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Economy in Brief

U.S. ISM Factory Sector Index Reaches Highest Level in More Than Two Years
by Tom Moeller  August 1, 2013

Factory sector business heated up last month. The Composite Index of Manufacturing Sector Activity from the Institute for Supply Management jumped  to 55.4 during July from an unrevised 50.9 in June. The figure was its highest level since June 2011 and well surpassed consensus expectations for modest improvement to 51.8. 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 rebound in the overall index was a surge in the production series to 65.0, its highest level since May 2004. A higher new orders index followed with a strong gain to 58.3. The export order index slipped m/m though its upward trend remained in place. Factory sector employment improved sharply, moving above break-even to 54.4, its highest level 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 rate of supplier deliveries slowed as indicated by a rise in this index to 52.1. Widespread component strength caused the inventory index to fall sharply to 47.0.

The prices paid index declined sharply to 49.0, its lowest level in 12 months. Twenty percent of firms raised prices while 22 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 order backlog series fell to its lowest level since November but the imports series surged to its highest in over three years.

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 Jul Jun May Jul'12 2012 2011 2010
Composite Index 55.4 50.9 49.0 50.5 51.7 55.2 57.3
 New Orders 58.3 51.9 48.8 47.5 52.9 56.4 59.2
 Production 65.0 53.4 48.6 53.3 53.6 57.4 61.0
 Employment 54.4 48.7 50.1 53.2 53.8 57.4 57.3
 Supplier Deliveries 52.1 50.0 48.7 49.7 50.0 54.7 58.1
 Inventories 47.0 50.5 49.0 49.0 48.2 50.1 50.8
Prices Paid Index (NSA) 49.0 52.5 49.5 39.5 53.2 65.2 68.9
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