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Economy in Brief

U.S. ISM Factory Index & Prices Fall To Lowest in Roughly Three Years
by Tom Moeller  July 02, 2012

Factory sector activity hasn't shown this much weakness since the end of the last recession. What's worse is that momentum is down. The June ISM Composite Index of industrial sector activity dropped to 49.7 from an unrevised 53.5 in May. The decline compared to Consensus expectations for a lesser decline to 52.0. The figure was the first below the break-even level of 50 since July of 2009. During the last ten years there has been an 80% correlation between the index level and the three-month change in factory sector production.

The largest component series decline was new orders. Its 12.3 point drop to 47.8 was to its lowest reading since the recession. That was followed by the second consecutive monthly decline in the production series to 51.0 and a two point drop in inventories to 44.0. The employment component was under less downward pressure and slipped to 56.6. During the last ten years there has been an 88% correlation between the level of the index and the m/m change in factory sector payrolls. Working the other way, the supplier deliveries series ticked up m/m to a still-low 48.9, indicating fast delivery speeds.

The price index fell sharply to 37.0, its lowest since April 2009. Just 7 percent of firms raised prices while 33 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 fell sharply to 47.5, its lowest since the recession's end. The imports series was steady at 53.5.

The figures from the Institute For Supply Management (ISM) are diffusion indexes and can be found in Haver's USECON database. The expectations data are in the AS1REPNA database.


ISM Mfg Jun May Apr Jun'11 2011 2010 2009
Composite Index 49.7 53.5 54.8 59.7 55.2 57.3 46.4
 New Orders 47.8 60.1 58.2 53.6 56.4 59.2 52.0
 Production 51.0 55.6 61.0 55.9 57.4 61.0 50.8
 Employment 56.6 56.9 57.3 61.0 57.4 57.3 40.7
 Supplier Deliveries 48.9 48.7 49.2 55.2 54.7 58.1 51.6
 Inventories 44.0 46.0 48.5 53.5 50.1 50.8 37.1
Prices Paid Index (NSA) 37.0 47.5 61.0 68.0 65.2 68.9 48.3
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