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Economy in Brief

ISM Factory Sector Index Backs Away from 2004 High
by Tom Moeller  April 2, 2018

Strength in U.S. manufacturing activity eased slightly last month. The March ISM manufacturing sector composite index fell to 59.3 and reversed its February rise. It nevertheless remained near the highest level since May 2004. A level of 60.0 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.

Each of the component series recorded a decline last month. The new orders figure fell sharply to the lowest level since August, and the production series declined to the weakest point since October. The inventories measure eased and the supplier delivery index fell, indicating slightly quicker delivery speeds.

The employment figure eased moderately. A lessened 23% (NSA) of respondents reported higher employment while an increased 11% indicated a decline. During the last ten years, there has been an 87% correlation between the index and the m/m change in factory sector employment.

The prices paid index strengthened to 78.1, the highest level since April 2011. That was up from the 2016 low of 33.5. Fifty-seven percent (NSA) of respondents reported paying higher prices while one percent paid less.

The export order index reversed its February strength with a decline to the lowest level in three months.  Nevertheless, it remained up sharply from the 2015 low.  The import order index eased m/m but also remained up sharply from the 2015 low. The order backlog series remained strong at the highest level since May 2004.

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) Mar Feb Jan Mar'17 2017 2016 2015
Composite Index 59.3 60.8 59.1 56.6 57.4 51.4 51.3
 New Orders 61.9 64.2 65.4 62.0 62.2 54.5 52.3
 Production 61.0 62.0 64.5 57.3 61.0 53.8 59.3
 Employment 57.3 59.7 54.2 58.7 56.8 49.2 50.7
 Supplier Deliveries 60.6 61.1 59.1 55.6 56.8 51.8 50.8
 Inventories 55.5 56.7 52.3 49.3 50.2 47.2 49.0
Prices Paid Index (NSA) 78.1 74.2 72.7 68.8 65.7 53.5 39.8
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