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Economy in Brief

ISM Factory Index Up Further
by Tom Moeller January 2, 2004

The Purchasing Managers’ Composite Index (PMI) released by the Institute of Supply Management rose to 66.2 in December from 62.8 in November. It was the highest level for the Composite Index since December 1983. Consensus expectations were for a reading of 61.0.

During the last twenty years there has been a 72% correlation between the level of the PMI index and the three month growth in factory sector industrial production. There has been a 58% correlation between the level of the PMI Composite Index and quarterly growth in real GDP.

The new orders index rose to 77.6, the highest level since July 1950. The production index also jumped to 73.0, the highest level since December 1983.

The employment index at 55.5 has risen nearly 10 points during the last three months. There has been a 72% correlation during the last ten years between the ISM employment index and the one-month change in factory sector payrolls.

The inventory index fell to 47.3 and reversed half of the prior month's gain.

The prices paid index rose last month to 66.0, the highest level since May 2000. There has been a 28% correlation between the prices paid index and the y/y change in the finished goods PPI over the last ten years. The correlation with the intermediate materials PPI has been a higher 63%.

ISM Manufacturing Survey Dec Nov Dec '02 2003 2002 2001
Composite Index 66.2 62.8 55.2 53.5 52.4 44.0
  New Orders Index 77.6 73.7 62.9 58.3 56.7 46.2
Prices Paid Index (NSA) 66.0 64.0 55.0 59.6 57.6 42.9
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