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Economy in Brief

U.S. ISM Factory Index Falls To Near Recovery Low
by Tom Moeller  June 1, 2011

The Composite Index of activity in the factory sector from the Institute for Supply Management dropped sharply last month to 53.5 from an unrevised 60.4 in April. On many counts, the figure was a disappointment. It was the lowest since September 2009.

Declines were widespread amongst the components. Finally, it was lower than Consensus expectations for 57.8. However, the reading continued to indicate positive factory growth and was the twenty-second consecutive monthly figure above the break-even level of 50. It was up from the low of 32.5 reached in December '08.

Declines in each of the components contributed to the lower composite index. The largest m/m decline was in new orders followed by production. The jobs figure also fell sharply to the lowest level since October. (During the last ten years there has been a 90% correlation between the jobs index and the m/m change in factory sector payrolls.) The supplier delivery index also fell indicating faster delivery speeds and the inventory index showed decumulation

The separate index of new export orders fell sharply to the lowest level this year. The index of prices backpedaled to 76.5, also its lowest level this year. A reduced 58% (NSA) of respondents reported higher prices while a slightly increased 5% indicated lower prices.

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

ISM Mfg May Apr Mar May'10 2010 2009 2008
Composite Index 53.5 60.4 61.2 57.8 57.3 46.3 45.5
 New Orders 51.0 61.7 63.3 61.0 59.2 51.6 42.1
 Employment 58.2 62.7 63.0 57.4 57.3 40.5 43.3
 Production 54.0 63.8 69.0 63.8 61.1 50.5 45.1
 Supplier Deliveries 55.7 60.2 63.1 60.6 58.1 51.5 51.6
 Inventories 48.7 53.6 47.4 46.2 50.8 37.1 45.5
Prices Paid Index (NSA) 76.5 85.5 85.0 77.5 68.9 48.3 66.5
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