ISM Manufacturing Index Slows

By John S. McClenahen Although business for U.S. manufacturers continued to grow in October, it was at a slower rate than most analysts expected. The Institute for Supply Management's (ISM) index of manufacturing activity was 56.8% in October, 1.7 percentage points below the 58.5% recorded in September. A figure above 50% indicates the manufacturing sector of the U.S. economy generally is growing; a figure below 50% signals the sector is contracting. ISM's data show new orders actually coming in faster during October than in September, even as production and employment were growing more slowly last month. Order backlogs shrank in October. "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," says Norbert J. Ore, chairperson of ISM's manufacturing business survey committee and group director for strategic sourcing and procurement at Georgia-Pacific Corp. "The decline in order backlogs is an indication that manufacturing has peaked, and some sectors are seeing this more than others," he states. In chemicals and other manufacturing industries, says ISM, profits are being squeezed by higher energy prices, with Ore characterizing energy prices and commodity price inflation as "major concerns." Tempe, Ariz.-based ISM calculates its manufacturing index from results of a monthly survey of purchasing and supply executives in more than 400 industrial companies.

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