ISM: Manufacturing index hits lowest level since 1980
Report confirms dire economic conditions
Sean A. Murphy -- Logistics Management, 12/2/2008
TEMPE, Ariz.—New manufacturing orders continued their downward trend in November, according to the Institute for Supply Management’s latest monthly report.
The report’s manufacturing index, otherwise known as the PMI, fell 2.7 percent to 36.2 percent since October. In addition, the new order index also fell to 27.9 percent, dropping from October’s 32.2 percent.
The new order index has been falling steadily for the past year, according to Norbert J. Ore, Chair of ISM’s Business Survey Committee. It’s bad enough the index is now at the lowest level since June 1980, but the slope has gotten steeper of late.
“Two months ago, we kind of fell off a cliff,” he said.
Three things, Ore said, are to blame: First, oil prices hitting $140 a barrel forced consumers to change their habits and spend less. Second, Hurricane Ike did serious damage to manufacturing and industrial centers. The last factor was the economy. Specifically, woes in the financial sector, causing a drop-off in consumer spending and layoffs in the workforce finally caught up with industry.
The result, Ore said, will be effects on production that will last a while.
“We’re going to be very negative in industrial production two months from now,” he said.
As to when the decline will stop, or at least slow down, Ore said analysts are still trying to figure that out.
“That’s the difficult part is, where’s the bottom?” he said.
Other ominous notes of this month’s report include order backlogs, which are at the lowest level since ISM first tracked the figures in January 1993, and the Prices Index hit 25.5 percent, its lowest reading since 1949, when it hit 20.1 percent.
One respondent noted a single positive note, stating that the U.S. dollar is strengthening against foreign currencies, after plunging over the past year or so. In addition, while many industries, such as textiles, printing, and machinery reported decline, apparel, leather and allied products, and paper products industries all reported growth in November.
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