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Economy in Brief

U.S. ISM Index Begins to Recover
by Tom Moeller  March 3, 2014

The factory sector began to bounce back last month following heavy winter snowfalls. The Composite Index of Manufacturing Sector Activity from the Institute for Supply Management improved to 53.2 during February from 51.3 in January. The latest reading beat expectations for little change at 51.5 as measured by the Action Economics Forecast Survey. Any figure above 50 indicates an increasing level of activity in the factory sector. During the last ten years, there has been a 76% correlation between the ISM index and the q/q change in real GDP.

Recoveries in inventories (52.5) and supplier deliveries (slower) prompted the improvement in last month's factory sector. New orders also rose slightly (54.5). Offsetting these gains was a sharply lower reading for production (48.2) and an unchanged employment figure (52.3). 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 export orders index fell to 53.5, the lowest reading since September and the imports index was unchanged at 53.5, the lowest reading since January of last year.

The prices paid index series slipped marginally to 60.0 but remained near the highest level in twelve months. Twenty seven percent of firms raised prices while seven 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 Feb Jan Dec Feb'13 2013 2012 2011
Composite Index 53.2 51.3 56.5 53.1 53.9 51.8 55.2
 New Orders 54.5 51.2 64.4 55.7 57.2 53.1 56.4
 Production 48.2 54.8 61.7 54.5 57.7 53.8 57.4
 Employment 52.3 52.3 55.8 52.2 53.2 53.8 57.4
 Supplier Deliveries 58.5 54.3 53.7 51.5 51.9 50.0 54.7
 Inventories 52.5 44.0 47.0 51.5 49.4 48.2 50.1
Prices Paid Index (NSA) 60.0 60.5 53.5 61.5 53.8 53.2 65.2
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