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Economy in Brief

U.S. ISM Index Falls Again
by Tom Moeller July 1, 2010

Growth still is positive, but for the factory sector the pace of improvement waned further last month. The June composite index from the Institute for Supply Management slipped to 56.2 from 59.7 in May. The latest figure disappointed Consensus expectations for a reading of 59.0 but still it was the eleventh consecutive monthly reading above 50. It was up from the low of 32.5 reached in December '08. (Any figure above the break-even point of 50 suggests rising activity.) The ISM data is available in Haver's USECON database.

Declines amongst the subseries were broad-based including new orders, production and vendor performance which all fell sharply. The employment index also fell moderately to 57.8 and reversed the gains of the prior two months. During the last ten years there has been an 89% correlation between the ISM employment index and the m/m change in factory sector payrolls. The inventory index rose modestly.

Also falling sharply was the export order index to its lowest level since December. During the last ten years there has been an 88% correlation between the level of the index and the quarterly change in merchandise exports. Nineteen percent of respondents reported higher export orders while seven reported lower orders.

The separate index of prices paid fell sharply to 57.0 which was the lowest level since November. It remained up from the December '08 low of 18.0. Just 32% (half the recent high) of respondents reported higher prices while 18% indicated lower prices. During the last twenty years there has been an 83% correlation between the price index and the three-month change in the PPI for intermediate goods.

The ISM data are available in Haver's USECON database.

ISM Mfg June May April June '09 2009 2008 2007
Composite Index 56.2 59.7 60.4 45.3 46.2 45.5 51.1
  New Orders 58.5 65.7 65.7 49.9 51.6 42.1 54.3
  Employment 57.8 59.8 58.5 42.1 40.5 43.3 50.5
  Production 61.4 66.6 66.9 53.2 50.4 45.2 54.1
  Supplier Deliveries 57.3 61.0 61.3 50.5 51.4 51.6 51.2
  Inventories 45.8 45.6 49.4 30.9 37.1 45.5 45.4
Prices Paid Index (NSA) 57.0 77.5 78.0 50.0 48.3 66.5 64.6
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