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Economy in Brief

U.S. ISM Index Shows Additional Factory Sector Improvement
by Tom Moeller  December 2, 2013

Activity in the manufacturing sector continued to firm last month. The Composite Index of Manufacturing Sector Activity from the Institute for Supply Management advanced to 57.3 during November from an unrevised 56.4 October reading. The latest reading was the highest level since April 2011. It beat expectations for a decline to 55.0, as measured by the Action Economics Survey. Any figure above 50 indicates an increasing level of activity in the factory sector. 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 hiring activity provided the greatest lift to last month's composite index. The factory sector employment series rose to 56.5, the highest level since April 2012. During the last ten years there has been an 88% correlation between the employment index and the m/m change in factory payrolls. The new orders index (63.6) gained with a jump in export orders while the production series (62.8) made up its October decline. To the downside were the inventories (50.5) and the supplier deliveries (53.2) indexes, the latter reversing much of its October indication of slower delivery speeds. The order backlog series increased to its highest level in nine months while the imports index slipped to the lowest level in six months.

The prices paid index series suggested easing pricing power as it backpedaled to its lowest level (52.5) since July. A lessened 18 percent of firms raised prices while a higher 13 percent lowered them. During the last ten years there has been a 67% 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 number is in the AS1REPNA database.

ISM Mfg Nov Oct Sep Nov'12 2012 2011 2010
Composite Index 57.3 56.4 56.2 49.9 51.7 55.2 57.3
 New Orders 63.6 60.6 60.5 51.1 52.9 56.4 59.2
 Production 62.8 60.8 62.6 53.1 53.6 57.4 61.0
 Employment 56.5 53.2 55.4 50.1 53.8 57.4 57.3
 Supplier Deliveries 53.2 54.7 52.6 50.1 50.0 54.7 58.1
 Inventories 50.5 52.5 50.0 45.0 48.2 50.1 50.8
Prices Paid Index (NSA) 52.5 55.5 56.5 52.5 53.2 65.2 68.9
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