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Economy in Brief

ISM Manufacturing Index Increases Unexpectedly in September
by Tom Moeller  October 1, 2021

• Factory activity improves to best level in four months.

• Component movement remains mixed.

• Pricing power picks up.

The Institute for Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity rose to 61.1 during September after improving to 59.9 in August. The reading remained below a March high of 64.7. A level of 59.5 had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 43% correlation between the composite index and the quarterly change in real GDP. Before the recent recession, there had been a 67% correlation.

Movement amongst the component series was mixed during September. Supply-chain problems caused the supplier deliveries index to rise to 73.4 and make up declines in the prior two months. Fifty percent of respondents reported slower delivery speeds and 3.2% reported them quicker. The inventories index rose to 55.6, the highest level in ten years. Offsetting these gains, the new orders reading held steady at 66.7, after falling in July to 64.9. The production index declined to 59.4 from 60.0 in August. The index has moved sideways since April. A fairly steady 31.6% (NSA) of respondent reported higher production but an increased 15.3% reported it lower.

The employment index increased to 50.2 during September from 49.0 in August. A fewer 17.0% (NSA) of respondents reported more hiring, while a greatly lessened 17.3% reported a decline in jobs.

The prices paid index rose slightly to 81.2 last month from 79.4. It remained below the June high of 92.1. An increased 69.5% of respondents reported higher prices while a slightly increased 7.1% reported them lower.

Amongst other ISM series not included in the composite, the order backlog figure fell sharply to 64.8 (NSA) and remained well below the high of 70.6 in May. The new export measure weakened to 53.5 from 56.6 and remained down versus a November high of 57.8. The imports index was little changed at 54.0 after falling sharply from 61.0 in June.

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) Sep Aug Jul Sep '20 2020 2019 2018
Composite Index 61.1 59.9 59.5 55.7 52.5 51.2 58.9
 New Orders 66.7 66.7 64.9 60.9 54.0 51.2 61.6
 Production 59.4 60.0 58.4 61.7 53.8 51.3 60.9
 Employment 50.2 49.0 52.9 49.3 44.3 50.9 56.9
 Supplier Deliveries 73.4 69.5 72.5 59.0 61.6 52.9 62.0
 Inventories 55.6 54.2 48.9 47.7 48.8 49.9 52.9
Prices Paid Index (NSA) 81.2 79.4 85.7 62.8 54.0 49.1 71.7
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