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Economy in Brief

U.S. ISM Factory Index Slips Back
by Tom Moeller  November 1, 2011

As foreshadowed by yesterday's report from the Chicago Purchasing Managers, the Institute for Supply Management reported today that its October Composite Index of factory sector activity slipped. The decline to 50.8 was from an unrevised 51.6 in September and it remained near the lowest since the economic recovery began two years ago. The latest reading was lower than Consensus expectations for improvement to 52.0. Nevertheless, the index indicated positive, but slower, factory growth and was the twenty-seventh consecutive monthly figure above the break-even level of 50.

Most of the index's five components were off m/m. The new orders series rose but the production, supplier delivery, inventory, and employment series each slipped or fell. During the last ten years there has been an 89% correlation between the employment series level and the m/m change in factory sector payrolls.

The price reading fell sharply to 41.0. It was the first reading below the break-even level of 50 since the recovery began. Just fourteen percent of firms raised prices, the least since the recession's end, while an increased one-third lowered them. During the last ten years there has been an 83% correlation between the index and the m/m change in the core intermediate producer price index.

The separate index of new export orders fell to 50.0, its lowest level since the recovery began. Reflecting weakness in the U.S. economic recovery, the imports series fell below break-even, also the lowest level since recovery began.

The ISM figures are diffusion indexes and can be found in Haver's USECON database. The expectations data are in the AS1REPNA database.

ISM Mfg Oct Sep Aug Oct'10 2010 2009 2008
Composite Index 50.8 51.6 50.6 56.9 57.3 46.3 45.5
 New Orders 52.4 49.6 49.6 59.9 59.3 51.7 42.1
 Employment 53.5 53.8 51.8 57.9 57.3 40.6 43.1
 Production 50.1 51.2 48.6 61.4 61.1 50.5 45.1
 Supplier Deliveries 51.3 51.4 50.6 52.3 58.1 51.5 51.6
 Inventories 46.7 52.0 52.3 53.2 50.8 37.1 45.5
Prices Paid Index (NSA) 41.0 56.0 55.5 71.0 68.9 48.3 66.5
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