ISM Index: Inventory Adjustment for Manufacturing
December 3, 2015 | MAPI FoundationEstimated reading time: 1 minute
“The Institute for Supply Management (ISM) reports that the November index was 48.6%, down slightly from 50.1% in October,” noted Daniel J. Meckstroth, vice president and chief economist for the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation. “With the dividing line between growth and decline at 50%, the October report indicated that manufacturing activity is at a standstill and today’s report says that activity is falling. Only 17% of the time in the last 25 years has the ISM index been at or less than 48.6%, so activity is abnormally weak. The only good news in the report is that employment is growing; this is inconsistent with the theme that manufacturing activity is declining.
“A competing indicator from Markit puts its index at 52.8% in November, down from 54.1% in October,” he added. “The Markit survey finds manufacturing output and new orders expanding at a slower rate rather than declining. Both ISM and Markit find manufacturing employment growing.
“Manufacturing has an inventory problem,” Meckstroth cautioned. “The ISM report finds firms are reducing inventory at a faster rate—an index of 43% in November compared with 46.5% in the prior month. The inventory drawdown is a symptom of slow production growth and the deflation that is rampant within the goods-producing industries. A large inventory drawdown means that firms’ demand is temporarily growing faster than production.
“The trade indicators in the ISM suggest that exports are falling faster than imports,” he explained “Foreign trade will be a major drag on manufacturing activity and the general economy this year and the next two years.
“The November ISM report suggests that manufacturing production is going through an inventory adjustment that has dragged production down,” Meckstroth concluded. “We believe that manufacturing production is temporarily weak in the fourth quarter and growth will accelerate in 2016 and 2017. Manufacturing industrial production, as measured by the Federal Reserve, will increase 1.8% this year even with the rapid appreciation of the dollar, collapsing commodity prices, severe winter weather, and West Coast port strike. Without these shocks repeating, manufacturing production will accelerate in the coming two years.”
Suggested Items
iNEMI Names Grace O'Malley CTO
05/02/2024 | iNEMIThe Board of Directors of the International Electronics Manufacturing Initiative (iNEMI) has named Grace O'Malley Chief Technical Officer (CTO).
Intel Takes Next Step Toward Building Scalable Silicon-Based Quantum Processors
05/02/2024 | BUSINESS WIRENature published an Intel research paper, “Probing single electrons across 300-mm spin qubit wafers,” demonstrating state-of-the-art uniformity, fidelity and measurement statistics of spin qubits.
ZESTRON Academy Launches 2024 Advanced Packaging & Power Electronics Webinar Series
05/01/2024 | ZESTRONZESTRON, the leading global provider of high-precision cleaning products, services, and training solutions in the electronics manufacturing and semiconductor industries, proudly announces the launch of its highly anticipated webinar series on Advanced Packaging & Power Electronics, a webinar series on the latest innovations, cleaning, and corrosion challenges.
NextFlex Convenes the Hybrid Electronics Community at Binghamton University
05/01/2024 | NextFlexBinghamton University hosted the NextFlex hybrid electronics community on April 18 for a day of expert presentations, breakout sessions on technology and manufacturing topics, and networking.
HQ NextPCB of HQ Electronics Debut on the International Stage for Electronics Manufacture at IPC APEX 2024
05/01/2024 | PRNewswireHQ NextPCB of HQ Electronics, a leading Chinese-based multilayer PCB manufacturer and assembly house showcased its industrial prowess on the international stage for the first time at the IPC APEX Expo 2024.