ISM Gauge Up for 17th Month

Joan Gunin, Don Hogsett, November 8, 2004

The key U.S. manufacturing sector grew during October for a 17th straight month — but at a slower pace than in September — and the rate of growth in manufacturing has now slacked for a fourth straight month, according to the Institute for Supply Management.

The ISM, a group of the country's purchasing managers that produces a widely watched indicator of the nation's economic health, said its monthly gauge of manufacturing activity came in at 56.8 percent, down 1.7 percentage points from a September reading of 58.5. The Index is now down 5.2 percent from a recent high of 62 reached in July.

“October continued a trend of slower growth, but that should be somewhat expected as manufacturing has experienced three quarters of strong growth so far this year,” said Norbert Ore, chairman of the ISM's Manufacturing Business Survey Committee.

Providing support to the monthly reading, the New Orders Index improved 0.2 percent during October. But the rate of growth in production slowed 2.7 percent, and the rate of employment growth slowed 3.3 percent, the ISM reported.

Manufacturers' inventories declined 2.8 percent, but their customers' inventories increased 2 percent. Putting somewhat more pressure on the sector, the index measuring order backlogs actually declined during the month, showing negative growth. The Backlog Index fell 6 percent, to a reading of 49 percent from 55 percent a month ago.

Putting pressure on the bottom line, the prices that manufacturers pay for raw materials and supplies continued to rise for the 32nd straight month. The Prices Index rose 2.5 percent to a reading of 78.5. During October, 61 percent of purchasing managers reported paying higher prices, while only 4 percent said their prices were lower. The remaining 35 percent report prices were unchanged.

Manufacturing benchmarks Month-over-month percentage-point change

Purchasing Managers' Index –1.7%
New Orders +0.2
Production –2.7
Employment –3.3
Inventories –2.8
Customers' Inventories +2.0
Prices Manufacturers Pay +2.5
Order Backlogs –6.0
Export Orders +4.8
Imports +2.7
Source: Institute for Supply Management

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