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Economy in Brief

ISM Manufacturing Index Slips But Pricing Improves
by Tom Moeller  December 2, 2019

The ISM Manufacturing Diffusion Index eased to 48.1 during November after rising slightly to 48.3 in October. A reading of 49.1 had been expected in the Action Economics Forecast Survey. Since 2009, there has been a 71% correlation between the composite index and the quarterly change in real GDP.

Changes in the component indexes were mixed last month. The production series improved to 49.1, its highest level in three months. The supplier delivery series rose to 52.0, indicating the slowest product delivery speeds since July. Nevertheless, the index remained well below the high of 67.6 during June of last year. Offsetting these increases, the new orders index fell to 47.2 and continued its decline from the December 2017 high of 67.3. The inventories index fell to 45.5, suggesting the quickest rate of inventory decumulation in over three years.

The employment index fell to 46.6. Fourteen percent of survey respondents reported increased hiring while 21% reported a decline. During the last 15 years, there has been an 81% correlation between the index level and the m/m change in factory sector payrolls.

The prices paid index improved to 46.7 after declining to 45.5 in October. Fifteen percent of survey respondents indicated higher prices while 21% reported price declines.

Amongst other series reported by the ISM, the export order index declined slightly following a surge during October. At 47.9, it remained below the 62.8 high in February 2018. The import index rose slightly. The order backlog index fell to a four-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. The expectations number is available in Haver's AS1REPNA database.

ISM Mfg (SA) Nov Oct Sep Nov'18 2018 2017 2016
Headline Index 48.1 48.3 47.8 58.8 58.8 57.4 51.3
 New Orders 47.2 49.1 47.3 61.8 61.5 62.2 54.5
 Production 49.1 46.2 47.3 59.9 60.7 60.9 53.8
 Employment 46.6 47.7 46.3 57.7 56.9 56.8 49.1
 Supplier Deliveries 52.0 49.5 51.1 61.5 62.0 56.8 51.8
 Inventories 45.5 48.9 46.9 52.9 52.9 50.4 47.5
Prices Paid Index (NSA) 46.7 45.5 49.7 60.7 71.7 65.0 53.1
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