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Economy in Brief

U.S. ISM Factory Index Increases Further; Pricing Power Strengthens
by Tom Moeller  March 01, 2013

The factory sector is increasingly gaining a firmer footing. The February composite index of manufacturing activity from the Institute for Supply Management rose to 54.2 from an unrevised 53.1 in January. The latest number beat expectations for a decline to 52.5. Any figure above 50 indicates an increasing level of activity. During the last ten years, there has been a 69% correlation between the ISM index and the q/q change in real GDP.

Improvement in the overall index was led by orders (57.8) & production (57.6). The inventories index also ticked higher to 51.5. Offsetting these gains was a decline in the employment reading to 52.6. During the last ten years there has been an 88% correlation between the employment index and the m/m change in factory payrolls. The supplier delivery index also fell to 51.4, indicating that product delivery speeds were the quickest since November.

The price index continued to rise, last month to 61.5, the highest level in twelve months. Thirty one percent of firms raised prices while eight 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 Feb Jan Dec Feb'12 2012 2011 2010
Composite Index 54.2 53.1 50.2 51.9 51.7 55.2 57.3
 New Orders 57.8 53.3 49.7 54.9 52.9 56.4 59.2
 Production 57.6 53.6 52.6 54.8 53.6 57.4 61.0
 Employment 52.6 54.0 51.9 52.1 53.8 57.4 57.3
 Supplier Deliveries 51.4 53.6 53.7 48.4 50.0 54.7 58.1
 Inventories 51.5 51.0 43.0 49.5 48.2 50.1 50.8
Prices Paid Index (NSA) 61.5 56.5 55.5 61.5 53.2 65.2 68.9
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