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Economy in Brief

ISM Manufacturing Index Suggests Rising Activity; Prices Paid Reading Is Steady
by Tom Moeller  October 3, 2016

Factory sector activity perked up last month. The ISM Composite Index of manufacturing activity improved to 51.5 during September from an unrevised 49.4 in August. The figure compared to 50.2 expected in the Action Economics Forecast Survey. The rise left the average for the first nine months this year at 50.9, down from 51.3 averaged in 2015. During the last ten years, there has been a 75% correlation between the index level and the q/q change in real GDP.

Performance amongst the component readings was mixed. New orders & production rose moderately. The employment index rebounded but remained below break-even, where it's been in all but one month this year. During the last ten years, there has been an 88% correlation between the index level and the m/m change in factory sector payrolls. The inventories reading increased and made up the prior month's decline. The fall in the supplier deliveries index to 50.3 suggested the quickest product delivery speeds since April.

The separate prices paid figure remained at 53.0, the weakest reading since March. It was down from a high of 63.5 in May. Twenty percent (NSA) of respondents reported paying higher prices while 14 percent paid less.

Amongst the other ISM series, the export index eased to 52.0 but remained up versus the February low of 46.5. The imports index recovered part of its August decline, but remained below break-even. The order backlog index rose to 49.5, its highest reading in three months.

The ISM figures are diffusion indexes where a reading above 50 indicates increase. The figures from the Institute for Supply Management can be found in Haver's USECON database. The expectations number is in Haver's AS1REPNA database.

ISM Mfg (SA) Sep Aug Jul Sep '15 2015 2014 2013
Composite Index 51.5 49.4 52.6 50.0 51.3 55.6 53.8
 New Orders 55.1 49.1 56.9 49.8 52.6 58.9 56.8
 Production 52.8 49.6 55.4 51.4 53.5 59.2 57.5
 Employment 49.7 48.3 49.4 50.2 51.0 54.4 53.1
 Supplier Deliveries 50.3 50.9 51.8 49.9 50.7 55.0 51.9
 Inventories 49.5 49.0 49.5 48.5 49.0 50.8 49.4
Prices Paid Index (NSA) 53.0 53.0 55.0 38.0 39.8 55.6 53.8
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