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Economy in Brief

U.S. ISM Factory Index Nudges Higher as Pricing Improves
by Tom Moeller  February 1, 2012

Factory sector activity is improving but it's hardly robust. The Composite Index of factory sector activity from the Institute For Supply Management rose to 54.1 from a revised 53.1 in December. The latest reading roughly matched Consensus expectations and earlier data reflected updated seasonal factors. The reading was the highest since July of 2010 and was the thirtieth consecutive monthly figure above the break-even level of 50.

Month-to-month improvement amongst the index components was scattered with the strongest gain in inventories accompanied by higher new orders and supplier delivery speeds. The production figure fell from its recent high and the employment number slipped. 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 index rose a sharp eight points to 55.5, the first month above the break-even level of 50 since September. Thirty percent of firms raised prices, the most since July, while a reduced nineteen percent 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 rose slightly to 55.0, its best since April. The imports series slipped to 52.5.

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 Jan Dec Nov Jan'11 2011 2010 2009
Composite Index 54.1 53.1 52.2 59.9 55.2 57.3 46.4
 New Orders 57.6 54.8 55.0 63.8 56.4 59.2 52.0
 Production 55.7 58.9 55.7 63.5 57.4 61.0 50.8
 Employment 54.3 54.8 52.4 60.7 57.4 57.3 40.7
 Supplier Deliveries 53.6 51.5 51.3 59.3 54.7 58.1 51.6
 Inventories 49.5 45.5 46.5 52.0 50.1 50.8 37.1
Prices Paid Index (NSA) 55.5 47.5 45.0 81.5 65.2 68.9 48.3
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