Global| Aug 01 2018ISM Factory Sector Index and Prices Slip
by:Tom Moeller
|in:Economy in Brief
Summary
The ISM composite index of activity in the factory sector eased to 58.1 during July from June's unrevised 60.2. Declines in the component readings were widespread. A reading of 59.2 had been expected in the Action Economics Forecast [...]
The ISM composite index of activity in the factory sector eased to 58.1 during July from June's unrevised 60.2. Declines in the component readings were widespread. A reading of 59.2 had been expected in the Action Economics Forecast Survey. During the last ten years, there has been a 74% correlation between the index level and q/q growth in real GDP.
The new orders reading fell to 60.2, the lowest level since May of last year and down from December's expansion high of 67.4. The production figure fell to 58.5, the lowest level in three months. The supplier deliveries index declined to 62.1 indicating quicker delivery speeds after a drastic slowing during June. Working the other way, the inventories figure rose to 53.3, the highest level in four months.
The employment series improved m/m to 56.5 but remained below the high of 59.8 reached last August. Twenty-seven percent (NSA) of respondents reported improved hiring while twelve percent reported fewer jobs. During the last ten years, there has been an 85% correlation between the level of the index and the m/m change in factory sector payrolls.
The prices paid index eased to 73.2 (NSA), the lowest level in six months. It remained well above the January 2016 low, however, of 33.9 when just five percent of respondents reported higher prices and 37% reported them lower. These figures compare to last month when 55% of firms reported higher prices and eight percent reported declines.
Amongst the other ISM series which are not in the composite, the export order series fell sharply to 55.3, the lowest level in nine months and down versus February's high of 62.8. The imports index fell to 54.7, nearly the lowest level in eight months, but up from the December 2015 low of 46. The capital expenditure lead-time series declined to 137, its lowest point since November 2016.
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. The expectations number is available in Haver's AS1REPNA database.
| ISM Mfg (SA) | Jul | Jun | May | Jul'17 | 2017 | 2016 | 2015 |
|---|---|---|---|---|---|---|---|
| Headline Index | 58.1 | 60.2 | 58.7 | 56.5 | 57.4 | 51.4 | 51.3 |
| New Orders | 60.2 | 63.5 | 63.7 | 61.0 | 62.2 | 54.5 | 52.3 |
| Production | 58.5 | 62.3 | 61.5 | 60.4 | 61.0 | 53.8 | 59.3 |
| Employment | 56.5 | 56.0 | 56.3 | 55.8 | 56.8 | 49.2 | 50.7 |
| Supplier Deliveries | 62.1 | 68.2 | 62.0 | 56.0 | 56.8 | 51.8 | 50.8 |
| Inventories | 53.3 | 50.8 | 50.2 | 49.2 | 50.4 | 47.5 | 49.4 |
| Prices Paid Index (NSA) | 73.2 | 76.8 | 79.5 | 61.7 | 65.0 | 53.1 | 40.1 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
