employment during August are: Petroleum & Coal Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products. The industries that reported decreases in employment during August are: Plastics & Rubber Products; Wood Products; Primary Metals; Furniture & Related Products; Fabricated Metal Products; and Transportation Equipment.

Employment						%Higher					%Same					%Lower					Net					Index
Aug 2008						17					63					20					-3					49.7
Jul 2008						19					65					16					+3					51.9
Jun 2008						11					69					20					-9					43.7
May 2008						17					63					20					-3					45.5

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations continued to slow, but at a slower rate in August, as the Supplier Deliveries Index registered 50.3 percent, which is 4.8 percentage points lower than the 55.1 percent registered in July. A reading above 50 percent indicates slower deliveries.

The six industries reporting slower supplier deliveries in August are: Primary Metals; Plastics & Rubber Products; Paper Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Transportation Equipment. The industries reporting faster deliveries in August are: Miscellaneous Manufacturing; Fabricated Metal Products; and Machinery.

Supplier Deliveries						%Slower					%Same					%Faster					Net					Index
Aug 2008						9					84					7					+2					50.3
Jul 2008						15					82					3					+12					55.1
Jun 2008						16					79					5					+11					55.1
May 2008						14					81					5					+9					53.7

Inventories

Manufacturers’ inventories contracted in August as the Inventories Index registered 49.3 percent, which is 4.3 percentage points higher than the 45 percent reported in July. An Inventories Index greater than 42.4 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 seven industries reporting higher inventories in August are: Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery. The industries that reported decreases in August are: Petroleum & Coal Products; Plastics & Rubber Products; Paper Products; Chemical Products; Miscellaneous Manufacturing; and Transportation Equipment.

Inventories						%Higher					%Same					%Lower					Net					Index
Aug 2008						18					65					17					+1					49.3
Jul 2008						12					64					24					-12					45.0
Jun 2008						21					58					21					0					51.2
May 2008						19					58					23					-4					48.0

Customers’ Inventories(c)

The ISM Customers’ Inventories Index registered 54.5 percent in August, an increase of 7.5 percentage points when compared to July’s reading of 47 percent. The index indicates that respondents believe their customers’ inventories are too high at this time.

Six industries reported higher customers’ inventories during August: Furniture & Related Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Chemical Products; Food, Beverage & Tobacco Products; and Machinery. The industries that reported lower customers’ inventories during August are: Plastics & Rubber Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Fabricated Metal Products.

Customers’ Inventories			% Reporting			%Too High			%About Right			%Too Low			Net			Index
Aug 2008			66			22			65			13			+9			54.5
Jul 2008			74			17			60			23			-6			47.0
Jun 2008			72			25			60			15			+10			55.0
May 2008			67			14			66			20			-6			47.0

Prices(c)

The ISM Prices Index registered 77 percent in August, indicating manufacturers are paying higher prices on average when compared to July. While 60 percent of respondents reported paying higher prices and 6 percent reported paying lower prices, 34 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In August, 17 industries reported paying higher prices: Textile Mills; Apparel, Leather & Allied Products; Wood Products; Petroleum & Coal Products; Paper Products; Miscellaneous Manufacturing; Chemical Products; Plastics & Rubber Products; Machinery; Fabricated Metal Products; Transportation Equipment; Nonmetallic Mineral Products; Computer & Electronic Products; Printing & Related Support Activities; Furniture & Related Products; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. Primary Metals is the only industry reporting paying lower prices on average in August.

Prices						%Higher					%Same					%Lower					Net					Index
Aug 2008						60					34					6					+54					77.0
Jul 2008						80					17					3					+77					88.5
Jun 2008						84					15					1					+83					91.5
May 2008						78					18					4					+74					87.0

Backlog of Orders(c)

ISM’s Backlog of Orders Index registered 43.5 percent in August, 0.5 percentage point higher than the 43 percent reported in July. Of the 87 percent of respondents who reported their backlog of orders, 15 percent reported greater backlogs, 28 percent reported smaller backlogs, and 57 percent reported no change from July.

The four industries reporting an increase in order backlogs in August are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The industries that reported decreases in order backlogs during August are: Nonmetallic Mineral Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Primary Metals; Wood Products; Furniture & Related Products; Transportation Equipment; and Chemical Products.

Backlog of Orders			% Reporting			%Greater			%Same			%Less			Net			Index
Aug 2008			87			15			57			28			-13			43.5
Jul 2008			85			15			56			29			-14			43.0
Jun 2008			86			19			57			24			-5			47.5
May 2008			87			18			56			26			-8			46.0

New Export Orders(c)

ISM’s New Export Orders Index registered 57 percent in August, an increase of 3 percentage points when compared to July’s index of 54 percent. This is the 69th consecutive month of growth in the New Export Orders Index.

The 10 industries reporting growth in new export orders in August are: Apparel, Leather & Allied Products; Paper Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Fabricated Metal Products; and Transportation Equipment. Machinery is the only industry reporting a decrease in new export orders in August.

New Export Orders

% Reporting

%Higher

%Same

%Lower

Net

Index

Aug 2008

79

23

68

9

+14