Economic activity in September

Economic activity in the manufacturing sector expanded in September for the second consecutive month, and the overall economy grew for the fifth consecutive month, according to the latest Manufacturing ISM Report On Business®. The recovery in manufacturing continues as the PMI registered 52.6 percent in September, which is 0.3 percentage point lower than the 52.9 percent reported in August, and the second month of expansion following 18 months of decline.

"The manufacturing sector grew for the second consecutive month in September. While the rate of growth moderated slightly when compared to August, the recovery broadened as the number of industries reporting growth increased from 11 to 13, said Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee.

"Both new orders and production are growing, but at a slower rate when compared to August. It appears the fundamentals for continuing recovery are still at work as inventories and sales are gaining balance. This month, we asked a special question with regard to the American Recovery and Reinvestment Act. Twelve of the 18 manufacturing industries expect to derive some benefit from the program, and 12 manufacturing industries responded that they expect their companies to see some benefit."

In September, 13 of the 18 manufacturing industries reported growth.

The industries — listed in order — are: Wood Products; Paper Products; Apparel, Leather & Allied Products; Transportation Equipment; Textile Mills; Printing & Related Support Activities; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Chemical Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products.

The four industries reporting contraction in September are: Primary Metals; Furniture & Related Products; Plastics & Rubber Products; and Machinery.

New Orders
ISM's New Orders Index registered 60.8 percent in September, 4.1 percentage points lower than the 64.9 percent registered in August. This is the third consecutive month of growth in the New Orders Index. A New Orders Index above 48.8 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 13 industries reporting growth in new orders in September — listed in order — are: Textile Mills; Paper Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Wood Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Fabricated Metal Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; and Transportation Equipment. The four industries reporting decreases in new orders in September are: Primary Metals; Machinery; Nonmetallic Mineral Products; and Furniture & Related Products.

Production
ISM's Production Index registered 55.7 percent in September, which is a decrease of 6.2 percentage points from the August reading of 61.9 percent. An index above 50.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the fourth consecutive month the Production Index has registered above 50 percent.

The 11 industries reporting growth in production during the month of September — listed in order — are: Paper Products; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Wood Products; Transportation Equipment; Printing & Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The three industries reporting decreases in production in September are: Primary Metals; Furniture & Related Products; and Computer & Electronic Products.

Employment
ISM's Employment Index registered 46.2 percent in September, which is 0.2 percentage point lower than the 46.4 percent reported in August. This is the 14th consecutive month of decline in employment. An Employment Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Three of the 18 manufacturing industries reported growth in employment in September: Apparel, Leather & Allied Products; Wood Products; and Transportation Equipment.

The 10 industries that reported decreases in employment during September — listed in order — are: Primary Metals; Plastics & Rubber Products; Nonmetallic Mineral Products; Furniture & Related Products; Machinery; Chemical Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Computer & Electronic Products.

Inventories
Manufacturers' inventories contracted at a slower rate in September as the Inventories Index registered 42.5 percent. The index is 8.1 percentage points higher than the August reading of 34.4 percent. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).
Two of the 18 manufacturing industries reported higher inventories in September: Wood Products; and Food, Beverage & Tobacco Products. The 12 industries that reported decreases in inventories in September — listed in order — are: Plastics & Rubber Products; Computer & Electronic Products; Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Primary Metals; Machinery; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; and Transportation Equipment.

Larson Notes: So how are we doing? Good? Bad? I guess it depends on who and what you are. I see quotes going out but not much real activity for my customers, Some but not what we would like. We always expect double digit growth for our clients and if they are not in a position to get over 10% growth I really don’t want to work with them.

The key is you, Look at what is growing. Can you move your company’s services into one of these areas?

Side note: either the stock market read my blog as I was getting the information together or they are reading the same sources.

Howard Larson
Larson & Associates
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