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FOR RELEASE: April 3, 2006

Contact: Rose Marie Goupil
  ISM, Media Relations
  Tempe, Arizona
  800/888-6276, Ext. 3015
  E-mail: rgoupil@ism.ws

March 2006 Manufacturing ISM Report On Business®

PMI at 55.2%

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 March 2006.

New Orders, Production, Employment Expanding
Deliveries Slowing, Prices Increasing

(Tempe, Arizona) — Economic activity in the manufacturing sector grew in March for the 34th consecutive month, while the overall economy grew for the 53rd 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. "The manufacturing sector, led by continued strength in new orders and production, continued to grow in March. The first quarter is now complete, and the ISM data indicates that it was a good quarter for U.S. manufacturing. Prices are still a major concern, particularly in the energy and metals markets. In general, manufacturing continues to experience a significant level of growth."

TOP PERFORMING INDUSTRIES

The 15 industries reporting growth in March — listed in order — are: Miscellaneous*; Apparel; Textiles; Petroleum; Industrial & Commercial Equipment & Computers; Printing & Publishing; Primary Metals; Transportation & Equipment; Wood & Wood Products; Chemicals; Electronic Components & Equipment; Fabricated Metals; Instruments & Photographic Equipment; Food; and Paper.

WHAT RESPONDENTS ARE SAYING ...
  • "Demand appears to be softening." (Chemicals)
  • "Overall sales have seen an increase of 20 percent over the past quarter." (Electronic Components & Equipment)
  • "Business is very strong in all sectors." (Food)
  • "Energy-related costs appear to be stabilizing, but metals look like they are in for another run-up shortly." (Instruments & Photographic Equipment)
  • "Slight uptick in business. Still haunted by price increases related to oil and energy." (Printing & Publishing)
MANUFACTURING AT A GLANCE
MARCH 2006


Index		 Series
Index
March		 Series
Index
February		 Percentage
Point
Change

Direction		 Rate
of
Change
Trend*
(Months)
PMI 55.2 56.7 -1.5 Growing Slower 34
New Orders 58.4 61.9 -3.5 Growing Slower 35
Production 57.5 57.4 +0.1 Growing Faster 35
Employment 52.5 55.0 -2.5 Growing Slower 10
Supplier Deliveries 53.1 52.2 +0.9 Slowing Faster 33
Inventories 48.7 49.6 -0.9 Contracting Faster 12
Customers' Inventories 48.0 48.5 -0.5 Too Low Faster 58
Prices 66.5 62.5 +4.0 Increasing Faster 8
Backlog of Orders 59.5 54.5 +5.0 Growing Faster 3
Exports 57.3 57.0 +0.3 Growing Faster 40
Imports 57.0 57.5 -0.5 Growing Slower 51
             
OVERALL ECONOMY Growing Slower 53
Manufacturing Sector Growing Slower 34

*Number of months moving in current direction


COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (8); Aluminum Extrusions; Aluminum Products (4); Carbon Black; Copper (10); Copper Products (4); Corrugated Containers (5); Electronic Components; Flour; Freight; Natural Rubber; Paper (3); Particle Board; Stainless Steel (2); Steel; Steel - Hot Rolled; and Sugar (2).

Commodities Down in Price

Caustic and Natural Gas (3).

Commodities in Short Supply

There were no commodities reported in short supply this month.

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


MARCH 2006 MANUFACTURING INDEX SUMMARIES


PMI

The PMI indicates that the manufacturing economy grew in March for the 34th consecutive month as it registered 55.2 percent, a decrease of 1.5 percentage points when compared to February's seasonally adjusted reading of 56.7 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 March PMI indicates that both the overall economy and the manufacturing sector are growing. The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (55.6 percent) corresponds to a 4.7 percent increase in real gross domestic product (GDP). In addition, if the PMI for March (55.2 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually.

THE LAST 12 MONTHS
Month PMI   Month PMI
Mar 2006 55.2   Sep 2005 58.0
Feb 2006 56.7   Aug 2005 53.5
Jan 2006 54.8   Jul 2005 56.4
Dec 2005 55.6   Jun 2005 54.0
Nov 2005 57.3   May 2005 51.8
Oct 2005 58.1   Apr 2005 53.8
Average for 12 months – 55.4
High – 58.1
Low – 51.8

New Orders

ISM's New Orders Index grew in March with a reading of 58.4 percent. The index is 3.5 percentage points lower than the seasonally adjusted 61.9 percent registered in February. March is the 35th 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). Fourteen industries reported increases during March: Petroleum; Miscellaneous*; Textiles; Printing & Publishing; Primary Metals; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Apparel; Wood & Wood Products; Paper; Chemicals; Fabricated Metals; Instruments & Photographic Equipment; and Electronic Components & Equipment.

New
Orders		 %
Better		 %
Same		 %
Worse
Net
Index
Mar 2006 37 51 12 +25 58.4
Feb 2006 38 51 11 +27 61.9
Jan 2006 30 54 16 +14 58.0
Dec 2005 30 50 20 +10 59.1

Production

ISM's Production Index registered 57.5 percent in March, 0.1 percentage point higher than the seasonally adjusted 57.4 percent reported in February. March is the 35th 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 March, 13 registered growth: Miscellaneous*; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Apparel; Printing & Publishing; Wood & Wood Products; Textiles; Primary Metals; Chemicals; Transportation & Equipment; Electronic Components & Equipment; Fabricated Metals; and Food.


Production		 %
Better		 %
Same		 %
Worse
Net
Index
Mar 2006 34 52 14 +20 57.5
Feb 2006 34 50 16 +18 57.4
Jan 2006 29 55 16 +13 56.6
Dec 2005 27 58 15 +12 57.8

Employment

ISM's Employment Index expanded for the 10th consecutive month in March. The index registered 52.5 percent in March compared to the seasonally adjusted 55 percent registered in February, a decrease of 2.5 percentage points. 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 nine industries reporting growth in employment during March are: Miscellaneous*; Apparel; Textiles; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Food; Primary Metals; and Chemicals.


Employment		 %
Higher		 %
Same		 %
Lower
Net
Index
Mar 2006 19 70 11 +8 52.5
Feb 2006 22 65 13 +9 55.0
Jan 2006 13 76 11 +2 51.3
Dec 2005 12 80 8 +4 53.6

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower for the 33rd consecutive month in March. ISM's Supplier Deliveries Index for March registered 53.1 percent, an increase of 0.9 percentage point when compared to February's seasonally adjusted reading of 52.2 percent. A reading above 50 percent indicates slower deliveries. The 10 industries reporting slower supplier deliveries in March are: Miscellaneous*; Printing & Publishing; Electronic Components & Equipment; Paper; Food; Primary Metals; Transportation & Equipment; Fabricated Metals; Industrial & Commercial Equipment & Computers; and Chemicals.

Supplier
Deliveries		 %
Slower		 %
Same		 %
Faster
Net
Index
Mar 2006 14 80 6 +8 53.1
Feb 2006 11 82 7 +4 52.2
Jan 2006 11 85 4 +7 55.3
Dec 2005 12 79 9 +3 52.9

Inventories

Manufacturers' inventories declined in March for the 12th consecutive month as ISM's Inventories Index registered 48.7 percent, indicating a faster rate of liquidation when compared to February's reading of 49.6 percent (seasonally adjusted). March's index represents a 0.9 percentage point decrease from February's index. 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 seven industries reporting higher inventories in March are: Textiles; Miscellaneous*; Fabricated Metals; Apparel; Wood & Wood Products; Food; and Chemicals.


Inventories		 %
Higher		 %
Same		 %
Lower
Net
Index
Mar 2006 18 64 18 0 48.7
Feb 2006 16 72 12 +4 49.6
Jan 2006 13 69 18 -5 46.5
Dec 2005 12 69 19 -7 47.3

Customers' Inventories**

The March Customers' Inventories Index is at 48 percent, 0.5 percentage point lower than the 48.5 percent reported in February. The index indicates that respondents believe their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 58th consecutive month that the index has registered below 50 percent. Eight industries reported higher customers' inventories during March: Miscellaneous*; Instruments & Photographic Equipment; Paper; Chemicals; Rubber & Plastic Products; Food; Primary Metals; and Fabricated Metals.

Customers'
Inventories		 %
Reporting		 %Too
High		 %About
Right		 %Too
Low
Net
Index
Mar 2006 68 14 68 18 -4 48.0
Feb 2006 75 15 67 18 -3 48.5
Jan 2006 75 9 74 17 -8 46.0
Dec 2005 76 13 70 17 -4 48.0

Prices**

In March, the ISM Prices Index was 66.5 percent, indicating manufacturers are paying higher prices on average when compared to February. While 42 percent of supply executives reported paying higher prices and 9 percent reported paying lower prices, most of the respondents (49 percent) reported that prices were unchanged from 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 March, 15 industries reported paying higher prices: Tobacco; Printing & Publishing; Petroleum; Furniture; Fabricated Metals; Transportation & Equipment; Glass, Stone & Aggregate; Electronic Components & Equipment; Wood & Wood Products; Food; Industrial & Commercial Equipment & Computers; Textiles; Primary Metals; Instruments & Photographic Equipment; and Chemicals.


Prices		 %
Higher		 %
Same		 %
Lower
Net
Index
Mar 2006 42 49 9 +33 66.5
Feb 2006 36 53 11 +25 62.5
Jan 2006 38 54 8 +30 65.0
Dec 2005 37 52 11 +26 63.0

Backlog of Orders**

ISM's Backlog of Orders Index registered 59.5 percent, indicating manufacturers' backlogs in March are expanding when compared to February. The index is 5 percentage points higher than the 54.5 percent reported in February. Of the 85 percent of respondents who report their backlog of orders, 34 percent reported greater backlogs, 15 percent reported smaller backlogs, and 51 percent reported no change from February. The 14 industries reporting an increase in order backlogs during the month are: Miscellaneous*; Textiles; Primary Metals; Transportation & Equipment; Wood & Wood Products; Apparel; Printing & Publishing; Paper; Industrial & Commercial Equipment & Computers; Fabricated Metals; Rubber & Plastic Products; Chemicals; Instruments & Photographic Equipment; and Food.

Backlog of
Orders		 %
Reporting		 %
Greater		 %
Same		 %
Less
Net
Index
Mar 2006 85 34 51 15 +19 59.5
Feb 2006 88 29 51 20 +9 54.5
Jan 2006 85 23 61 16 +7 53.5
Dec 2005 86 22 55 23 -1 49.5

New Export Orders

ISM's New Export Orders Index for March registered 57.3 percent, an increase of 0.3 percentage point when compared to February's seasonally adjusted index of 57 percent. This is the 40th consecutive month of growth in export orders. The 10 industries reporting growth in new export orders in March are: Miscellaneous*; Instruments & Photographic Equipment; Printing & Publishing; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Furniture; Electronic Components & Equipment; Chemicals; Paper; and Fabricated Metals.

New Export
Orders		 %
Reporting		 %
Higher		 %
Same		 %
Lower
Net
Index
Mar 2006 79 21 77 2 +19 57.3
Feb 2006 79 19 75 6 +13 57.0
Jan 2006 77 19 79 2 +17 58.5
Dec 2005 76 12 83 5 +7 54.3

Imports**

Imports of materials by manufacturers grew during March as the Imports Index registered 57 percent. The index decreased 0.5 percentage point when compared to February's index of 57.5 percent, indicating a slower rate of growth. The 13 industries reporting growth in import activity for March are: Miscellaneous*; Wood & Wood Products; Textiles; Furniture; Instruments & Photographic Equipment; Food; Fabricated Metals; Paper; Transportation & Equipment; Rubber & Plastic Products; Chemicals; Industrial & Commercial Equipment & Computers; and Electronic Components & Equipment. (Beginning with the January 2006 report, the Imports Index no longer meets the criteria for seasonal adjustments.)


Imports		 %
Reporting		 %
Higher		 %
Same		 %
Lower
Net
Index
Mar 2006 82 19 76 5 +14 57.0
Feb 2006 80 21 73 6 +15 57.5
Jan 2006 81 20 74 6 +14 57.0
Dec 2005 80 13 79 8 +5 52.8

*Miscellaneous is a preponderance of jewelry, toys, sporting goods and musical instruments.
**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 is unchanged at 118 days. Average leadtime for Production Materials increased 5 days to 55 days. Average leadtime for Maintenance, Repair and Operating (MRO) supplies increased 5 days to 29 days.

Percent Reporting

Capital
Expenditures		 Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Mar 2006 24 9 11 15 30 11 118
Feb 2006 21 9 14 18 26 12 118
Jan 2006 22 9 16 15 29 9 112
Dec 2005 22 11 13 18 25 11 113
 

Production
Materials		 Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Mar 2006 19 39 23 12 4 3 55
Feb 2006 19 40 27 9 3 2 50
Jan 2006 18 39 25 12 4 2 53
Dec 2005 20 36 27 11 5 1 51
 

MRO
Supplies		 Hand-
to-
Mouth
30
Days
60
Days
90
Days
6
Months
1
Year+
Average
Days
Mar 2006 48 34 11 5 1 1 29
Feb 2006 52 34 9 4 1 0 24
Jan 2006 53 33 11 3 0 0 22
Dec 2005 51 31 12 5 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 monthly replies to questions asked of purchasing and supply executives in approximately 400 industrial companies. Membership of the Business Survey Committee is diversified by Standard Industrial Classification (SIC) category, based on each industry's contribution to gross domestic product (GDP). Twenty industries from various U.S. geographical areas are represented on the committee. The 20 manufacturing Standard Industry Classification codes are: Food; Tobacco; Textiles; Apparel; Wood & Wood Products; Furniture; Paper; Printing & Publishing; Chemicals; Petroleum; Rubber & Plastic Products; Leather; Glass, Stone & Aggregate; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Transportation & Equipment; Instruments & Photographic Equipment; and Miscellaneous (a preponderance of jewelry, toys, sporting goods and musical instruments).

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 March 2006 data will be released at 10:00 a.m. (ET) on April 3, 2006.


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