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Tempe, AZ, Nov. 5 - The rate of growth in the manufacturing sector ignored historical seasonality in October, dropping for the third straight month. New orders upticked, but production dropped sharply. The electronics industry appears to be slowing, said the Institute for Supply Management.

Manufacturing grew for the 17th consecutive month, ISM said, based on its monthly poll of the supply chain. ISM said that while growth remains strong, inflation worries are rampant.

"Strong growth continues, but at a slower rate than in September," said ISM chairman Norbert Ore. "However, energy prices and commodity price inflation are major concerns for manufacturing buyers."

The PMI measure of economic activity fell 1.7 points to 56.8%, but remained above the benchmark 50% level for the 17th straight month.

New orders rose 0.2 points and production declined 6.8 points. "Manufacturing experienced three quarters of strong growth this year [and] the decline in order backlogs is an indication that manufacturing has peaked," said Ore.

Trends in pricing (higher) and customer inventories (lower) continued. Order backlogs dropped in October, yet imports and exports rose.

Electronic Components and Equipment, and Industrial and Commercial Equipment and Computers were among the sectors reporting growth.

                                                June                      July                        August                   Sept.                      Oct.

PMI                                           61.1                 62.0                  59.0                 58.5                 56.8

New orders                             60.0                 64.7                  61.2                 58.1                 58.3

Production                               63.2                 66.1                  59.5                 61.6                 54.8

Inventories                               51.1                        49.9                         51.7                        51.0                        48.2

Customer inventories               39.0                        37.5                        45.5                        41.4                         43.5

Backlogs                                  58.5                        58.0                         55.0                        55.0                        49.0

Source: Institute for Supply Management, November 2004


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