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Economy in Brief

U.S. ISM Factory Index Falls to Recovery Low While Pricing Pressure Eases
by Tom Moeller  December 3, 2012

The Institute for Supply Management reported that its composite index of manufacturing activity fell to 49.5 in November from an unrevised 51.7 in October. The latest level was the lowest since July 2009 and it was well short of expectations for 51.5. Any figure above 50 indicates an increasing level of activity. During the last ten years there has been a 70% correlation between the ISM index and the q/q change in real GDP.

Lower readings for new orders (50.3) and inventories (45.0) were offset by higher figures for production (53.7) and supplier deliveries (50.3. In addition, the lower employment index (48.4) indicated payroll contraction and was at nearly the lowest level of the recovery. During the last ten years there has been an 88% correlation between the employment index and the m/m change in factory payrolls. The separate index of new export orders dropped to 47.0 and continued to indicate declines in exports. It was near its lowest reading since the recession's end. The import series improved slightly from its recovery low to 48.0.

The price index fell to 52.5 with lower oil prices and economic weakness. Nevertheless, it remained above the break-even level of 50. Eighteen percent of firms raised prices while thirteen 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 Nov Oct Sep Nov'11 2011 2010 2009
Composite Index 49.5 51.7 51.5 52.2 55.2 57.3 46.4
 New Orders 50.3 54.2 52.3 55.0 56.4 59.2 52.0
 Production 53.7 52.4 49.5 55.7 57.4 61.0 50.8
 Employment 48.4 52.1 54.7 52.4 57.4 57.3 40.7
 Supplier Deliveries 50.3 49.6 50.3 51.3 54.7 58.1 51.6
 Inventories 45.0 50.0 50.5 46.5 50.1 50.8 37.1
Prices Paid Index (NSA) 52.5 55.0 58.0 45.0 65.2 68.9 48.3
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