Manufacturing index holds steady again in August
Prices are down, but weakness in new orders could result in an inventory overhang.
By Allison Manning, Associate Editor -- Modern Materials Handling, 9/2/2008
While the overall economy grew for the 82nd consecutive month, economic activity failed to grow in the manufacturing sector, according to the Institute of Supply Management’s August Report on Business.
The Purchasing Managers Index (PMI) for August was 49.9%, only a slight change from July’s 50%. A reading above 50% indicates that the manufacturing economy is generally expanding. Below that indicates it is generally contracting.
“Even though it would indicate very little change month-to-month, we still see signs of certain things happening,” Norbert J. Ore, Chair of the ISM Business Survey Committee, told Modern.
Ore pointed out that in the past year, the index has only ranged between a high of 50.7 and low of 48.7.
“Manufacturing has been running at pretty much the same level in the past 12 months,” he said. “That’s probably very positive right now, given some of the things happening in the overall economy.”
The 11 point decline in the prices index, while still at a “lofty level” at 77, is a good sign that lower oil prices will ultimately translate into lower commodity prices for manufacturing, Ore said. Copper, corn, diesel fuel, fuel oil, natural gas and soybean oil all declined in price this month.
“The lower oil prices and stronger dollar are good news,” a fabricated metal products respondent said.
Ore said one of his major concerns is the weakness in new orders of the past two months, while production has remained strong, possibly resulting in an inventory overhang. Inventories gained 4.3 points and customers’ inventories went up 7.5 points.
“The good news for manufacturing is the second half of the year is almost always stronger than the first half,” he said. “Are we positioned to benefit from the second half industry, like food and beverage?”
Five industries reported growth in August:
• Paper products
• Computer and electronic products
• Miscellaneous manufacturing
• Apparel, leather and allied products
• Chemical products
Wood products, plastics and rubber products, fabricated metal products, transportation equipment, furniture and related products, machinery and primary metals all saw contraction.
New orders, inventories down in July
08/04/2008ISM Report: More bad news in manufacturing
11/03/2008Manufacturing continues slide
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