Factory output rose in November for the 18th consecutive month, while the overall economy grew for the 37th straight month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®. The report, which is issued by the Institute for Supply Management (ISM), gives an early indication of the status of the manufacturing sector.
The ISM's index for manufacturing activity exceeded expectations, increasing by one percentage point to 57.8 in November. A reading above 50 indicates expansion within the sector while a reading below 50 signifies contraction over the prior month.
"November reverses three consecutive months in which the rate of growth had slowed," says Norbert J. Ore, C.P.M., who manages the index for the ISM and is also group director of strategic sourcing and procurement at Georgia-Pacific Corporation. "The manufacturing sector appears poised to end the year on a strong note as the new orders index made its way back above the 60% mark, and the employment index picked up significant momentum. There is still significant upward pressure on prices as commodity price increases are common."
Comments from survey respondents focused on inflationary concerns. While many manufacturers are enjoying strong sales, there is concern that commodity prices are eroding profits. Energy leads the list of inflationary drivers as many commodities are derived from oil and gas feedstocks.
The new orders index rose 3.2 percentage points to 61.5% in November. ISM's production index decreased 1.9 percentage points from 58.9% in October to 57% in November. Meanwhile, the ISM employment index is at 57.6% for the month, an increase of 2.8 percentage points from the 54.8% reported in October.
ISM's supplier deliveries index registered 56.5%, 2.1 percentage points lower than October's 58.6 percent. ISM's inventories index hit 50.7% in November, up from the 48.2% reported in October. Meanwhile, the customers' inventories index for November is at 43.5%, unchanged from October.
The prices index in November is 74%, 4.5 percentage points lower than the 78.5% reported in October. "Prices are a big issue, but the strength in new orders offsets some of those concerns as companies work to benefit from the volume," says Ore.
ISM's backlog of orders index for November declined 1.5 percentage points to 47.5%. Meanwhile, ISM's new export orders index registered 54.7%, a decrease of 1.9 percentage points from October's 56.6%. ISM's imports index decreased 0.1 percentage point to 58.4%.
In November, 15 industries reported growth: miscellaneous*; food; textiles; tobacco; printing and publishing; apparel; transportation and equipment; chemicals; instruments and photographic equipment; industrial and commercial equipment and computers; electronic components and equipment; furniture; wood and wood products; fabricated metals; and rubber and plastic products.
To learn how you might respond to this survey and contribute to this monthly report on the state of the manufacturing sector, please visit the ISM Report or contact Kristin Bryson at ISM (kbryson@ism.ws).

For more information on the latest Manufacturing ISM Report On Business, go to www.ism.ws/ISMReport/ROB122004.cfm.

*Miscellaneous is a preponderance of jewelry, toys, sporting goods and musical instruments.

Sources:

November Manufacturing ISM Report On Business
Institute for Supply Management
www.ism.ws/ISMReport/ROB122004.cfm

Fed: Economy is Growing
USA Today, December 1, 2004
www.usatoday.com/money/economy/fed/beigebook/2004-12-01-beige-book_x.htm