Episode 316: The ISM Manufacturing AND Non-manufacturing Reports

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The ISM Manufacturing Report On Business

Hosts Lew Weiss and Tim Grady welcome Tim Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee with an unprecedented inside look at the ISM Manufacturing Report On Business for February 2019. Don’t miss this live report for a deep dive into the report and take a close look at the latest developments through the world of manufacturing.

The full report can be found at the bottom of this page.

The ISM Non-manufacturing Report On Business

LIVE at 12 Noon ET – Anthony Nieves, ISM committee chair on the Non-Manufacturing Report On Business joins Manufacturing Talk Radio host Tim Grady for a look inside the ISM Non-manufacturing Report On Business. Don’t miss this special LIVE broadcast only on Manufacturing Talk Radio.

The full report can be found at the bottom of this page.

Tim Fiore

Guest Tim Fiore
Guest Tim Fiore, Chair, ISM Manufacturing Business Survey Committee

Timothy Fiore is Chair of the ISM Manufacturing Business Survey Committee. In that role, he is responsible for compiling, writing and releasing the ISM® Manufacturing Report On Business®, based on the survey results of a panel of supply management professionals across 18 different industry sectors. The Report On Business® is released on the first business day of each month, and features the world renowned PMI® Index as its key measure.

Prior to his current role, Fiore was the Chief Procurement Officer of ThyssenKrupp NA. He was responsible for developing and implementing ThyssenKrupp’s first consolidated North American supply management program initially addressing indirect and transportation cost, procurement processes, systems, tools and supply-chain employee development. His organization supported all of ThyssenKrupp’s operating companies in the United States, Canada and Mexico, as well as the company’s regional headquarters. Through collaboration, teamwork and deployment of effective competition among the TK Global, Regional and Business Area supply management organizations, ThyssenKrupp NA will realize the benefits of mass and scale in the Region.

In his position, Fiore drew on extensive experience in designing and optimizing supply chains, including serving as senior vice president of supply management at Terex Corporation and Celanese Corporation. He also was senior vice president of supply management and chief procurement officer at Ryder System, Inc. and president of Ryder Energy Distribution Company. Prior to joining Ryder, Fiore spent more than 20 years at United Technologies Corporation companies in a series of procurement and supply chain management capacities.

Fiore is the past Chair of the Board of Advisors of CAPS Research as well as a past board director for the Institute for Supply Management (ISM). He served on the Finance Committee as Chair and as a member of the Nominating Committee. He has been a member of The Conference Board’s Purchasing and Supply Leadership Council and a member of Howard University Business School’s Supply Chain Advisory Board. He also is an adviser to ISM affiliate ISM-Connecticut, Inc. and ISM Greater Boston and has been a jury member for the European Business School and Supply Management Institute’s professional development program. He is also a Richter Scholar Mentor.

Fiore holds a master’s in business administration with a technology focus and a master’s degree in management from Rensselaer Polytechnic Institute and a bachelor’s degree in history from the University of Massachusetts in Amherst.

Anthony Nieves

Anthony Nieves
Guest ISM Committee Chair Anthony Nieves

Anthony Nieves is the Chief Executive Officer of a Home Health Agency – Five Star Home Health, Inc. As a leading home health care agency in Southern California, Five Star Home Health, Inc., provides comprehensive medical care and support for patients with chronic diseases and post-acute care needs. Nieves is also the Principal and Sole Managing Member of Riviera Hospitality, LLC – A 141 seat white tablecloth restaurant and lounge serving Italian and international fare. Additionally he is the Principal of Convergence Investments, LLC – a diverse investment strategy company with a concentration in the services sector. Included in this are supply management consulting, healthcare and hospitality management.

Nieves is also the former Chief Procurement Officer and Senior Vice President of Supply Management for Hilton Worldwide. Nieves and was responsible for end-to-end supply management services and solutions for all properties within the Hilton portfolio. A purchasing and supply management veteran for 25+ years, Nieves’ past experiences include wholesale distribution and full service restaurant management.

A recognized leader within the supply management and hospitality industries, Nieves is the 2010 recipient of the J. Shipman Gold Medal Award which is presented annually to an individual who has made a major contribution to the profession, to the Institute for Supply Management, and to his or her community. Contributions include leadership, influencing the positive recognition of the profession, publishing and teaching. It is the highest award that can be conferred by Institute for Supply Management (ISM).

Nieves serves as the chair for Non-Manufacturing Business Survey Committee for the Institute for Supply Management (ISM). In this role he facilitates the analysis for the monthly Non-Manufacturing Report on Business. He is the past chair of the board of directors for ISM and is the Chair Emeritus for the Purchasing Manager’s Executive Study Group of the National Restaurant Association (NRA). Nieves is the past chairperson of The Conference Board’s Purchasing and Supply Leadership Council. The council consists of 35+ chief procurement officers representing various fortune 500 companies. Additionally, he is a past Board Trustee for the Center for Advanced Procurement and Supply Research (CAPS Research), an independent global research organization.

Nieves holds the titles of Certified Professional in Supply Management (CPSM), Certified Purchasing Manager (C.P.M.) and Accredited Purchasing Practitioner (A.P.P.) through ISM and Certified Foodservice Purchasing Manager (CFPM) through the National Restaurant Association. Nieves is a frequent speaker to major national and international organizations Nieves earned a Bachelor of Science degree in hospitality, travel and tourism management from Florida International University

February 2019 Manufacturing ISM® Report On Business®

PMI® at 54.2%

New Orders, Production, and Employment Growing

Supplier Deliveries Slowing at Slower Rate; Backlog Growing

Raw Materials Inventories Growing; Customers’ Inventories Too Low

Prices Decreasing; Exports and Imports Growing

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in February, and the overall economy grew for the 118th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The February PMI® registered 54.2 percent, an decrease of 2.4 percentage points from the January reading of 56.6 percent. The New Orders Index registered 55.5 percent, a decrease of 2.7 percentage points from the January reading of 58.2 percent. The Production Index registered 54.8 percent, 5.7-percentage point decrease compared to the January reading of 60.5 percent. The Employment Index registered 52.3 percent, a decrease of 3.2 percentage points from the January reading of 55.5 percent. The Supplier Deliveries Index registered 54.9 percent, a 1.3 percentage point decrease from the January reading of 56.2 percent. The Inventories Index registered 53.4 percent, an increase of 0.6 percentage point from the January reading of 52.8 percent. The Prices Index registered 49.4 percent, a 0.2-percentage point decrease from the January reading of 49.6 percent, indicating lower raw materials prices for the second straight month after nearly three years of increases.

“Comments from the panel reflect continued expanding business strength, supported by notable demand and output, although both were softer than the prior month. Demand expansion continued, with the New Orders Index reaching the mid-50s, the Customers’ Inventories Index scoring lower and remaining too low, and the Backlog of Orders returning to a low-50s expansion level. Consumption (production and employment) continued to expand but fell a combined 8.9 points from the previous month’s levels. Inputs — expressed as supplier deliveries, inventories and imports — stabilized at a mid-50s level and had a slight negative impact on the PMI®. Inputs continue to reflect an easing business environment, confirmed by Prices Index contraction.

“Exports continue to expand, at slightly stronger rates compared to January. The manufacturing sector continues to expand, but inputs and prices indicate easing of supply chain constraints,” says Fiore.

Of the 18 manufacturing industries, 16 reported growth in February, in the following order: Printing & Related Support Activities; Textile Mills; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Paper Products; Wood Products; Primary Metals; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Transportation Equipment; Machinery; Furniture & Related Products; and Plastics & Rubber Products. The only industry reporting contraction in February is Nonmetallic Mineral Products.

What respondents are saying
  • “Strong domestics market. Slow export markets.” (Paper Products)
  • “Demand remains healthy at the beginning of 2019. However, growing concerns for what could be another round of tariffs in March are further escalating price increases of already constrained electronic components. Expect to see increased lead times and prices throughout Q1 and Q2.” (Computer & Electronic Products)
  • “Strong start to the year, though weather has been a challenge.” (Chemical Products)
  • “Still fairly steady with production and services.” (Transportation Equipment)
  • “Economy showing general strength, especially in manufacturing. Cost pressures and tariff challenges persist but are manageable. General outlook is for stability and potential improvement in the second half of 2019.” (Food, Beverage & Tobacco Products)
  • “Orders remain strong. Supplier delivery continues to be challenged on some commodities.” (Machinery)
  • “Aerospace engine-related business continues to be strong. Energy and general industry-related business is flat to down.” (Miscellaneous Manufacturing)
  • “Business so far this year is meeting, but not exceeding, our forecast. We are concerned about indicators showing a slight recession for the second half of the calendar year.” (Fabricated Metal Products)
  • “Uncertainty of steel prices due to Section 232 tariffs on imported steel and lack of resolution of the anti-dumping trade cases.” (Petroleum & Coal Products)
  • “General business conditions started to slow at the end of January, continuing through February.” (Plastics and Rubber Products)

Manufacturing at a Glance
February 2019

Index Series Index Feb Series Index Jan Percentage Point Change Direction Rate of Change Trend* (Months)
PMI® 54.2 56.6 -2.4 Growing Slower 30
New Orders 55.5 58.2 -2.7 Growing Slower 38
Production 54.8 60.5 -5.7 Growing Slower 30
Employment 52.3 55.5 -3.2 Growing Slower 29
Supplier Deliveries 54.9 56.2 -1.3 Slowing Slower 36
Inventories 53.4 52.8 +0.6 Growing Faster 14
Customers’ Inventories 39.0 42.8 -3.8 Too Low Faster 29
Prices 49.4 49.6 -0.2 Decreasing Faster 2
Backlog of Orders 52.3 50.3 +2.0 Growing Faster 2
New Export Orders 52.8 51.8 +1.0 Growing Faster 36
Imports 55.3 53.8 +1.5 Growing Faster 25
OVERALL ECONOMY Growing Slower 118
Manufacturing Sector Growing Slower 30
Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes.
*Number of months moving in current direction.

Commodities reported up/down in price and in short supply

Commodities Up in Price

Aluminum*; Electronic Components (7); Paper-Based Products; Plastic Components; Printed Circuit Board Assemblies (2); Steel* (6); Steel — Hot Rolled* (2); and Steel Products* (10).

Commodities Down in Price

Aluminum* (5); Caustic Soda (5); Memory (2); Oil; Steel* (6); Steel — Hot Rolled* (6); and Steel Products* (2).

Commodities in Short Supply

Capacitors (20); Electronic Components (10); and Resistors (16).

The number of consecutive months the commodity is listed is indicated after each item.
*Indicates both up and down in price.


Manufacturing Index Summaries


PMI®

Manufacturing expanded in February, as the PMI® registered 54.2 percent, a decrease of 2.4 percentage points from the January reading of 56.6 percent. “This indicates growth in manufacturing for the 30th consecutive month. The PMI® reversed a January increase in expansion primarily through an expansion softening of a combined 8.9 points in production and employment. The index reached its lowest level of expansion since November 2016, when the PMI® measured 53 percent,” says Fiore. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI® above 42.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the February PMI® indicates growth for the 118th consecutive month in the overall economy and 30th straight month of growth in the manufacturing sector. “The past relationship between the PMI® and the overall economy indicates that the PMI® for February (54.2 percent) corresponds to a 3.3-percent increase in real gross domestic product (GDP) on an annualized basis,” says Fiore.

The Last 12 Months

Month PMI®
Feb 2019 54.2
Jan 2019 56.6
Dec 2018 54.3
Nov 2018 58.8
Oct 2018 57.5
Sep 2018 59.5
Month PMI®
Aug 2018 60.8
Jul 2018 58.4
Jun 2018 60.0
May 2018 58.7
Apr 2018 57.9
Mar 2018 59.3
58.0
60.8
54.2

New Orders

ISM®’s New Orders Index registered 55.5 percent in February, which is a decrease of 2.7 percentage points when compared to the 58.2 percent reported for January, indicating growth in new orders for the 38th consecutive month. “Customer demand expansion softened compared to January, with four of the top six industry sectors expanding,” says Fiore. A New Orders Index above 52.5 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

Thirteen of 18 industries reported growth in new orders in February, in the following order: Wood Products; Computer & Electronic Products; Printing & Related Support Activities; Fabricated Metal Products; Primary Metals; Furniture & Related Products; Plastics & Rubber Products; Chemical Products; Miscellaneous Manufacturing; Paper Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Machinery. The only industry reporting a decrease in new orders in February is Nonmetallic Mineral Products.

New Orders % Higher % Same % Lower Net Index
Feb 2019 28.2 57.8 14.0 +14.2 55.5
Jan 2019 29.8 52.0 18.3 +11.5 58.2
Dec 2018 19.7 57.5 22.9 -3.2 51.3
Nov 2018 31.0 55.0 14.0 +17.0 61.8

Production

ISM®’s Production Index registered 54.8 percent in February, which is a decrease of 5.7 percentage points when compared to the 60.5 percent reported for January, indicating growth in production for the 30th consecutive month. “Production expansion continued in February, but at a slower pace compared to January. Production was not able to keep pace with customer-inventory demand and was not able to prevent a growth in backlog orders. Weather conditions causing factory shutdowns may have contributed to the weaker expansion performance,” says Fiore. An index above 51.7 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The 12 industries reporting growth in production during the month of February — listed in order — are: Printing & Related Support Activities; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Petroleum & Coal Products; Fabricated Metal Products; Primary Metals; Paper Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Machinery. The four industries reporting a decrease in production in February are: Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; and Plastics & Rubber Products.

Production % Higher % Same % Lower Net Index
Feb 2019 26.0 59.5 14.5 +11.5 54.8
Jan 2019 28.3 56.0 15.7 +12.6 60.5
Dec 2018 21.6 58.8 19.5 +2.1 54.1
Nov 2018 30.6 56.8 12.6 +18.0 59.9

Employment

ISM®’s Employment Index registered 52.3 percent in February, a decrease of 3.2 percentage points when compared to the January reading of 55.5 percent. This indicates growth in employment in February for the 29th consecutive month. “Employment continued to expand, but at the lowest level since November 2016, when the index registered 51.6 percent,” says Fiore. An Employment Index above 50.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Ten of 18 manufacturing industries reported employment growth in February, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Primary Metals; Computer & Electronic Products; Machinery; Transportation Equipment; and Chemical Products. The two industries reporting a decrease in employment in February are: Wood Products; and Fabricated Metal Products. Six industries reported no change in employment in February compared to January.

Employment % Higher % Same % Lower Net Index
Feb 2019 18.2 68.7 13.2 +5.0 52.3
Jan 2019 17.6 71.1 11.3 +6.3 55.5
Dec 2018 18.6 70.7 10.7 +7.9 56.0
Nov 2018 22.7 69.1 8.2 +14.5 57.7

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations slowed in February, as the Supplier Deliveries Index registered 54.9 percent. This is 1.3 percentage points lower than the 56.2 percent reported for January. “This is the 36th straight month of slowing supplier deliveries, with the index recording its lowest level of expansion since May 2017, when it registered 54.3 percent. Supplier delivery improvement contributed to slight gains in inventory expansion,” says Fiore. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The 12 industries reporting slower supplier deliveries in February — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Fabricated Metal Products; Petroleum & Coal Products; Primary Metals; Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Computer & Electronic Products. No industry reported faster supplier deliveries in February. Six industries reported no change in supplier deliveries in February compared to January.

Supplier Deliveries % Slower % Same % Faster Net Index
Feb 2019 16.6 77.3 6.1 +10.5 54.9
Jan 2019 17.7 75.6 6.7 +11.0 56.2
Dec 2018 17.6 78.0 4.4 +13.2 59.0
Nov 2018 25.9 70.2 3.9 +22.0 61.5

Inventories*

The Inventories Index registered 53.4 percent in February, an increase of 0.6 percentage point from the 52.8 percent reported for January. “Inventories expanded for the 14th consecutive month, at a faster rate than the previous month. This growth is due to continued improvement in supplier delivery performance. Inventory expansion achieved its highest level since August 2018, when the index reached 55.4 percent,” says Fiore. An Inventories Index greater than 44.3 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 10 industries reporting higher inventories in February — listed in order — are: Textile Mills; Wood Products; Printing & Related Support Activities; Paper Products; Furniture & Related Products; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Fabricated Metal Products. The three industries reporting a decrease in inventories in February are: Primary Metals; Plastics & Rubber Products; and Miscellaneous Manufacturing.

Inventories % Higher % Same % Lower Net Index
Feb 2019 20.0 66.8 13.2 +6.8 53.4
Jan 2019 21.5 62.5 16.0 +5.5 52.8
Dec 2018 20.9 60.6 18.4 +2.5 51.2
Nov 2018 23.4 59.0 17.6 +5.8 52.9

Customers’ Inventories*

ISM®’s Customers’ Inventories Index registered 39 percent in February, which is 3.8 percentage points lower than the 42.8 percent reported for January, indicating that customers’ inventory levels were considered too low. “Customers’ inventories are too low for the 29th consecutive month and recorded their lowest level since December 2010, when the index registered 39 percent. Low customer inventories continue to represent future production-growth potential,” says Fiore.

The only industry reporting customers’ inventories as too high during the month of February is Apparel, Leather and Allied Products. The 10 industries reporting customers’ inventories as too low during February — listed in order — are: Chemical Products; Machinery; Primary Metals; Plastics & Rubber Products; Computer & Electronic Products; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Paper Products. Six industries reported no change in inventories in February compared to January.

Customers’ Inventories % Reporting % Too High % About Right % Too Low Net Index
Feb 2019 74 4.3 69.4 26.3 -22.0 39.0
Jan 2019 77 9.6 66.4 24.0 -14.4 42.8
Dec 2018 82 4.3 74.7 21.0 -16.7 41.7
Nov 2018 79 8.9 65.1 26.0 -17.1 41.5

Prices*

The ISM® Prices Index registered 49.4 percent in February, a decrease of 0.2 percentage point from the January reading of 49.6 percent, indicating a decrease in raw materials prices for the second straight month. The Prices Index has dropped 22.2 percentage points over the past four months. “Prices contracted for the second straight month. Decreases were reported in aluminum, steel, steel-based products, various chemicals and plastic resins. Steel prices have returned to more normal levels. Price increases and shortages continue for passive electronic components,” says Fiore. A Prices Index above 52.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

Six of the 18 industries reported paying increased prices for raw materials in February, in the following order: Printing & Related Support Activities; Textile Mills; Computer & Electronic Products; Transportation Equipment; Miscellaneous Manufacturing; and Machinery. The eight industries reporting a decrease in prices for raw materials in February — listed in order — are: Furniture & Related Products; Wood Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Paper Products; Fabricated Metal Products; Chemical Products; and Food, Beverage & Tobacco Products.

Prices % Higher % Same % Lower Net Index
Feb 2019 20.0 58.9 21.1 -1.1 49.4
Jan 2019 20.6 57.9 21.5 -0.9 49.6
Dec 2018 26.8 56.1 17.1 +9.7 54.9
Nov 2018 32.0 57.3 10.7 +21.3 60.7

Backlog of Orders*

ISM®’s Backlog of Orders Index registered 52.3 percent in February, which is 2 percentage points higher than the 50.3 percent reported in January, indicating order backlogs grew for the month. “Backlogs expanded during February despite the softening of growth in new orders, indicating production struggled to keep up with incoming demand,” says Fiore.

The nine industries reporting growth in order backlogs in February — listed in order — are: Wood Products; Printing & Related Support Activities; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Primary Metals; Paper Products; Transportation Equipment; Miscellaneous Manufacturing; and Machinery. The seven industries reporting a decrease in order backlogs during February in the following order are: Apparel, Leather & Allied Products; Textile Mills; Petroleum & Coal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Chemical Products.

Backlog of Orders* % Reporting % Higher % Same % Lower Net Index
Feb 2019 88 23.4 57.8 18.8 +4.6 52.3
Jan 2019 88 20.1 60.3 19.6 +0.5 50.3
Dec 2018 89 19.8 60.3 19.9 -0.1 50.0
Nov 2018 88 27.7 57.5 14.9 +12.8 56.4

New Export Orders*

ISM®’s New Export Orders Index registered 52.8 percent in February, 1 percentage point higher compared to the January reading of 51.8 percent, indicating growth in new export orders for the 36th consecutive month. “Export orders continued expansion at better rates than the prior month, but still at low levels of expansion, consistent with the prior four months. Two of the six big industry sectors contributed to the expansion,” says Fiore.

The seven industries reporting growth in new export orders in February — listed in order — are: Wood Products; Furniture & Related Products; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; Machinery; and Plastics & Rubber Products. The two industries reporting a decrease in new export orders in February are: Apparel, Leather and Allied Products; and Fabricated Metal Products. Nine industries reported no change in new export orders in February.

New Export Orders* % Reporting % Higher % Same % Lower Net Index
Feb 2019 78 11.8 82.2 6.1 +5.7 52.8
Jan 2019 78 12.8 77.8 9.3 +3.5 51.8
Dec 2018 80 13.9 77.7 8.4 +5.5 52.8
Nov 2018 81 12.9 78.6 8.4 +4.5 52.2

Imports*

ISM®’s Imports Index registered 55.3 percent in February, an increase of 1.5 percentage points when compared to the 53.8 percent reported for January, indicating that imports grew in February for the 25th consecutive month. “Imports expansion improved, reversing a three-month expansion decline that was due in part to continued activity to import prior to the Lunar New Year, as well as to avoid potential tariff increases on March 1. The index recorded its best expansion performance since June 2018, when it achieved 59 percent,” says Fiore.

The 13 industries reporting growth in imports during the month of February — listed in order — are: Wood Products; Textile Mills; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Machinery; Chemical Products; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Fabricated Metal Products. No industry reported a decrease in imports during February.

Imports % Reporting % Higher % Same % Lower Net Index
Feb 2019 80 16.6 77.5 5.9 +10.7 55.3
Jan 2019 85 17.0 73.6 9.4 +7.6 53.8
Dec 2018 86 16.7 72.0 11.3 +5.4 52.7
Nov 2018 83 18.7 69.8 11.5 +7.2 53.6
*The Inventories, Customers’ Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy

Average commitment lead time for Capital Expenditures decreased by two days in February to 146 days. Average lead time for Production Materials was unchanged at 68 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased by three days to 33 days

Percent Reporting

Capital Expenditures Hand-to-Mouth 30 Days 60 Days 90 Days 6 Months 1 Year + Average Days
Feb 2019 18 3 13 20 26 20 146
Jan 2019 20 4 12 18 24 22 148
Dec 2018 19 5 11 22 23 20 142
Nov 2018 19 5 9 22 22 23 150
Production Materials Hand-to-Mouth 30 Days 60 Days 90 Days 6 Months 1 Year + Average Days
Feb 2019 10 37 24 17 9 3 68
Jan 2019 13 30 27 19 8 3 68
Dec 2018 11 35 27 17 6 4 68
Nov 2018 9 35 30 15 8 3 68
MRO Supplies Hand-to-Mouth 30 Days 60 Days 90 Days 6 Months 1 Year + Average Days
Feb 2019 34 45 15 4 1 1 33
Jan 2019 35 39 17 6 2 1 36
Dec 2018 37 41 14 5 3 0 32
Nov 2018 37 39 15 6 3 0 33

February 2019 Non-Manufacturing ISM® Report On Business

NMI® at 59.7%

Business Activity Index at 64.7%

New Orders Index at 65.2%

Employment Index at 55.2%

(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in February for the 109th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: “The NMI® registered 59.7 percent, which is 3 percentage points higher than the January reading of 56.7 percent. This represents continued growth in the non-manufacturing sector, at a faster rate. The Non-Manufacturing Business Activity Index increased to 64.7 percent, 5 percentage points higher than the January reading of 59.7 percent, reflecting growth for the 115th consecutive month, at a faster rate in February. The New Orders Index registered 65.2 percent, 7.5 percentage points higher than the reading of 57.7 percent in January. The Employment Index decreased 2.6 percentage points in February to 55.2 percent from the January reading of 57.8 percent. The Prices Index decreased 5 percentage points from the January reading of 59.4 percent to 54.4 percent, indicating that prices increased in February for the 21st consecutive month. According to the NMI®, all 18 non-manufacturing industries reported growth. The non-manufacturing sector’s growth rate rebounded in February after cooling off in January. Respondents are concerned about the uncertainty of tariffs, capacity constraints and employment resources; however, they remain mostly optimistic about overall business conditions and the economy.”

INDUSTRY PERFORMANCE

The 18 non-manufacturing industries reporting growth in February — listed in order — are: Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Mining; Educational Services; Utilities; Other Services; Real Estate, Rental & Leasing; Construction; Health Care & Social Assistance; Professional, Scientific & Technical Services; Public Administration; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Information; Accommodation & Food Services; Arts, Entertainment & Recreation; and Retail Trade.

What respondents are saying
  • “We are anxiously awaiting decisions in the next couple of weeks on the fate of the proposed tariffs on China. High Chinese commitments to agriculture output will put cost pressure on food and restaurant margins.” (Accommodation & Food Services)
  • “The beginning of the year is generally our slowest time of year in the health-care industry. [Activity] will gradually pick up until April, then be steady until the fourth quarter, when there will be a large increase.” (Health Care & Social Assistance)
  • “Still strong in all areas, due mostly to commercial construction activity.” (Construction)
  • “The local economy is doing well. Business lending remains competitive. The rise in interest rates have helped boost our net interest margin.” (Finance & Insurance)
  • “Business continues to stay steady, with little drop off. However, we are more concerned about tariffs in the short term, since there seems to be no agreement. However, we do believe it will be a short-lived issue. In the long term, tariffs will force our suppliers to source elsewhere, which will levy more competition from manufacturers in other low- or non-tariffed countries and even in the U.S. Ultimately, the tariffs will force an improvement to the overall supply chain and better mitigate supply risk in our industry.” (Management of Companies & Support Services)
  • “Increased activity level over the end of 2018.” (Mining)
  • “Business continues [to] improve, and we expect it to continue through 2019. Domestic trucking availability is improving.” (Other Services)
  • “Confidence is returning in the marketplace, but tariff surcharges are still in place.” (Retail Trade)
  • “Tariffs continue to have an impact on our business. The contractor labor shortage continues to be the biggest supply challenge for our company and others in our region and industry.” (Utilities)
  • “Seeing increases in business activity. Projecting strong sales for the month, stable prices and generally good fill rates from suppliers. Some spot outages, mostly due to capacity and planning limitations or shortfalls.” (Wholesale Trade)

ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® NON-MANUFACTURING AND ISM® MANUFACTURING SURVEYS*
FEBRUARY 2019

Non-Manufacturing Manufacturing
Index Series Index Feb Series Index Jan Percent Point Change Direction Rate of Change Trend** (Months) Series Index Feb Series Index Jan Percent Point Change
NMI®/ PMI® 59.7 56.7 +3.0 Growing Faster 109 54.2 56.6 -2.4
Business Activity/ Production 64.7 59.7 +5.0 Growing Faster 115 54.8 60.5 -5.7
New Orders 65.2 57.7 +7.5 Growing Faster 115 55.5 58.2 -2.7
Employment 55.2 57.8 -2.6 Growing Slower 60 52.3 55.5 -3.2
Supplier Deliveries 53.5 51.5 +2.0 Slowing Faster 38 54.9 56.2 -1.3
Inventories 51.0 49.0 +2.0 Growing From Contracting 1 53.4 52.8 +0.6
Prices 54.4 59.4 -5.0 Increasing Slower 21 49.4 49.6 -0.2
Backlog of Orders 55.5 52.5 +3.0 Growing Faster 14 52.3 50.3 +2.0
New Export Orders 55.0 50.5 +4.5 Growing Faster 25 52.8 51.8 +1.0
Imports 48.5 52.0 -3.5 Contracting From Growing 1 55.3 53.8 +1.5
Inventory Sentiment 59.0 60.5 -1.5 Too High Slower 260 N/A N/A N/A
Customers’ Inventories N/A N/A N/A N/A N/A N/A 39.0 42.8 -3.8
Overall Economy Growing Faster 115
Non-Manufacturing Sector Growing Faster 109
Non-Manufacturing ISM® Report On Business® data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment Indexes. Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries Indexes.
*Number of months moving in current direction.

Commodities reported up/down in price and in short supply

Commodities Up in Price

Beef (2); Copper Wire; Labor (5); Paper; Paper Products; and Steel Products (17).

Commodities Down in Price

Cheese; Diesel (3); and Fuel (4).

Commodities in Short Supply

Construction Subcontractors (14); Labor (5); Labor — Construction (35); Labor — Temporary (6); and Medical Supplies (4).

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


FEBRUARY 2019 Non-Manufacturing Index Summaries


NMI®

In February, the NMI® registered 59.7 percent, 3 percentage points lower than the 56.7 percent registered in January, indicating continued growth in the non-manufacturing sector for the 109th consecutive month. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

An NMI® above 48.6 percent, over time, generally indicates an expansion of the overall economy. Therefore, the February NMI® indicates growth for the 115th consecutive month in the overall economy and expansion in the non-manufacturing sector for the 109th consecutive month. Nieves says, “The past relationship between the NMI® and the overall economy indicates that the NMI® for February (59.7 percent) corresponds to a 3.9-percent increase in real gross domestic product (GDP) on an annualized basis.”

NMI® History

Month NMI®
Feb 2019 59.7
Jan 2019 56.7
Dec 2018 58.0
Nov 2018 60.4
Oct 2018 60.0
Sep 2018 60.8
Month NMI®
Aug 2018 58.8
Jul 2018 56.7
Jun 2018 58.7
May 2018 58.9
Apr 2018 57.2
Mar 2018 58.7
58.7
60.8
56.7

Business Activity

ISM®’s Business Activity Index registered 64.7 percent in February, an increase of 5 percentage points from the January reading of 59.7 percent. This represents growth in business activity for the 115th consecutive month. Sixteen industries reported increased business activity. Comments from respondents include: “Demand for medical supplies, equipment, services, professional services and construction are all up” and “Activity has picked up after a very sluggish first half of last month.”

The 16 industries reporting growth of business activity in February — listed in order — are: Management of Companies & Support Services; Utilities; Transportation & Warehousing; Educational Services; Other Services; Mining; Real Estate, Rental & Leasing; Wholesale Trade; Public Administration; Accommodation & Food Services; Professional, Scientific & Technical Services; Arts, Entertainment & Recreation; Health Care & Social Assistance; Finance & Insurance; Information; and Construction. The only industry reporting a decrease in February is Retail Trade.

Business Activity % Higher % Same % Lower Index
Feb 2019 39 51 10 64.7
Jan 2019 33 43 24 59.7
Dec 2018 32 50 18 61.2
Nov 2018 40 49 11 64.3

New Orders

ISM®’s Non-Manufacturing New Orders Index registered 65.2 percent, an increase of 7.5 percentage points from the January reading of 57.7 percent. New orders grew in February for the 115th consecutive month, at a substantially faster rate compared with January. Comments from respondents include: “Increased activity in the oil and gas sector leading to trickle-down effect for service companies” and “Expanding business with our current customers.”

The 16 industries reporting growth of new orders in February — listed in order — are: Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Mining; Utilities; Educational Services; Real Estate, Rental & Leasing; Construction; Public Administration; Health Care & Social Assistance; Professional, Scientific & Technical Services; Accommodation & Food Services; Information; Finance & Insurance; Other Services; and Retail Trade. No industry reported contraction in February.

New Orders % Higher % Same % Lower Index
Feb 2019 38 52 10 65.2
Jan 2019 28 51 21 57.7
Dec 2018 35 50 15 62.7
Nov 2018 36 52 12 62.7

Employment

Employment activity in the non-manufacturing sector grew in February for the 60th consecutive month. ISM®’s Non-Manufacturing Employment Index registered 55.2 percent, a decrease of 2.6 percentage points from the January reading of 57.8 percent. Eleven industries reported increased employment, and four industries reported decreased employment. Comments from respondents include: “Lower employment makes higher-paying positions elsewhere more attractive” and “It is more difficult to find well-qualified workers. Our backlog of unfilled jobs is stubbornly the same despite the efforts of the HR department.”

The 11 industries reporting an increase in employment in February — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Educational Services; Real Estate, Rental & Leasing; Construction; Mining; Other Services; Finance & Insurance; and Health Care & Social Assistance. The four industries reporting a reduction in employment in February are: Accommodation & Food Services; Information; Retail Trade; and Public Administration.

Employment % Higher % Same % Lower Index
Feb 2019 21 66 13 55.2
Jan 2019 22 65 13 57.8
Dec 2018 26 60 14 56.6
Nov 2018 22 69 9 58.0

Supplier Deliveries

Supplier deliveries were slower in February for the 38th consecutive month. The index registered 53.5 percent, which is 2 percentage points higher than the 51.5 percent registered in January. This indicates that deliveries are slowing at faster rate in February as compared with January. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Manufacturing back orders are slowing deliveries” and “General increase in U.S. economic activity is straining manufacturers already running at full capacity.”

The seven industries reporting slower deliveries in February — listed in order — are: Transportation & Warehousing; Mining; Wholesale Trade; Retail Trade; Information; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The three industries reporting faster deliveries in February are: Real Estate, Rental & Leasing; Construction; and Accommodation & Food Services. Eight industries reported no change in supplier deliveries in February as compared to January.

Supplier Deliveries % Slower % Same % Faster Index
Feb 2019 11 85 4 53.5
Jan 2019 10 83 7 51.5
Dec 2018 13 77 10 51.5
Nov 2018 15 83 2 56.5

Inventories*

ISM®’s Non-Manufacturing Inventories Index grew in February after a month of contraction, registering 51 percent, which is 2 percentage points higher than the 49 percent that was reported in January. Of the total respondents in February, 30 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Support increase in volume” and “Carrying additional inventory to meet demand [due to] customer business increasing.”

The six industries reporting an increase in inventories in February — listed in order — are: Real Estate, Rental & Leasing; Construction; Professional, Scientific & Technical Services; Other Services; Management of Companies & Support Services; and Finance & Insurance. The six industries reporting a decrease in inventories — listed in order — are: Utilities; Transportation & Warehousing; Retail Trade; Mining; Public Administration; and Wholesale Trade.

Inventories % Higher % Same % Lower Index
Feb 2019 20 62 18 51.0
Jan 2019 22 54 24 49.0
Dec 2018 20 63 17 51.5
Nov 2018 26 63 11 57.5

Prices*

Prices paid by non-manufacturing organizations for materials and services increased in February for the 21st consecutive month. ISM®’s Non-Manufacturing Prices Index registered 54.4 percent, 5 percentage points lower than the 59.4 percent reported in January. Eighteen percent of respondents reported higher prices, 74 percent indicated no change in prices paid, and 8 percent of respondents reported lower prices.

Twelve non-manufacturing industries reported an increase in prices paid during the month of February, listed in the following order: Arts, Entertainment & Recreation; Other Services; Wholesale Trade; Construction; Public Administration; Utilities; Health Care & Social Assistance; Information; Finance & Insurance; Management of Companies & Support Services; Transportation & Warehousing; and Professional, Scientific & Technical Services. The three non-manufacturing industries reporting a decrease in prices paid during the month of February are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; and Mining.

Prices % Higher % Same % Lower Index
Feb 2019 18 74 8 54.4
Jan 2019 25 67 8 59.4
Dec 2018 18 74 8 58.0
Nov 2018 28 67 5 64.3
NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.

Backlog of Orders

ISM®’s Non-Manufacturing Backlog of Orders Index grew in February. The index registered 55.5 percent, which is 3 percentage points higher than the 52.5 percent reported in January. Of the total respondents in February, 38 percent indicated they do not measure backlog of orders.

The nine industries reporting an increase in order backlogs in February — listed in order — are: Utilities; Accommodation & Food Services; Retail Trade; Mining; Public Administration; Wholesale Trade; Transportation & Warehousing; Construction; and Professional, Scientific & Technical Services. The four industries that reported a decrease in backlogs in February are: Real Estate, Rental & Leasing; Finance & Insurance; Information; and Health Care & Social Assistance.

Backlog of Orders % Higher % Same % Lower Index
Feb 2019 24 63 13 55.5
Jan 2019 20 65 15 52.5
Dec 2018 20 61 19 50.5
Nov 2018 22 67 11 55.5

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based personnel grew for the 25th consecutive month. The New Export Orders Index registered 55 percent in February which is 4.5 percentage points higher than the 50.5 percent that was reported in January. Of the total respondents in February, 64 percent indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.

The five industries reporting an increase in new export orders in February are: Real Estate, Rental & Leasing; Accommodation & Food Services; Wholesale Trade; Mining; and Information. The two industries reporting a decrease in exports for the month of February are: Other Services; and Finance & Insurance. Eight industries reported no change in exports in February.

New Export Orders % Higher % Same % Lower Index
Feb 2019 17 76 7 55.0
Jan 2019 15 71 14 50.5
Dec 2018 22 75 3 59.5
Nov 2018 19 77 4 57.5

Imports

The Imports Index contracted in February. The reading of 48.5 percent is 3.5 percentage points lower than the 52 percent reported in January. Fifty-one percent of respondents reported that they do not use, or do not track the use of, imported materials.

The three industries reporting an increase in imports for the month of February are: Mining; Wholesale Trade; and Retail Trade. The four industries reporting a decrease in imports in the month of February are: Public Administration; Information; Health Care & Social Assistance; and Professional, Scientific & Technical Services. Ten industries reported no change in imports in February as compared to January.

Imports % Higher % Same % Lower Index
Feb 2019 8 81 11 48.5
Jan 2019 12 80 8 52.0
Dec 2018 15 77 8 53.5
Nov 2018 16 77 7 54.5

Inventory Sentiment

The ISM® Non-Manufacturing Inventory Sentiment Index in February registered 59 percent, which is 1.5 percentage points lower than the 60.5 percent that was reported in January. This indicates that respondents believe their inventories are still too high. In February, 24 percent of respondents said their inventories were too high, 6 percent of the respondents said their inventories were too low, and 70 percent said their inventories were about right.

The nine industries reporting a feeling that their inventories were too high in February — listed in order — are: Wholesale Trade; Information; Construction; Professional, Scientific & Technical Services; Utilities; Public Administration; Management of Companies & Support Services; Mining; and Health Care & Social Assistance. The two industries reporting a feeling that their inventories were too low in February are: Transportation & Warehousing; and Accommodation & Food Services.

Inventory Sentiment

Inventory Sentiment % Too High % About Right % Too Low Index
Feb 2019 24 70 6 59.0
Jan 2019 26 69 5 60.5
Dec 2018 22 74 4 59.0
Nov 2018 24 72 4 60.0