SUPPORTING STATEMENT - PART A
U.S. Department of Commerce
U.S. Census Bureau
Manufacturers' Shipments, Inventories, and Orders Survey
Form (M-3(SD))
(OMB Control No. 0607-0008)

A.	Justification

			1.	 Necessity of the Information Collection
				
		The U.S. Census Bureau is requesting an extension of the currently approved collection for the Manufacturers’ Shipments, Inventories, and Orders (M3) survey.  This survey collects monthly data from domestic manufacturers on Form M-3 (SD), which is mailed at the end of each month.  The form and transmittal letter are shown in Appendices A and B.  Data requested are shipments, new orders, unfilled orders, total inventory, materials and supplies, work-in-process, and finished goods.  It is currently the only survey that provides broad-based monthly statistical data on the economic conditions in the domestic manufacturing sector.  The survey is designed to measure current industrial activity and to provide an indication of future production commitments.  The value of shipments measures the value of goods delivered during the month by domestic manufacturers.  Estimates of new orders serve as an indicator of future production commitments and represent the current sales value of new orders received during the month, net of cancellations.  Substantial accumulation or depletion of backlogs of unfilled orders measures excess (or deficient) demand for manufactured products.  The level of inventories, especially in relation to shipments, is frequently used to monitor the business cycle. 

		This survey provides an essential component of the current economic indicators needed for assessing the evolving status of the economy and formulating economic policy.  The Office of Information and Regulatory Affairs, Office of Management and Budget (OMB) has designated this survey as a principal federal economic indicator.  The shipments and inventory data are essential inputs to the gross domestic product (GDP), while the orders data are direct inputs to the leading economic indicator series.  The GDP and the economic indicator series would be incomplete without these data.  The survey also provides valuable and timely domestic manufacturing data for economic planning and analysis to business firms, trade associations, research and consulting agencies, and academia.  The M3 survey is authorized by Title 13, United States Code, Sections 131, 182, 193, and 224.
			
	2.	Needs and Uses

		The data are used for analyzing short- and long-term trends, both in the manufacturing sector and as related to other sectors of the economy.  The data on value of shipments, especially when adjusted for change in inventory, measure current levels of production.  New orders figures serve as an indicator of future production commitments.  Changes in the level of unfilled orders, because of excess or shortfall of new orders compared with shipments, are used to measure the excess (or deficiency) in the demand for manufactured products.  Changes in the level of inventories and the relation of these to shipments are used to project future movements in manufacturing activity.  These statistics are valuable for analysts of business cycle conditions including members of the Council of Economic Advisers (CEA), the Bureau of Economic Analysis (BEA), the Federal Reserve Board (FRB), the Department of the Treasury, business firms, trade associations, private research and consulting agencies, and the academic community. 

		Information quality is an integral part of the pre-dissemination review of information disseminated by the Census Bureau (fully described in the Census Bureau’s Information Quality Guidelines).  Information quality is also integral to information collections conducted by the Census Bureau and is incorporated into the clearance process required by the Paperwork Reduction Act.	

		3.	Use of Information Technology

		One of the strategic objectives of the Census Bureau is to pursue the least burdensome means of collecting necessary information.  To ease respondent burden, we permit companies to submit data in a format compatible with their internal computerized bookkeeping accounts.  Respondents further are encouraged to submit data through the Census Taker Internet Reporting System, by facsimile into our Paperless Facsimile Image Reporting System (PFIRS), and through Touch Tone Data Entry (TDE).  The M3 collects ninety-nine percent of its data electronically.

		Respondents have been submitting data through the Census Taker Reporting System since November 2003.  Respondents select a link on our web page or type the URL to allow them to enter data.  Data received via the Internet are converted to an ASCII file and downloaded to our company database.  This method of data collection is cost-effective as it reduces the number of monthly forms mailed.  The respondents who choose to report via the Internet receive a monthly e-mail reminder instead of a report.  We currently receive about 900 reports monthly through the Census Taker Internet Reporting System. 

Our Paperless Facsimile Image Reporting System (PFIRS) was implemented in 2000.  The system captures a facsimile image as it is transmitted.  The image is then evaluated through our OCR (optical character recognition) software. 

Once processed, the data are converted to an ASCII file and then downloaded to our company database, thus eliminating data keying.  We receive about 2,200 reports each month via the PFIRS.

We continue to receive data electronically via the TDE system that was initiated in 1992.  There are 6 toll-free telephone lines that the respondent can call 24 hours a day.  Responses are made by using the key pad of a touch tone telephone.  Currently more than 200 respondents are submitting their data monthly using TDE. 
		
	4.	Efforts to Identify Duplication

		The Census Bureau makes a concentrated effort on a continuing basis to identify possible duplications, both within the agency and outside the agency, and to eliminate them whenever possible.  The M3 survey is the only survey that provides broad-based monthly shipments, inventories, and orders statistics on the entire domestic manufacturing sector, as well as specific important industrial categories.

		The Institute for Supply Management collects opinion and directional information on shipments, inventories, and orders from a small sample of companies.  There are other monthly surveys that cover narrowly defined subsectors of manufacturing, but no other public or private survey provides comprehensive monthly statistics for the entire U.S. manufacturing sector.

	5.	Minimizing Burden

		For this survey, we generally do not request reports from companies with less than $50 million in annual shipments.  However, for some of the industries made up primarily of small companies, the inclusion of several small companies is necessary to obtain sufficient coverage levels to produce reliable estimates.

	6.	 Consequences of Less Frequent Collection

		The data collected in this monthly survey provide policy makers with timely, current information essential to assessing the strength of the economy and analyzing short-term trends in the manufacturing sector.  If the survey was conducted less frequently, timely knowledge, especially of unexpected developments, would be missing.  Also, monthly data are needed by the BEA to make early estimates of quarterly GDP and by the Conference Board for calculations of the monthly economic indicators series.

	7.	 Special Circumstances

		All OMB guidelines are observed except one.  We ask respondents to report information more often than quarterly.  The M3 survey is conducted monthly to meet the timeliness requirements documented in Section 6 above.  As soon as the data can be accurately compiled, they are released in order to assist Government policy makers, business decision-makers, and other data users in monitoring the direction of the economy.

	8.	 Consultations Outside the Agency

		Consultations with survey respondents take place regularly through company visits and telephone calls.  These contacts cannot be listed because of their confidential status under Title 13.  Through these contacts we gain considerable insight into the operations of manufacturers and have developed a cooperative rapport with respondents and analysts. 

		We also have continuing contact with the BEA within the Department of Commerce, the FRB, the CEA, the Department of the Treasury, and large numbers of financial and economic advisers, forecasters, and journalists, relative to the adequacy, accuracy, and timeliness of the data.  Comments generally show satisfaction with the data.  In a 1997 correspondence from OMB, we are authorized to prerelease our data to the BEA to improve the coverage and accuracy of the GDP estimates.
				
		Specific representatives to whom we provide data and have discussed the M3 programs are:
					Representative and
	Organization			Telephone Number/E-Mail

		Bureau of Economic Analysis 	Paul Lally
					(202) 606-9743
					paul.lally@bea.gov
		
		Federal Reserve Board                      	John Stevens	
					(202) 452-2206
					John.J.Stevens@frb.gov
 	 	
		Council of Economic Advisers 	Adrienne Pilot
					(202) 395-5110
					apilot@cea.eop.gov

	Council of Economic Advisers	Steven Braun
					(202) 395-4666
					sbraun@cea.eop.gov

		Department of the Treasury		Valerie Personick
					(202) 622-1686
					valerie.personick@do.treas.gov

	                   The Conference Board		         	Ataman Ozyildirim
				(212) 339-0399
				ataman.ozyildirim @conference-
				board.org
			
We published a notice in the Federal Register on December 16, 2008 (Volume 73, Page 76333-76334) inviting the public to comment on our plans to submit this request.   We received one letter from BEA indicating its continued support of the collection. 
		
	9.	Paying Respondents

No respondents are paid or given gifts to report on our survey.
		
10.	Assurance of Confidentiality

All data collected in the M3 survey are confidential under Section 9 of Title 13, United States Code and may be seen only by persons sworn to uphold the confidentiality of Census Bureau information and may be used only for statistical purposes.  We inform respondents of the voluntary and confidential nature of this survey on the monthly report forms and in the instruction manuals which we provide on our website. (see Appendices A and E).

11.	Justification for Sensitive Questions

There are no sensitive questions.

12.	Estimate of Hour Burden 

The estimate of total respondent burden hours for this survey is 17,200 hours annually. This estimate was derived as follows: 

Number of	Annual	Minutes per		Burden
Survey Form	Reporting Units	Frequency	Response 		Hours

Current panel
				M3 	 4,300		12		20			17,200

				We estimated the burden hours based on extensive contact with survey respondents. The estimated annual cost to the respondents is $471,796.  We calculated this annual cost by multiplying the total burden hours by an average hourly wage of $27.43.  The average hourly wage is that of an accountant, presented in the 2007 National Occupation Employment and Wage Estimate
				publication, published by BLS.

13.	Estimate of Cost Burden

We do not expect respondents to incur any costs other than that of their time to respond.  The information requested is of the type and scope normally carried in company records and no special hardware or accounting software or system is necessary to provide answers to this information collection.  Therefore, respondents are not expected to incur any capital and start-up costs or systems maintenance costs in responding.  Further, purchasing of outside accounting or information collection services, if performed by the respondent, is part of usual and customary business practices and not specifically required for this information collection.

14.	Cost to Federal Government

We estimate the total cost to the Federal Government for this program to be $3,200,000, all paid from Census Bureau appropriations.
		
15.	Reason for Change in Burden

We adjusted the burden in the collection upward to reflect the current level of respondents to the survey.
	
16.	Project Schedule

At the end of each month, we mail forms to the survey respondents requesting data for the month just ended.  Although the due date printed on the report form is 15 days after its receipt, long-standing arrangements exist with most major companies for filing dates that are consistent with the closing of their books.

We tabulate, review, and analyze responses beginning about the 13th working day following the close of the report period.  

The monthly publication of the data generally follows the schedule shown : 

Report		Scheduled Release Date

Advance Report on	18 working days after the end of the
Durable Goods	reporting period at 8:30 a.m., or if 
				the 18th day is a Monday, the report is 
				issued on the 19th day

Manufacturers' Shipments,	23 or 24 working days after the end of
Inventories, and Orders	the reporting period at 10:00 a.m. 
Report		(5 working days after the Advance Report)

Annual Benchmark Report	as benchmark data become available 
				(the most recent was issued in May 2008)

An example of the Advance Report on Durable Goods is shown in Appendix C and an example of the Manufacturers' Shipments, Inventories, and Orders Report is shown in Appendix D.
		
The scheduled release dates occasionally do not match the above criteria due to scheduling conflicts with other government press releases.
	
17.	Request to Not Display Expiration Date

The expiration date and OMB number will be displayed on the forms.

18.	Exceptions to the Certification

There are no exceptions.

19.	North American Industry Classification System (NAICS) Codes Affected

Data are collected for all manufacturing industries.  Data are collected for NAICS subsectors 311 - 339.  Under NAICS, we collect and tabulate data for 89 industry groupings.  See NAICS industry groupings in Appendix E.