Global| Feb 01 2017ISM Factory Sector Index Moves Higher; Prices Strengthen
by:Tom Moeller
|in:Economy in Brief
Summary
The ISM composite index of factory sector activity increased to 56.0 during January from 54.5 in December, initially reported as 54.7. It was highest reading since November 2014. Expectations called for 55.0 in the Action Economics [...]
The ISM composite index of factory sector activity increased to 56.0 during January from 54.5 in December, initially reported as 54.7. It was highest reading since November 2014. Expectations called for 55.0 in the Action Economics Forecast Survey. Data for the last two years were revised slightly. During the last ten years, there has been a 75% correlation between the index level and the q/q change in real GDP.
A stronger production reading of 61.4 led the composite index higher last month. It was the firmest level also since November 2014. The new orders, supplier delivery and inventory indexes also rose modestly.
The employment measure strengthened to 56.1 in January, its highest level since August 2014. Twenty-one percent (NSA) of respondents raised employment levels while 13% lowered them. Twelve months earlier, just 11% were raising employment. During the last ten years, there has been an 88% correlation between the jobs index and the m/m change in factory sector payrolls.
Pricing power is building. The prices paid index rose to 69.0 from 65.5 and reached its highest level since May 2011. Forty-four percent of respondents raised prices, while six percent lowered them. In January 2016, just five percent of firms were raising prices.
Amongst the sub-indexes, the new export series eased m/m to 54.5, but remained up from 47.0 where it stood twelve months earlier. The imports index slipped to 50.0, its lowest level since September. The order backlog series rose to 49.5, its highest level since September.
The ISM figures are diffusion indexes where a reading above 50 indicates increase. The figures from the Institute for Supply Management can be found in Haver's USECON database. The expectations number can be found in Haver's AS1REPNA database.
| ISM Mfg (SA) | Jan | Dec | Nov | Jan'16 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|---|---|
| Composite Index | 56.0 | 54.5 | 53.5 | 48.6 | 51.5 | 51.4 | 55.6 |
| New Orders | 60.4 | 60.3 | 54.8 | 52.3 | 54.7 | 52.6 | 58.9 |
| Production | 61.4 | 59.4 | 55.6 | 50.9 | 54.0 | 53.5 | 59.2 |
| Employment | 56.1 | 52.8 | 52.5 | 46.2 | 49.7 | 51.0 | 54.4 |
| Supplier Deliveries | 53.6 | 53.0 | 55.5 | 50.1 | 51.9 | 50.7 | 55.0 |
| Inventories | 48.5 | 47.0 | 49.0 | 43.5 | 47.2 | 49.0 | 50.8 |
| Prices Paid Index (NSA) | 69.0 | 65.5 | 54.5 | 33.5 | 53.5 | 39.8 | 55.6 |
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.
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