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Economy in Brief

ISM Manufacturing Index Eases in June
by Tom Moeller  July 1, 2021

• Factory activity expands for 13th consecutive month.

• Component movement is mixed.

• Price increases continue to be broad-based.

The Institute for Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity slipped to 60.6 during June, falling back after its May increase to 61.2. A reading of 61.1 had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 42% correlation between the composite index and the quarterly change in real GDP. Before the recession began, there had been a 67% correlation.

Movement amongst the component series was mixed in June. A lower new orders reading led last month's slowdown, declining to 66.0 after rising to 67.0 in May. The figure has been near the current level since October of last year. The supplier deliveries reading fell to 75.1 from 78.8. It continued to indicate dramatically slower product delivery speeds versus two years ago. Fifty-four percent (NSA) of respondents reported slower speeds while three percent reported a quickening. Working higher was the production index to 60.8 after declining to 58.5 in May. The inventories index rose slightly to 51.1, the highest level since October.

The employment index fell to 49.9 during June from 50.9 in May. Indicating a marginal decline in payrolls, it brought the reading to the lowest since November of last year. An increased 26.6% (NSA) of respondents reported more hiring, up from 20.8% in May. An increased 19.3% reported fewer jobs, up from 7.2% three months earlier.

The prices paid index jumped to 92.1 last month after easing to 88.0 in May. It was the highest point since July 1979. A strengthened 84.8% of respondents reported higher prices while only 0.7% reported them lower.

Amongst other ISM series not included in the composite, the order backlog figure fell sharply to 64.5 (NSA), but remained well above 45.3 twelve months earlier. The new export measure edged higher to 56.2 from 55.4. The figure remained down versus a November high of 57.8.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data 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) Jun May Apr Jun'20 2020 2019 2018
Composite Index 60.6 61.2 60.7 52.2 52.5 51.2 58.9
 New Orders 66.0 67.0 64.3 56.7 54.0 51.2 61.6
 Production 60.8 58.5 62.5 56.0 53.8 51.3 60.9
 Employment 49.9 50.9 55.1 41.1 44.3 50.9 56.9
 Supplier Deliveries 75.1 78.8 75.0 57.0 61.6 52.9 62.0
 Inventories 51.1 50.8 46.5 50.2 48.8 49.9 52.9
Prices Paid Index (NSA) 92.1 88.0 89.6 51.3 54.0 49.1 71.7
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