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Economy in Brief

ISM Activity & Pricing Indexes Up
by Tom Moeller May 1, 2006

The April Composite Index of activity in the factory sector reported by the Institute of Supply Management (ISM) surged to 57.3, well ahead of Consensus expectations for an unchanged reading at 55.0. The figure was the highest since last November and represented improvement from the 1Q average of 55.6.

During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.

A higher production index at 60.4 versus 57.2 averaged during 1Q led last month's rise. Moreover, the employment index rebounded to 55.8 versus 52.9 during 1Q. 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. The inventory index also rose to its highest level (51.3) in a year while the supplier deliveries index increased to its highest (57.7) since October.

To the downside was the new orders index which fell to the lowest level (57.6) since August. New export orders were notably weak as the index dropped to the lowest level (53.4) since last June.

The price index showed further strength with a five point increase to its highest level since November. During the last twenty years there has been a 91% correlation between the price index and the three month change in the PPI for intermediate goods less food & energy.

Are We Engineering Ourselves Out of Manufacturing Jobs? from the Federal Reserve Bank of Cleveland can be found here.

ISM Manufacturing Survey April Mar April '05 2005 2004 2003
Composite Index 57.3 55.2 53.8 55.5 60.5 53.3
  New Orders Index 57.6 58.4 54.7 57.4 63.5 57.9
Prices Paid Index (NSA) 71.5 66.5 71.0 66.4 79.8 59.6
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