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Economy in Brief

ISM Factory Sector Index Slips but Remains Firm
by Tom Moeller  February 1, 2018

The ISM manufacturing sector composite index eased to 59.1 during January from 59.3 in December, revised from 59.7. A level of 59.0 had been expected in the Action Economics Forecast Survey. During the last ten years, there has been a 76% correlation between the level of the index and q/q growth in real GDP.

Last month's slip reflected a decline in the new orders reading from its eight-year high. The production measure also declined slightly to 64.5 but remained up sharply from its August 2016 low of 50.0. To the upside, the inventories index increased sharply to the highest level since September. The supplier delivery index rose and suggested the slowest delivery speeds in three months.

The employment figure indicated slower growth in payrolls as it fell to the lowest level since May. During the last ten years, there has been an 87% correlation between the index and the m/m change in factory sector employment. A greatly lessened eighteen percent (NSA) of respondents reported higher employment while a slightly higher twelve percent indicated a decline.

The prices paid index jumped to 72.7, the highest level since May 2011. That was up from the 2016 low of 33.5. Forty-seven percent (NSA) of respondents reported paying higher prices while one percent paid less.

The export order index continued to indicate strong growth as it surged to 59.8, roughly matching the highest level since 2011. The import order index also jumped to an expansion high. The order backlog series rose moderately and remained near the three-year high.

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 can be found in Haver's AS1REPNA database.

ISM Mfg (SA) Jan Dec Nov Jan'17 2017 2016 2015
Composite Index 59.1 59.3 58.2 55.6 57.4 51.4 51.3
 New Orders 65.4 67.4 63.9 60.1 62.2 54.5 52.3
 Production 64.5 65.2 64,3 60.5 61.0 53.8 59.3
 Employment 54.2 58.1 59.2 54.8 56.8 49.2 50.7
 Supplier Deliveries 59.1 57.2 56.6 53.5 56.8 51.8 50.8
 Inventories 52.3 48.5 47.1 48.5 50.2 47.2 49.0
Prices Paid Index (NSA) 72.7 68.3 64.8 69.0 65.7 53.5 39.8
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