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Economy in Brief

U.S. ISM Indicates Moderate Improvement In Factory Sector
by Tom Moeller  October 1, 2012

Activity in the manufacturing sector improved last month. The ISM Composite Index of industrial sector activity rose to 51.5 during September, the first month above the break-even level of 50 since May. Nevertheless, the improvement was modest as the reading remained well below last year's Q1 highs near 60. The figure beat Consensus expectations for 49.8. During the last ten years there has been an 80% correlation between the index level and the three-month change in factory sector production.

Improvement in the component series was broad-based and led by new orders to 52.3. The gain in employment to 54.7 also was to its highest level since June. During the last ten years there has been an 88% correlation between the employment index and the m/m change in manufacturing payrolls. Lesser gains were logged by the production (49.5) and supplier delivery series (50.3) while the inventory index fell to 50.5.  

The separate index of new export orders again improved modestly. However, the index level of 48.5 still indicated declines in exports and remained near its lowest reading since the recession's end. The import series was roughly stable at 49.5, still at its recovery low.

With higher oil prices, the price index rose sharply to 58.0, its highest level since April. Twenty seven percent of firms raised prices while 11 percent lowered them. During the last ten years there has been a 65% correlation between the index and the m/m change in the intermediate producer price index.

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 Sep Aug Jul Sep'11 2011 2010 2009
Composite Index 51.5 49.6 49.8 52.5 55.2 57.3 46.4
 New Orders 52.3 47.1 48.0 51.1 56.4 59.2 52.0
 Production 49.5 47.2 51.3 52.5 57.4 61.0 50.8
 Employment 54.7 51.6 52.0 55.2 57.4 57.3 40.7
 Supplier Deliveries 50.3 49.3 48.7 51.6 54.7 58.1 51.6
 Inventories 50.5 53.0 49.0 52.0 50.1 50.8 37.1
Prices Paid Index (NSA) 58.0 54.0 39.5 56.0 65.2 68.9 48.3
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