January 2011 Manufacturing Index Summaries

State of Manufacturing

Finding reliable and decent sources of information on manufacturing is sometimes difficult and oftentimes it takes hours to find the information you may need to accurately assess the state of the manufacturing industry. To this end, several manufacturing indicators are listed below. These indicators are reported by the Institute for Supply Management and were chosen to represent a current snapshot of different dimensions of the industry and its performance. The indicators are updated as new data becomes available and can be found at the National Institute of Standards and Technology website.  I trust the information below will be useful to you in exploring and analyzing the current state of manufacturing and its potential future direction.

January 2011 Manufacturing Index Summaries

(as reported by the Institute for Supply Management)

The PMI measures five dimensions of manufacturing: new orders, inventory levels, production, supplier delivers, and employment conditions. An index reading over 50 percent suggests that manufacturing is generally expanding; an index reading below 50 percent generally suggests contraction. Each of these individual factors are adjusted and weighted according to time of year and other events to create a composite measure.

The manufacturing sector continued to grow in January and the overall index of manufacturing activity reached its highest level since May 2004. The PMI grew 2.8 percentage points compared to the reading in December. The Manufacturing PMI has indicated an expanding manufacturing sector for 18 straight months.

Month PMI
Jan 2011 60.8
Dec 2010 58.5
Nov 2010 58.2
Oct 2010 56.9

New Orders
Estimates of new orders is an indicator of future production commitments and represents the current value of new orders received during the month, net of cancellations.

ISM's New Orders Index grew significantly in January compared to December. January's New Orders Index was 5.8 percentage points higher in January compared to December. This is the 19th consecutive month of growth in New Orders.

New Orders % Better % Same % Worse Net Index
Jan 2011 46 36 18 +28 67.8
Dec 2010 31 47 22 +9 62.0
Nov 2010 30 45 25 +5 59.6
Oct 2010 36 39 25 +11 59.9

Manufacturers' inventories have grown over the past seven months. Growth in inventories slowed in December compared to November. The inventories index grew slightly in January compared to December. Inventories were 0.6 percentage points higher in January from the prior month.

Inventories % Higher % Same % Lower Net Index
Jan 2011 25 54 21 +4 52.4
Dec 2010 24 52 24 0 51.8
Nov 2010 25 58 17 +8 56.1
Oct 2010 27 52 21 +6 53.2

ISM's Production Index in January registered a gain of 0.5 percentage points compared to December. The production index rose to 63.5 in January. This is the 20th consecutive month of growth in the production index.

Production % Better % Same % Worse Net Index
Jan 2011 40 44 16 +24 63.5
Dec 2010 30 52 18 +12 63.0
Nov 2010 26 54 20 +6 58.2
Oct 2010 37 49 14 +23 61.4

Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations slowed in January as the Supplier Deliveries Index registered 58.6 percent. This is the 20th consecutive month the Supplier Deliveries Index has been above 50%. An index above 50 indicates slower deliveries.

Supplier Deliveries % Faster % Same % Slower Net Index
Jan 2011 5 77 18 +13 58.6
Dec 2010 7 78 15 +8 56.7
Nov 2010 5 77 18 +13 58.1
Oct 2010 10 76 13 +3 52.3

ISM's Employment Index grew in January compared to December. The employment index had been trending down (but remained positive) over the past few months so this is a hopeful sign. This is the 16th consecutive month of growth in manufacturing employment.

Employment % Higher % Same % Lower Net Index
Jan 2011 24 69 7 +17 61.7
Dec 2010 22 66 12 +10 58.9
Nov 2010 25 66 10 +15 59.0
Oct 2010 26 64 10 +16 57.9

New Export Orders
ISM's New Export Orders Index grew significantly in January compared to December. The export orders index rose by 7.5 percentage points in January compared to December. This is the eighteenth consecutive month of growth in the New Export Orders Index.


New Export Orders % Reporting % Higher % Same % Lower Net Index
Jan 2011 81 30 64 6 +24 62.0
Dec 2010 81 21 67 12 +9 54.5
Nov 2010 81 23 68 9 +14 57.0
Oct 2010 79 30 61 9 +21 60.5

For further information on the current Manufacturing Index, please contact Don Applegarth or go to our Insight on the February Manufacturing Index update.

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Schneider Downs provides accountingtax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH. 

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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