March/April 2015 / INDUSTRIAL DISTRIBUTION 15 www.inddist.com
Orders, Production & Inventory
ISM’s New Orders Index registered 52.9 percent in January,
a decrease of 4. 9 percentage points when compared to
the December seasonally adjusted reading of 57.8 percent,
indicating growth in new orders for the 20th consecutive
month. A New Orders Index above 52.1 percent, over
time, is generally consistent with an increase in the Census
Bureau’s series on manufacturing orders (in constant 2000
ISM’s Production Index registered 56.5 percent in January, which is a decrease of 1.2 percentage points when
compared to the seasonally adjusted 57.7 percent reported
in December, indicating growth in production for the 11th
consecutive month. An index above 51.1 percent, over
time, is generally consistent with an increase in the Federal
Reserve Board’s Industrial Production figures.
ISM’s Backlog of Orders Index registered 46 percent in
January, which is 6. 5 percentage points lower than the 52.5
percent reported in December, indicating contraction in
order backlogs following three months of growth in order
backlogs. Of the 87 percent of respondents who reported
their backlog of orders, 18 percent reported greater backlogs, 26 percent reported smaller backlogs, and 56 percent
reported no change from December.
The Inventories Index registered 51 percent in January, which is 5. 5 percentage points higher than the 45.5
percent registered in December, indicating raw materials
inventories are growing following one month of inventories contracting. An Inventories Index greater than 42.9
percent, over time, is generally consistent with expansion
in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).
Exports, Imports & Prices
ISM’s New Export Orders Index registered 49.5 percent in
January, which is 2. 5 percentage points lower than the 52
percent reported in December. January’s reading reflects a
month of contraction in the level of exports, following 25
consecutive months of growth in new export orders.
ISM’s Imports Index registered 55.5 percent in January,
which is 0.5 percentage point higher than the 55 percent
reported in December. This month’s reading represents 24
consecutive months of growth in imports.
“A major downside to the ISM report is that the manu-
facturing trade deficit continues to get worse,” Meckstroth
cautions. “Imports are growing faster and exports are
falling. The export index dipped below 50 to 49.5 but the
imports index rose to 55.5 from 55 in December. Foreign
trade will be a drag on manufacturing activity this year.”
The ISM Prices Index registered 35 percent in January,
which is a decrease of 3. 5 percentage points compared to
the December reading of 38. 5 percent. In January, 11 per-
cent of respondents reported paying higher prices, 41 per-
cent reported paying lower prices, and 48 percent of supply
executives reported paying the same prices as in December.
This is the third consecutive month that raw materials prices
have registered a decrease, with the Prices Index decreasing
a total of 18. 5 percentage points over these three months.
A Prices Index above 52.1 percent, over time, is generally
consistent with an increase in the Bureau of Labor Statistics
(BLS) Producer Price Index for Intermediate Materials.
“Falling oil prices and other commodity prices are evident
in the report,” Meckstroth adds. “The price index indicated
declining prices for the last three months. Deflation in com-
modity prices is good for consumers (especially oil prices)
but it does influence the pace of investment spending.”
“The January ISM report is neither good nor bad but
lukewarm,” Meckstroth concludes. “Manufacturing
production was exceptionally strong in the fourth quarter
( 5. 2 percent growth in manufacturing industrial pro-
duction), with the overall economy decelerating from a
growth of 5 percent in the third quarter to 2. 6 percent in
the fourth quarter. Manufacturing activity is now shifting
to a slower, more sustainable rate of growth.”
For more information on the Institute of Supply Management, visit www.ism.ws.