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Economy in Brief

ISM Manufacturing Index Declines in October
by Tom Moeller  November 1, 2021

• Factory activity eases from four-month high.

• New orders lead downturn.

• Pricing power continues to intensify.

The Institute for Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity slipped to 60.8 during October after rising to 61.1 in September. The reading remained below a March high of 64.7. A level of 60.5 had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 41% correlation between the composite index and the quarterly change in real GDP.

Weakness in new orders led last month's downturn in the index overall with a decline to 59.8 from 66.7 in September. It was the lowest level since March of last year. A greatly lessened 29.7% (NSA) of respondents reported higher new orders, down from 36.6% in September, while 12.0% reported a decline in October versus 9.1% in the prior month. The production index of 59.3 was fairly steady m/m but the supplier delivery series rose to 75.6 from 73.4, indicating the slowest product delivery speeds since May. The inventories index rose to 57.0 last month from September's 55.6. The level was increased from a low of 44.8 in August 2020.

The employment index increased to 52.0 during October from 50.2 in September. An increased 21.3% (NSA) of respondents reported more hiring, up from 17.0% in September, while 15.9% reported a decline in jobs versus 17.3% in September.

The prices paid index rose to 85.7 in October from 81.2 in September, but it remained below the June high of 92.1. An increased 72.3% (NSA) of respondents reported higher prices, the most in three months, while 1.0% reported price declines, down from 7.1% in September.

In other ISM series not included in the composite, the order backlog figure fell to 63.6 (NSA) and remained well below the high of 70.6 in May. The new export measure edged up to 54.6 from 53.4 but remained down versus a November 2020 high of 57.8. The imports index fell sharply to 49.1, the lowest level since June of last year.

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) Oct Sep Aug Oct '20 2020 2019 2018
Composite Index 60.8 61.1 59.9 58.8 52.5 51.2 58.9
 New Orders 59.8 66.7 66.7 66.9 54.0 51.2 61.6
 Production 59.3 59.4 60.0 63.1 53.8 51.3 60.9
 Employment 52.0 50.2 49.0 52.1 44.3 50.9 56.9
 Supplier Deliveries 75.6 73.4 69.5 60.5 61.6 52.9 62.0
 Inventories 57.0 55.6 54.2 51.6 48.8 49.9 52.9
Prices Paid Index (NSA) 85.7 81.2 79.4 65.5 54.0 49.1 71.7
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