October 2014 Manufacturing ISM® Report On Business®

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 2014.

New Orders, Employment and Production Growing, Inventories Growing, Supplier Deliveries Slowing

Economic activity in the manufacturing sector expanded in October for the 17th consecutive month, and the overall economy grew for the 65th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM^®Report On Business^®.

The report was issued by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management^® (ISM^®) Manufacturing Business Survey Committee. "The October PMI^® registered 59 percent, an increase of 2.4 percentage points from September’s reading of 56.6 percent, indicating continued expansion in manufacturing. The New Orders Index registered 65.8 percent, an increase of 5.8 percentage points from the 60 percent reading in September, indicating growth in new orders for the 17th consecutive month. The Production Index registered 64.8 percent, 0.2 percentage point above the September reading of 64.6 percent. The Employment Index grew for the 16th consecutive month, registering 55.5 percent, an increase of 0.9 percentage point above the September reading of 54.6 percent. Inventories of raw materials registered 52.5 percent, an increase of 1 percentage point from the September reading of 51.5 percent, indicating growth in inventories for the third consecutive month. Comments from the panel generally cite positive business conditions, with growth in demand and production volumes."

Of the 18 manufacturing industries, 16 are reporting growth in October in the following order: Plastics & Rubber Products; Textile Mills; Fabricated Metal Products; Miscellaneous Manufacturing; Primary Metals; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Chemical Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Transportation Equipment; Furniture & Related Products; Paper Products; Machinery; and Computer & Electronic Products. The only industry reporting contraction in October is Petroleum & Coal Products.

WHAT RESPONDENTS ARE SAYING ...

• "Holiday orders are exceeding seasonal forecasts. Customers are demanding additional quantities above prior orders. Fuel costs and other positive signals appear to be creating demand above normal." (Food, Beverage & Tobacco Products)
• "Weakness in commodity prices very positive on our business." (Fabricated Metal Products)
• "We continue to see strong demand across multiple sectors." (Transportation Equipment)
• "Business steady and strong." (Furniture & Related Products)
• "Another strong month in terms of business growth." (Computer & Electronic Products)
• "Most business segments are seeing an upward trend in orders — mostly from existing customers, but also some new customers. Transportation continues to be a major issue." (Chemical Products)
• "Conditions are still basically flat." (Printing & Related Support Activities)
• "Production is oversupplying demand, and prices have softened." (Wood Products)
• "Outer body material changes in the auto industry means new equipment and manufacturing growth." (Machinery)
• "Business conditions are good; sales and production volumes are generally increasing." (Miscellaneous Manufacturing)

Manufacturing ISM^®Report On Business^® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries indexes.

*Number of months moving in current direction.

OCTOBER 2014 MANUFACTURING INDEX SUMMARIES

PMI^®

Manufacturing expanded in October as the PMI^® registered 59 percent, an increase of 2.4 percentage points when compared to September’s reading of 56.6 percent. This is the same reading as reported in August 2014, which is the highest reading for the index since March of 2011 when it registered 59.1 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 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the October PMI^® indicates growth for the 65th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 17th consecutive month. Holcomb stated, "The past relationship between the PMI^® and the overall economy indicates that the average PMI^® for January through October (55.6 percent) corresponds to a 4.1 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI^® for October (59 percent) is annualized, it corresponds to a 5.2 percent increase in real GDP annually."

The Manufacturing ISM^®Report On Business^® is published monthly by Institute for Supply Management^®, the first supply institute in the world. Founded in 1915, ISM^®'s mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. By executing and extending its mission through education, research, standards of excellence and information dissemination — including the renowned monthly ISM^®Report On Business^® — ISM^® maintains a strong global influence among individuals and organizations. ISM^® is a not-for-profit educational association that serves professionals with an interest in supply management who live and work in more than 80 countries. 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 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 2014 data will be released at 10:00 a.m. (ET) on Monday, December 1, 2014.