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Economy in Brief

U.S. ISM Factory Activity Remains Near Break-Even but Employment Declines
by Tom Moeller  November 2, 2015

Activity in the manufacturing sector was little changed last month. October's Composite Index of 50.1 from the Institute for Supply Management (ISM) compared to an unrevised 50.2 in September. A reading of 50.0 had been expected in the Action Economics Forecast Survey. During the last ten years, there has been a 73% correlation between the level of the index and the q/q change in real GDP

Performance amongst the component series was mixed last month. The employment series declined sharply to 47.6, the first month below break-even since April. During the last ten years, there has been an 89% correlation between the index level and the m/m change in factory sector payrolls. Also moving lower was the inventories index. It's decline to 46.5 indicated decumulation at the quickest rate since December of last year. Twenty-two percent of companies were reducing inventories, up sharply from 16% twelve months earlier, and 15% were raising them, down from 21% one year ago. The pace of supplier deliveries held fairly steady as indicated by a reading of 50.4. To the upside, the new orders index rose to 52.9, its highest level in three months. The production series improved a bit to 52.9, but was off sharply from last year's high of 63.1.

The prices reading improved slightly to 39.0, but remained down from last year's high of 60.5. Nine percent of respondents indicated higher prices while 31% reported them lower. During the last ten years, there has been an 85% correlation between the index and the m/m change in the core intermediate PPI.

The new export order index improved m/m to 47.5, but remained near the three-year low. Imports fell sharply to the 2013 lows and the order backlog series showed moderate decline.

The figures from the Institute For Supply Management (ISM) are diffusion indexes. A reading above 50 represents growth in factory sector activity. They can be found in Haver's USECON database. The expectations number is in the AS1REPNA database.

Is Monetary Policy Overburdened? from the Federal Reserve Bank of Boston is available here.

ISM Mfg (SA) Oct Sep Aug Oct '14 2014 2013 2012
Composite Index 50.1 50.2 51.1 57.9 55.7 53.8 51.7
 New Orders 52.9 50.1 51.7 63.0 59.0 56.9 52.9
 Production 52.9 51.8 53.6 62.8 59.2 57.5 53.7
 Employment 47.6 50.5 51.2 55.2 54.5 53.2 53.8
 Supplier Deliveries 50.4 50.2 50.7 56.1 55.0 51.9 50.0
 Inventories 46.5 48.5 48.5 52.5 50.8 49.4 48.2
Prices Paid Index (NSA) 39.0 38.0 39.0 53.5 55.6 53.8 53.2
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