The September 2010 ISM Manufacturing Survey is out and PMI came in at 54.4%. August 2010 manufacturing ISM was 56.3%. This is a -1.9% decline in the factory index. While this is the 14th month for expansion (anything above 50 is an expansion), this is a slowing on the manufacturing ISM. The below graph shows PMI is now back to December 2009 levels.
This is what the Institute of Supply Management said about their ISM manufacturing survey report (pretty damn pessimistic frankly):
While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging. The growth of new orders continued to slow, as the index is down significantly from its cyclical high of 65.9 percent (January 2010). Production is currently growing at a faster rate than new orders, but it typically lags and would be expected to weaken further in the fourth quarter. Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter. Both the Inventories and Backlog of Orders Indexes are sending strong negative signals of weakening performance in the sector.
New orders dropped -2.0% to 51.1 for September. In the below St. Louis Fed FRED graph, we see a clear slowing on new orders in terms of the rate of change.
Below is the ISM table data. Notice how manufacturing is under performing the rest of the economy.
| MANUFACTURING AT A GLANCE SEPTEMBER 2010 | ||||||
|---|---|---|---|---|---|---|
|
Index |
Series Index September |
Series Index August |
Percentage Point Change |
Direction |
Rate of Change |
Trend* (Months) |
| PMI | 54.4 | 56.3 | -1.9 | Growing | Slower | 14 |
| New Orders | 51.1 | 53.1 | -2.0 | Growing | Slower | 15 |
| Production | 56.5 | 59.9 | -3.4 | Growing | Slower | 16 |
| Employment | 56.5 | 60.4 | -3.9 | Growing | Slower | 10 |
| Supplier Deliveries | 52.3 | 56.6 | -4.3 | Slowing | Slower | 16 |
| Inventories | 55.6 | 51.4 | +4.2 | Growing | Faster | 3 |
| Customers' Inventories | 42.5 | 43.5 | -1.0 | Too Low | Slower | 18 |
| Prices | 70.5 | 61.5 | +9.0 | Increasing | Faster | 15 |
| Backlog of Orders | 46.5 | 51.5 | -5.0 | Contracting | From Growing | 1 |
| Exports | 54.5 | 55.5 | -1.0 | Growing | Slower | 15 |
| Imports | 56.5 | 56.5 | 0.0 | Growing | Same | 13 |
| OVERALL ECONOMY | Growing | Slower | 17 | |||
| Manufacturing Sector | Growing | Slower | 14 | |||
Hiring decreased to 56.5%, -3.9% lower than last month. Below is the ISM manufacturing employment graph. We see this month breaks a trend on hiring, while still above 50 it shows employment in manufacturing is slowing and considering the unemployment rates and layoffs in manufacturing to date, this is not good news..
Production, graphed below, normalized to 50, was 56.5, a decrease of -3.4 points from August, another slowing growth rate. Production corresponds to the Fed's industrial production.
Inventories, in the below graph (normalized to zero), jumped 4.2 percentage points to expansion, 55.6%.
There was also a massive jump in prices, 9 percentage points to 70.5%, manufacturers are paying. This cuts into their bottom line. From the graph, while this is a jump, prices declined in previous months.
The ISM neutral point is 50. Above is growth, below is contraction, although the ISM is this report is noting some variance in the individual indexes (see their report). For example, A PMI above 42, over time, also indicates growth.
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