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Economy in Brief

U.S. Factory Sector Expansion Gains Steam
by Tom Moeller  March 1, 2011

Last month, the Composite Index of activity in the factory sector from the Institute for Supply Management increased to 61.4 from an unrevised 60.8 in January. The figure beat consensus expectations for a reading of 60.6. The latest was the highest level since May 2004 and was the nineteenth consecutive monthly figure above the break-even 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.

Most of the component series rose last month. The production and employment series led the gain. The latter index rose m/m to 64.5. It was the highest level since 1973 and was the seventeenth consecutive month above 50. Thirty-five percent of firms reported higher employment while nine percent reported it lower. During the last ten years there has been a 91% correlation between the index level and the m/m change in factory sector employment.

The new orders series ticked up to 68.0, its highest since January 2004. Separately, the export order index to rose to 62.5, its highest level since July 1998. During the last ten years there has been an 85% correlation between the level of the index and the quarterly change in merchandise exports. Thirty-one percent of respondents reported higher export orders while six percent reported orders lower.

The separate index of prices paid rose to 81.5, its highest level since July 2008 and up from the December '08 low of 18.0. Sixty-six percent of respondents reported higher prices while just two percent indicated lower prices.

The ISM figures can be found in Haver's USECON database. The forecast data is in the AS1REPNA database.

Semiannual Monetary Policy Report To Congress by Fed Chairman Ben S. Bernanke can be found here.

ISM Mfg Feb Jan Dec Feb'10 2010 2009 2008
Composite Index 61.4 60.8 58.5 57.1 57.3 46.3 45.5
 New Orders 68.0 67.8 62.0 61.9 59.2 51.6 42.1
 Employment 64.5 61.7 58.9 57.3 57.3 40.5 43.3
 Production 66.3 63.5 63.0 58.8 61.1 50.5 45.1
 Supplier Deliveries 59.4 58.6 56.7 60.0 58.1 51.5 51.6
 Inventories 48.8 52.4 51.8 46.4 50.8 37.1 45.5
Prices Paid Index (NSA) 82.0 81.5 72.5 67.0 68.9 48.3 66.5
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