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Economy in Brief

U.S. ISM Factory Sector Index Increases to Highest Level Since 2004
by Tom Moeller  February 1, 2011

The Composite Index from the Institute for Supply Management increased last month to 60.8 from a revised 58.5 during December. The figure easily beat consensus expectations for a reading of 58.0. The latest was the highest level since May 2004. It was the eighteenth consecutive monthly figure above the break-even 50 and 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.

Sharp recoveries in new orders and employment accounted for the m/m increase in the total index. The orders index rose as 46 percent (NSA) of respondents reported higher orders and 15 percent indicated lower. The employment index rose m/m to 61.7. It was the highest level since 1973 and was the fourteenth consecutive month above 50. During the last ten years there has been a 90% correlation between the index level and the m/m change in factory sector employment.

The export order index to jumped to 62.0, its highest level since last May. During the last ten years there has been an 88% correlation between the level of the index and the quarterly change in merchandise exports. Thirty percent of respondents reported higher export orders while a lessened six percent reported orders lower.

The separate index of prices paid rose to 72.5, its highest level since the April high of 78.0 and up from the December '08 low of 18.0. Forty-eight percent of respondents reported higher prices while just three percent indicated lower prices.

ISM Mfg Jan Dec Nov Jan'10 2010 2009 2008
Composite Index 60.8 58.5 58.2 58.3 57.3 46.2 45.5
 New Orders 67.8 62.0 56.6 66.1 59.2 51.6 42.1
 Employment 61.7 58.9 59.0 54.3 57.3 40.5 43.3
 Production 63.5 63.0 58.2 65.1 61.0 50.4 45.2
 Supplier Deliveries 58.6 56.7 58.1 59.6 58.1 51.4 51.6
 Inventories 52.4 51.8 56.1 46.4 50.8 37.1 45.5
Prices Paid Index (NSA) 81.5 72.5 69.5 61.5 68.9 48.3 66.5
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