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Economy in Brief

U.S. ISM Composite Factory Sector Index Falls to Recovery Low
by Tom Moeller  June 3, 2013

Forward momentum in the factory sector has disappeared. The Composite Index of manufacturing activity from the Institute for Supply Management fell to 49.0 during May from an unrevised 50.7 in April. Below the break-even point of 50, it was the lowest reading since the recession ended in June 2009. The figure disappointed consensus expectations for 50.5. 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.

Leading the overall index down was a fall in the production reading. The sharp decline to 48.6 brought it to the lowest level since May 2009. Also down hard was the new orders reading to 48.8, its lowest since April 2009. The separate index of new export orders dropped sharply to 51.0, a five month low. The employment reading slipped to 50.1, also a recovery-low. During the last ten years there has been an 88% correlation between the employment index and the m/m change in factory payrolls. Falling sharply in addition was the supplier delivery index to 48.7, thus indicating faster delivery speeds. Offsetting these declines was a modest rise in the inventories index to 49.0.

The prices paid index at 49.5 weakened further and indicated no rise in prices. Nineteen percent of firms raised prices but twenty 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.

The Ten Suggestions is the title of Fed Chairman Ben S. Bernanke's speech and it can be found here


ISM Mfg May Apr Mar May'12 2012 2011 2010
Composite Index 49.0 50.7 51.3 52.5 51.7 55.2 57.3
 New Orders 48.8 52.3 51.4 57.2 52.9 56.4 59.2
 Production 48.6 53.5 52.2 54.1 53.6 57.4 61.0
 Employment 50.1 50.2 54.2 55.9 53.8 57.4 57.3
 Supplier Deliveries 48.7 50.9 49.4 49.2 50.0 54.7 58.1
 Inventories 49.0 46.5 49.5 46.0 48.2 50.1 50.8
Prices Paid Index (NSA) 49.5 50.0 54.5 47.5 53.2 65.2 68.9
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