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Economy in Brief
U.S. Existing Home Sales & Prices Rise Again
The NAR reported that sales of existing homes increased 1.1% during March (-1.2% y/y) to 5.600 million units (AR)...
PMIs Stabilize or Creep Higher After Drop-Off
In the EMU, both the services and manufacturing sectors took a substantial step down one month ago...
FIBER: Industrial Commodity Prices Strengthen Selectively
The FIBER Industrial Materials Price Index increased 0.4% during the last four weeks...
German PPI Accelerates
The German year-on-year PPI has generally been decelerating since early 2017...
U.S. Leading Economic Indicators Signal Continued Expansion
The Conference Board's Composite Index of Leading Economic Indicators increased 0.3% during March...
by Tom Moeller October 1, 2009
The National
Association of Purchasing Management data continued to indicate that
the recession in U.S. factory sector activity is over. Though the
September composite index slipped to 52.6 from 52.9 in August, it
remained near the highest level since June of 2007. (Any reading above
the break-even point of 50 suggests rising activity.) The latest figure
was up from the low of 32.9 hit last December but it fell short of
Consensus expectations for a reading of 54.0. The ISM data is available
in Haver's USECON database.
A sharp decline in
the production component to a still firm 55.7 accounted for much of the
latest decline. During the last ten years there has been an 84%
correlation between the level of the production component of the
composite index and the three-month growth in factory sector industrial
production.
It is appropriate to correlate the ISM index level
with factory sector output growth because the ISM
index is a diffusion index. It measures growth by using all of the
positive changes in activity added to one half of the zero change in
activity measures. The new orders component fell
just modestly. On the up side, the export order index at 55.0 was near
the highest in over a year, suggesting that recessions abroad are
winding down. During the last ten years there has been a 53%
correlation between the index and the q/q change in real exports of
goods in the GDP accounts.
The employment index also fell just slightly. Though the 46.2 reading continued to suggest a lower level of hiring, the index was near its highest level since last August and was up from the February low of 26.1. During the last ten years there has been a 90% correlation between the index level and the three-month change in manufacturing payrolls.
A reduced rate of inventory
liquidation seems to be behind the factory sector's recent improvement.
The inventory index jumped to 42.5 which was its highest level since
last October. The speed of supplier deliveries also points toward
improvement in activity. Slower delivery speeds are indicated by a rise
in the index to its highest level since 2005 (no typo).
The separate index of prices paid also suggests improved factory sector activity. At 63.5, the reading was near its highest level since last August and it's up from the December low of 18.0. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
ISM Mfg | September | August | September '08 | 2008 | 2007 | 2006 |
---|---|---|---|---|---|---|
Composite Index | 52.6 | 52.9 | 43.4 | 45.5 | 51.1 | 53.1 |
New Orders Index | 60.8 | 64.9 | 39.2 | 42.1 | 54.3 | 55.4 |
Employment Index | 46.2 | 46.4 | 40.9 | 43.2 | 50.5 | 51.7 |
Prices Paid Index (NSA) | 63.5 | 65.0 | 53.5 | 66.5 | 64.6 | 65.0 |