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Economy in Brief

ISM Index Lifted by Hurricane Rebuilding & Inventory Restocking
by Tom Moeller October 3, 2005

The Institute of Supply Management reported that the Composite Index of activity in the manufacturing sector jumped unexpectedly to 59.4 from 53.6 in September. Consensus expectations had been for a decline to 52.0.

During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.

Each of the index's five components rose though the 7.4 point rise in new orders to a more than one year high and a like gain in production seemed noteworthy after earlier months' easing.

The rise in the inventories index to the second highest level of the year suggests that the destocking efforts of the prior five months are winding down. The vendor deliveries index increased to highest since last October.

The rate of factory sector job creation rose slightly though the index at 53.1 contrasts with recent government data that suggest job loss. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.

Pricing in the factory sector firmed even more to the highest since last October. The prices paid index rose to 78.0 on top of last month's increase.

Hurricane Katrina and the Employment Situation report for September 2005, to be released this Friday, from the U.S. Department of Labor is available here.

ISM Manufacturing Survey Sept Aug Sept '04 2004 2003 2002
Composite Index 59.4 53.6 59.1 60.5 53.3 52.4
  New Orders Index 63.8 56.4 59.9 63.5 57.9 56.5
Prices Paid Index (NSA) 78.0 62.5 76.0 79.8 59.6 57.6
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