October 2006 Manufacturing ISM Report On Business by armedman1

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									October 2006 Manufacturing ISM Report On Business®

                                   PMI at 51.2%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing
reports released across the country. The national report's information reflects the
entire United States, while the regional reports contain primarily regional data from
their local vicinities. Also, the information in the regional reports is not used in
calculating the results of the national report. The information compiled in this report
is for the month of October 2006.

                New Orders, Production, Employment Growing
                             Inventories Contracting
                                 Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector grew in October
for the 41st consecutive month, while the overall economy grew for the 60th
consecutive month, say the nation's supply executives in the latest Manufacturing
ISM Report On Business®.

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for
Supply Management™ Manufacturing Business Survey Committee. "In October, the
manufacturing sector fell to its lowest level of growth since June 2003. There was
significant movement in most of the indexes as new orders and production
continued to soften, while backlogs contracted for a second month. There was
particularly good news on the pricing front as the Prices Index fell 14 points,
signaling some relief for buyers for the first time in 15 months. A second positive
signal is the improvement in new export orders as the weaker dollar continues to
support a strong export market."

TOP PERFORMING INDUSTRIES

The eight industries reporting growth in October — listed in order — are: Apparel,
Leather & Allied Products; Miscellaneous Manufacturing; Computer & Electronic
Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products;
Furniture & Related Products; Chemical Products; and Paper Products.

WHAT RESPONDENTS ARE SAYING ...

        "Still receiving price increases on petroleum-based products." (Chemical
       Products)
        "Business appears to be softening slightly — both volume and margin."
       (Fabricated Metal Products)
           "Raw material leadtimes shortening, especially in wood and steel."
          (Furniture & Related Products)
           "Raw material prices have not yet begun to decline in response to lower oil
          and natural gas prices." (Paper Products)
           "Business is softening, particularly in Europe." (Machinery)


                                     MANUFACTURING AT A GLANCE

                                               OCTOBER 2006


                            Series     Series      Percentage                      Rate

                            Index      Index         Point                          of           Trend*

Index                      October   September      Change      Direction         Change         (Months)


PMI                          51.2       52.9          -1.7       Growing          Slower            41


New Orders                   52.1       54.2          -2.1       Growing          Slower            42


Production                   51.9       56.1          -4.2       Growing          Slower            42


Employment                   50.8       49.4          +1.4       Growing      From Contracting      1


Supplier Deliveries          50.2       54.1          -3.9       Slowing          Slower            40


Inventories                  49.4       46.4          +3.0      Contracting       Slower            2


Customers' Inventories       52.0       49.0          +3.0       Too High      From Too Low         1


Prices                       47.0       61.0         -14.0      Decreasing    From Increasing       1


Backlog of Orders            44.5       46.5          -2.0      Contracting        Faster           2


Exports                      57.8       55.3          +2.5       Growing           Faster           47


Imports                      57.0       56.0          +1.0       Growing           Faster           58




                      OVERALL ECONOMY                            Growing          Slower            60


                      Manufacturing Sector                       Growing          Slower            41




*Number of months moving in current direction




COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT
SUPPLY

Commodities Up in Price

Corrugated Containers (12); Methanol (2); and Stainless Steel (6).
Commodities Down in Price

Aluminum (2); Copper Products; Fuel; Gasoline (2); Natural Gas (2); Natural
Rubber (2); Oil-Based Products; Polyethylene Resin; and Steel.

Commodities in Short Supply

Titanium.

Note: The number of consecutive months the commodity is listed is indicated after
each item.




      OCTOBER 2006 MANUFACTURING INDEX SUMMARIES



PMI

The PMI indicates that the manufacturing economy grew in October for the 41st
consecutive month as it registered 51.2 percent, a decrease of 1.7 percentage
points when compared to September's reading of 52.9 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 42 percent, over a period of time, generally indicates an
expansion of the overall economy. The October PMI indicates that both the overall
economy and the manufacturing sector are growing at a slower rate. "The past
relationship between the PMI and the overall economy indicates that the average
PMI for January through October (54.6 percent) corresponds to a 4.3 percent
increase in real gross domestic product (GDP). In addition, if the PMI for October
(51.2 percent) is annualized, it corresponds to a 3.1 percent increase in real GDP
annually."

THE LAST 12 MONTHS


 Month     PMI     Month     PMI


Oct 2006   51.2   Apr 2006   57.3


Sep 2006   52.9   Mar 2006   55.2


Aug 2006   54.5   Feb 2006   56.7
Jul 2006   54.7     Jan 2006       54.8


Jun 2006   53.8     Dec 2005       55.6


May 2006   54.4     Nov 2005       57.3


    Average for 12 months – 54.9

            High – 57.3

            Low – 51.2




New Orders

ISM's New Orders Index registered 52.1 percent in October. The index is 2.1
percentage points lower than the 54.2 percent reported in September. October is
the 42nd consecutive month the index has exceeded 50 percent. A New Orders
Index above 51.1 percent, over time, is generally consistent with an increase in the
Census Bureau's series on manufacturing orders (in constant 2000 dollars). Seven
industries reported increases during October: Apparel, Leather & Allied Products;
Miscellaneous Manufacturing; Computer & Electronic Products; Furniture & Related
Products; Nonmetallic Mineral Products; Chemical Products; and Food, Beverage &
Tobacco Products.


New          %       %         %

Orders     Better   Same   Worse          Net   Index


Oct 2006     26      47        27         -1    52.1


Sep 2006     28      54        18         +10   54.2


Aug 2006     27      51        22         +5    54.2


Jul 2006     29      52        19         +10   56.1




Production

ISM's Production Index registered 51.9 percent in October, 4.2 percentage points
lower than the 56.1 percent reported in September. October is the 42nd consecutive
month of growth in the index. An index above 50 percent, over time, is generally
consistent with an increase in the Federal Reserve Board's Industrial Production
figures. Of the industries reporting in October, 10 registered growth: Apparel,
Leather & Allied Products; Computer & Electronic Products; Textile Mills;
Miscellaneous Manufacturing; Paper Products; Nonmetallic Mineral Products;
Primary Metals; Furniture & Related Products; Chemical Products; and
Transportation Equipment.
               %         %          %

Production   Better     Same      Worse     Net    Index


Oct 2006       22        58         20      +2      51.9


Sep 2006       28        59         13      +15     56.1


Aug 2006       23        61         16      +7      56.6


Jul 2006       27        56         17      +10     57.6




Employment

ISM's Employment Index registered 50.8 percent in October, an increase of 1.4
percentage points when compared to September's reading of 49.4 percent. An
Employment Index above 48.9 percent, over time, is generally consistent with an
increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
The five industries reporting growth in employment during October are: Apparel,
Leather & Allied Products; Food, Beverage & Tobacco Products; Miscellaneous
Manufacturing; Chemical Products; and Primary Metals.


                   %         %         %

Employment     Higher    Same       Lower    Net    Index


Oct 2006           17        63        20     -3     50.8


Sep 2006           12        72        16     -4     49.4


Aug 2006           19        66        15     +4     54.0


Jul 2006           16        70        14     +2     50.7




Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower
for the 40th consecutive month in October. ISM's Supplier Deliveries Index for
October registered 50.2 percent, a decrease of 3.9 percentage points when
compared to September's reading of 54.1 percent. A reading above 50 percent
indicates slower deliveries. The three industries reporting slower supplier deliveries
in October are: Computer & Electronic Products; Nonmetallic Mineral Products; and
Transportation Equipment.


Supplier       %         %         %

Deliveries   Slower     Same      Faster    Net    Index
Oct 2006       9       83          8      +1     50.2


Sep 2006      13       82          5      +8     54.1


Aug 2006      16       80          4      +12    55.0


Jul 2006      16       80          4      +12    55.4




Inventories

Manufacturers' inventories contracted at a slower rate in October as ISM's
Inventories Index registered 49.4 percent, a 3 percentage point increase when
compared to September's reading of 46.4 percent. An Inventories Index greater
than 42.2 percent, over time, is generally consistent with expansion in the Bureau
of Economic Analysis' (BEA) figures on overall manufacturing inventories (in
chained 2000 dollars). The four industries reporting higher inventories in October
are: Food, Beverage & Tobacco Products; Furniture & Related Products; Paper
Products; and Primary Metals.


                %         %        %

Inventories   Higher   Same    Lower       Net   Index


Oct 2006        17        61       22      -5     49.4


Sep 2006        14        66       20      -6     46.4


Aug 2006        20        62       18      +2     50.2


Jul 2006        13        70       17      -4     50.5




Customers' Inventories*

The ISM Customers' Inventories Index registered 52 percent in October, which is 3
percentage points higher than the 49 percent reported in September. The index
indicates that respondents believe their customers have sufficient inventories on
hand (inventories are too high) at this time. This reversal in the index concludes 64
consecutive months that the index registered below 50 percent. Eight industries
reported higher customers' inventories during October: Textile Mills; Wood Products;
Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco
Products; Plastics & Rubber Products; Furniture & Related Products; Fabricated
Metal Products; and Chemical Products.


Customers'         %        %Too       %About    %Too

Inventories   Reporting     High        Right    Low     Net   Index
Oct 2006            74        19       66       15   +4    52.0


Sep 2006            71        15       68       17   -2    49.0


Aug 2006            75        10       72       18   -8    46.0


Jul 2006            73        12       65       23   -11   44.5




Prices*

In October, the ISM Prices Index registered 47 percent, indicating manufacturers
are paying lower prices on average when compared to September. While 58 percent
of supply executives reported paying the same prices and 24 percent reported
paying lower prices, only 18 percent of respondents reported that prices were
higher than the preceding month.

A Prices Index above 47.1 percent, over time, is generally consistent with an
increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In
October, five industries reported paying higher prices: Food, Beverage & Tobacco
Products; Computer & Electronic Products; Chemical Products; Machinery; and
Primary Metals.


            %            %     %

Prices     Higher    Same     Lower    Net   Index


Oct 2006    18           58    24      -6    47.0


Sep 2006    36           50    14      +22   61.0


Aug 2006    50           46        4   +46   73.0


Jul 2006    59           39        2   +57   78.5




Backlog of Orders*

ISM's Backlog of Orders Index registered 44.5 percent, indicating manufacturers'
backlogs in October are contracting for the second consecutive month. The index is
2 percentage points lower than the 46.5 percent reported in September. Of the 85
percent of respondents who reported their backlog of orders, 14 percent reported
greater backlogs, 25 percent reported smaller backlogs, and 61 percent reported no
change from September. The six industries reporting an increase in order backlogs
in October are: Apparel, Leather & Allied Products; Plastics & Rubber Products;
Nonmetallic Mineral Products; Transportation Equipment; Chemical Products; and
Miscellaneous Manufacturing.
Backlog of        %            %         %       %

Orders        Reporting    Greater   Same       Less    Net    Index


Oct 2006          85           14        61      25     -11    44.5


Sep 2006          83           14        65      21     -7     46.5


Aug 2006          83           19        65      16     +3     51.5


Jul 2006          88           19        63      18     +1     50.5




New Export Orders

ISM's New Export Orders Index registered 57.8 percent in October, an increase of
2.5 percentage points when compared to September's index of 55.3 percent. This is
the 47th consecutive month of growth in export orders. The 11 industries reporting
growth in new export orders in October are: Apparel, Leather & Allied Products;
Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Primary Metals;
Miscellaneous Manufacturing; Furniture & Related Products; Transportation
Equipment; Plastics & Rubber Products; Computer & Electronic Products; Fabricated
Metal Products; and Chemical Products.


New Export          %          %         %         %

Orders         Reporting    Higher    Same      Lower    Net    Index


Oct 2006            80         18        76        6     +12     57.8


Sep 2006            77         14        80        6      +8     55.3


Aug 2006            77         14        81        5      +9     55.7


Jul 2006            79         10        83        7      +3     51.9




Imports*

Imports of materials by manufacturers grew during October as the Imports Index
registered 57 percent. The index is 1 percentage point higher when compared to
September. The nine industries reporting growth in import activity for October are:
Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Wood Products;
Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber
Products; Chemical Products; Machinery; and Computer & Electronic Products.


                %          %         %         %

Imports      Reporting    Higher    Same      Lower    Net    Index
Oct 2006       85          19      76         5     +14    57.0


Sep 2006       81          18      76         6     +12    56.0


Aug 2006       81          15      78         7     +8     54.0


Jul 2006       83          22      71         7     +15    57.5




* The Backlog of Orders, Prices, Customers' Inventories and Imports Indexes do not
meet the accepted criteria for seasonal adjustments.




Buying Policy

Average commitment leadtime for Capital Expenditures increased 10 days to 119
days. Average leadtime for Production Materials increased 8 days to 55 days.
Average leadtime for Maintenance, Repair and Operating (MRO) supplies increased
2 days to 24 days.

Percent Reporting


                            Percent Reporting


               Hand-

Capital             to-   30     60     90          6        1     Average

Expenditures   Mouth      Days   Days   Days      Months   Year+    Days


Oct 2006            22     9      14     19         22      14       119


Sep 2006            26     8      14     18         23      11       109


Aug 2006            25     7      11     22         22      13       116


Jul 2006            19     12     13     21         23      12       116




               Hand-

Production          to-   30     60     90          6        1     Average

Materials      Mouth      Days   Days   Days      Months   Year+    Days


Oct 2006            21     36     23     13         4        3       55


Sep 2006            19     43     22     12         3        1       47


Aug 2006            19     40     25     10         6        0       48
Jul 2006     18      38     28     8       6        2       54




            Hand-

MRO          to-    30     60     90       6       1      Average

Supplies    Mouth   Days   Days   Days   Months   Year+    Days


Oct 2006     52      31     13     3       1        0       24


Sep 2006     50      37     10     3       0        0       22


Aug 2006     49      35     14     2       0        0       23


Jul 2006     48      36     12     3       0        1       27




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. Use of the
data is in the public domain and should be compared to all other economic data
sources when used in decision-making.

Data and Method of Presentation

The Manufacturing ISM Report On Business® is based on data compiled from
purchasing and supply executives nationwide. Membership of the Manufacturing
Business Survey Committee is diversified by NAICS, based on each industry's
contribution to gross domestic product (GDP). Manufacturing Business Survey
Committee responses are divided into the following NAICS code categories: Food,
Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products;
Wood Products; Paper Products; Printing & Related Support Activities; Petroleum &
Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral
Products; Primary Metals; Fabricated Metal Products; Machinery; Computer &
Electronic Products; Electrical Equipment, Appliances & Components;
Transportation Equipment; Furniture & Related Products; and Miscellaneous
Manufacturing (products such as medical equipment and supplies, jewelry, sporting
goods, toys and office supplies).

Survey responses reflect the change, if any, in the current month compared to the
previous month. For each of the indicators measured (New Orders, Backlog of
Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories,
Customers' Inventories, Employment and Prices), this report shows the percentage
reporting each response, the net difference between the number of responses in the
positive economic direction (higher, better and slower for Supplier Deliveries) and
the negative economic direction (lower, worse and faster for Supplier Deliveries),
and the diffusion index. Responses are raw data and are never changed. The
diffusion index includes the percent of positive responses plus one-half of those
responding the same (considered positive).

The resulting single index number for those meeting the criteria for seasonal
adjustments (PMI, New Orders, Production, Employment, Supplier Deliveries,
Inventories and New Export Orders) is then seasonally adjusted to allow for the
effects of repetitive intra-year variations resulting primarily from normal differences
in weather conditions, various institutional arrangements, and differences
attributable to non-moveable holidays. All seasonal adjustment factors are supplied
by the U.S. Department of Commerce and are subject annually to relatively minor
changes when conditions warrant them. The PMI is a composite index based on the
seasonally adjusted diffusion indexes for five of the indicators with varying weights:
New Orders – 30%; Production – 25%; Employment – 20%; Supplier Deliveries –
15%; and Inventories – 10%.

Diffusion indexes have the properties of leading indicators and are convenient
summary measures showing the prevailing direction of change and the scope of
change. A PMI reading above 50 percent indicates that the manufacturing economy
is generally expanding; below 50 percent indicates that it is generally declining. A
PMI in excess of 42.0 percent, over a period of time, indicates that the overall
economy, or gross domestic product (GDP), is generally expanding; below 42.0
percent, it is generally declining. The distance from 50 percent or 42.0 percent is
indicative of the strength of the expansion or decline. With some of the indicators
within this report, ISM has indicated the departure point between expansion and
decline of comparable government series, as determined by regression analysis.

Responses to Buying Policy reflect the percent reporting the current month's
leadtime, the approximate weighted number of days ahead for which commitments
are made for Production Materials; Capital Expenditures; and Maintenance, Repair
and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days,
60 days, 90 days, six months (180 days), a year or more (360 days), and the
weighted average number of days. These responses are raw data, never revised,
and not seasonally adjusted since there is no significant seasonal pattern.

The Manufacturing ISM Report On Business® is published monthly by the
Institute for Supply Management™. The Institute for Supply Management™,
established in 1915, is the largest supply management organization in the world as
well as one of the most respected. ISM's mission is to lead the supply management
profession through its standards of excellence, research, promotional activities and
education. This report has been issued by the association since 1931, except for a
four-year interruption during World War II.
The full text version of the Manufacturing ISM Report On Business® is posted
on ISM's Web site at www.ism.ws on the first business day of every month after
10:10 a.m. (ET).

The next Manufacturing ISM Report On Business® featuring the November
2006 data will be released at 10:00 a.m. (ET) on Friday, December 1, 2006.

								
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