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Economy in Brief

ISM Index Down Sharply
by Tom Moeller August 1, 2007

The Institute of Supply Management (ISM) reported that the Composite Index of activity in the manufacturing sector fell sharply to 53.8 from 56.0 during June. Consensus expectations for a lesser dip to 55.5 and the decline reversed the moderate gains of the prior two months.


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.


Three of the index's five components fell last month, but the decline in the production index was a notable 7.3 points to the lowest level since March. The employment index also fell for the third month in a row to the lowest level since March. 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 new orders index fell 2.8 points to the lowest since April. The inventory index rose 3.2 points to 48.5 and the supplier deliveries index rose in July to 52.0.


Prices fell three points to 65.0. This third consecutive monthly decline lowered the price index eight points below the recent peak in March. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.

ISM Manufacturing Survey July June July '06 2006 2005 2004
Composite Index 53.8 56.0 54.4 53.9 55.5 60.5
  New Orders Index 57.5 60.3 55.6 55.4 57.4 63.5
Prices Paid Index (NSA) 65.0 68.0 78.5 65.0 66.4 79.8
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