September 2012 ISM Reports

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Manufacturing moved back into expansion territory during September, with the Institute for Supply Management’s (ISM) PMI jumping up to 51.5 percent, from 49.6 in August (50 percent is the breakpoint between contraction and expansion). After reciting some report details, Bradley Holcomb, chair of ISM’s Manufacturing Business Survey Committee, concluded with, “Comments from the [respondent] panel generally reflect a mix of optimism over new orders beginning to pick up, and continued concern over soft global business conditions and an unsettled political environment." The sub-indices were mixed: The number of respondents reporting increased new orders and employment rose, and new export orders contracted more slowly in the face of a dramatic rise in the number of respondents reporting higher input prices.
 

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The service sector grew at a faster clip in September, reflected by a 1.4 percentage point rise (to 55.1 percent) in the non-manufacturing index (now known simply as the “NMI”). Comments by Anthony Nieves, chair of ISM’s Non-manufacturing Business Survey Committee, had the same tenor as Holcomb’s. “Respondents' comments continue to be mixed,” said Nieves; “however, the majority indicate a slightly more positive perspective on current business conditions." The mix of service sub-indices was somewhat more upbeat than was the case for manufacturing; the number of respondents reporting heightened business activity and new orders increased dramatically; however, the number of firms facing higher input prices once again rose noticeably.
 

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Wood Products reported greater overall activity in September, but the only subindex contributing to it appeared to be greater employment. Paper Products’ expansion was more broadly based, but some clouds may be on the horizon from falling new export orders and higher imports. Real Estate reported contraction in overall activity, thanks primarily to a drop in employment. Construction, by contrast, received broad-based encouraging news.

Prices for fuel and corrugated boxes increased in September; some respondents reported higher prices for copier paper, while other lower prices. No relevant commodities were in short supply.