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Economy in Brief

U.S. ISM Factory Index Slips As Prices Recover
by Tom Moeller  March 1, 2012

Forward momentum in factory sector activity waned a bit last month. The Composite Index of industrial sector activity from the Institute For Supply Management slipped to 52.4 from an unrevised 54.1 in January. The latest reading disappointed Consensus expectations for a rise to 55.0. Nevertheless, the figure above the break-even level of 50 continued to indicate an expanding level of overall activity. During the last ten years there has been an 80% correlation between the index level and the three-month change in factory sector production.

All of the component series either fell or were unchanged last month. The greatest decline occurred in supplier deliveries indicating faster delivery speeds. That is consistent with the next greatest component decline which was new orders. The employment series also fell m/m but it remained above break-even. During the last ten years there has been an 88% correlation between the employment series level and the m/m change in factory sector payrolls.

The price index rose another sharp six points to 61.5, its second month since September above the break-even level of 50. Thirty one percent of firms raised prices, the most since July, while a reduced eight percent lowered them, the least since May. 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 sharply to 59.5, its best since April. The imports series also rose to 54.0, its highest since September.

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 Feb Jan Dec Feb'11 2011 2010 2009
Composite Index 52.4 54.1 53.1 59.8 55.2 57.3 46.4
 New Orders 54.9 57.6 54.8 62.7 56.4 59.2 52.0
 Production 55.3 55.7 58.9 64.4 57.4 61.0 50.8
 Employment 53.2 54.3 54.8 61.1 57.4 57.3 40.7
 Supplier Deliveries 49.0 53.6 51.5 60.1 54.7 58.1 51.6
 Inventories 49.5 49.5 45.5 50.5 50.1 50.8 37.1
Prices Paid Index (NSA) 61.5 55.5 47.5 82.0 65.2 68.9 48.3
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