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Economy in Brief

U.S. ISM Factory Index Posts Unexpected Decline; Pricing Power Weakens
by Tom Moeller  April 1, 2013

Recent improvement in the factory sector stalled last month. The March composite index of manufacturing activity from the Institute for Supply Management fell to 51.3 from an unrevised 54.2 in February. The decline reversed most of two months' improvement and it disappointed expectations for stability at 54.0. 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.

Leading the overall index lower were the readings for production (52.2) and new orders (51.4). However, the new export orders figure (56.0) rose to its highest level since April of last year. The inventory index declined to 49.5 while the supplier delivery reading fell to its lowest level (49.4) since May of last year. That indicated faster delivery speeds and more economic slack. Offsetting these declines was a rise in the employment index to 54.2, its highest reading since June of last year. During the last ten years there has been an 88% correlation between the employment index and the m/m change in factory payrolls. 

The prices paid index (54.5) weakened sharply last month and reversed three months of improvement. Twenty one percent of firms raised prices while twelve 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 Mar Feb Jan Mar'12 2012 2011 2010
Composite Index 51.3 54.2 53.1 53.3 51.7 55.2 57.3
 New Orders 51.4 57.8 53.3 56.8 52.9 56.4 59.2
 Production 52.2 57.6 53.6 55.9 53.6 57.4 61.0
 Employment 54.2 52.6 54.0 55.6 53.8 57.4 57.3
 Supplier Deliveries 49.4 51.4 53.6 48.0 50.0 54.7 58.1
 Inventories 49.5 51.5 51.0 50.0 48.2 50.1 50.8
Prices Paid Index (NSA) 54.5 61.5 56.5 61.0 53.2 65.2 68.9
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