August Manufacturing ISM Report on Business; PMI at 51.1%

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Economic activity in the manufacturing sector expanded in August for the 32nd consecutive month, and the overall economy grew for the 75th 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® (ISM®) Manufacturing Business Survey Committee. "The August PMI® registered 51.1 percent, a decrease of 1.6 percentage points from the July reading of 52.7 percent. The New Orders Index registered 51.7 percent, a decrease of 4.8 percentage points from the reading of 56.5 percent in July. The Production Index registered 53.6 percent, 2.4 percentage points below the July reading of 56 percent. The Employment Index registered 51.2 percent, 1.5 percentage points below the July reading of 52.7 percent. Inventories of raw materials registered 48.5 percent, a decrease of 1 percentage point from the July reading of 49.5 percent. The Prices Index registered 39 percent, down 5 percentage points from the July reading of 44 percent, indicating lower raw materials prices for the 10th consecutive month. The New Export Orders Index registered 46.5 percent, down 1.5 percentage points from the July reading of 48 percent. Comments from the panel reflect a mix of modest to strong growth depending upon the specific industry, the positive impact of lower raw materials prices, but also a continuing concern over export growth."

August 2015 Manufacturing Index Summaries

PMI

Manufacturing expanded in August as the PMI registered 51.1 percent, a decrease of 1.6 percentage points from the July reading of 52.7 percent, indicating growth in manufacturing for the 32nd consecutive month. The August PMI reading is the lowest since May 2013 when the PMI registered 50.1 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 43.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the August PMI® indicates growth for the 75th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 32nd consecutive month. Holcomb stated, "The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through August (52.4 percent) corresponds to a 2.9 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for August (51.1 percent) is annualized, it corresponds to a 2.5 percent increase in real GDP annually."

New Orders

ISM®'s New Orders Index registered 51.7 percent in August, a decrease of 4.8 percentage points when compared to the July reading of 56.5 percent, indicating growth in new orders for the 33rd consecutive month, but at a slower rate than in July. 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 seven industries reporting growth in new orders in August — listed in order — are: Textile Mills; Plastics & Rubber Products; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The seven industries reporting a decrease in new orders during August — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Primary Metals; Petroleum & Coal Products; Machinery; and Fabricated Metal Products.

Production

ISM®'s Production Index registered 53.6 percent in August, which is a decrease of 2.4 percentage points when compared to the 56 percent reported in July, indicating growth in production for the 36th consecutive month. An index above 51.1 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 August — listed in order — are: Textile Mills; Plastics & Rubber Products; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Chemical Products. The five industries reporting a decrease in production during August are: Primary Metals; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; and Transportation Equipment.

Employment

ISM®'s Employment Index registered 51.2 percent in August, which is a decrease of 1.5 percentage points when compared to the 52.7 percent reported in July, indicating growth in employment for the fourth consecutive month. An Employment Index above 50.6 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, in August, six industries reported employment growth in the following order: Nonmetallic Mineral Products; Paper Products; Fabricated Metal Products; Machinery; Chemical Products; and Food, Beverage & Tobacco Products. The eight industries reporting a decrease in employment in August — listed in order — are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Primary Metals; Plastics & Rubber Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Transportation Equipment.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in August as the Supplier Deliveries Index registered 50.7 percent, which is 1.8 percentage points higher than the 48.9 percent reported in July. This month of slowing supplier deliveries follows two consecutive months of faster supplier deliveries. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in August are: Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Machinery; and Transportation Equipment. The five industries reporting faster supplier deliveries during August are: Petroleum & Coal Products; Plastics & Rubber Products; Paper Products; Computer & Electronic Products; and Chemical Products. Eight industries reported no change in supplier deliveries in August compared to July.

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. The data should be compared to all other economic data sources when used in decision-making.