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Economy in Brief

ISM Manufacturing Index Falls but Prices Increase
by Tom Moeller  June 3, 2019

The ISM manufacturing index unexpectedly declined to 52.1 during May from 52.8 in April. It was the lowest level since October 2016 and remained below the expansion peak of 60.8 last August. The Action Economics Forecast Survey anticipated a reading of 53.0. Since 2008, there has been a 73% correlation between the index level and quarterly growth in real GDP.

Performance amongst the ISM index components was mixed last month. The supplier delivery series fell to 52.0 from 54.6 and indicated the quickest product delivery speeds since October 2016. The inventories index declined to 50.9 from 52.9, but has been fairly stable since early last year. The production series fell one point to 51.3. That was below the January 2018 high of 65.5 and was the lowest level since August 2016. Offsetting these declines was a rise in the new orders index to 52.7 from 51.7. The reading remained, however, below the December 2017 peak of 67.3.

Also inching higher was the employment figure to 53.7 from 52.4. Nevertheless, it still was the lowest level since April 2017. A higher 23% (NSA) of respondents reported higher payrolls while a higher 13% reported a decline. Since 2008, there has been an 84% correlation between the employment index and the m/m change in factory sector payrolls.

The prices paid series, which is not part of the composite series, improved to 53.2, but remained below the high of 79.5 in May of last year. A slightly higher 22% of respondents reported increased prices while lower prices were reported by a lessened 16%.

Amongst other series in the ISM survey, the export index rose modestly to 51.0, but remained significantly below February 2018 high of 62.8. The order backlog measure dropped sharply to a three-year low.

The ISM figures are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. Commodity prices can be found in USECON as well as the CMDTY database. The expectations number is available in Haver's AS1REPNA database.

ISM Mfg (SA) May Apr Mar May'18 2018 2017 2016
Headline Index 52.1 52.8 55.3 58.7 58.8 57.4 51.3
 New Orders 52.7 51.7 57.4 62.9 61.4 62.2 54.5
 Production 51.3 52.3 55.8 61.5 60.7 60.9 53.8
 Employment 53.7 52.4 57.5 56.7 56.9 56.8 49.1
 Supplier Deliveries 52.0 54.6 54.2 62.1 62.0 56.8 51.8
 Inventories 50.9 52.9 51.8 50.2 52.9 50.4 47.5
Prices Paid Index (NSA) 53.2 50.0 54.3 79.5 71.7 65.0 53.1
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