Global| Apr 03 2017ISM Factory Sector Index & Pricing Power Strengthen
by:Tom Moeller
|in:Economy in Brief
Summary
Improvement in factory sector momentum is building. The ISM composite index of factory sector activity at 57.0 during Q1'17 was the strongest reading in six years. The March level alone slipped to 57.2 from an unrevised 57.7 in [...]
Improvement in factory sector momentum is building. The ISM composite index of factory sector activity at 57.0 during Q1'17 was the strongest reading in six years. The March level alone slipped to 57.2 from an unrevised 57.7 in February, but it was the seventh consecutive month above 50, indicating factory sector expansion. Expectations had called for 57.3 in the Action Economics Forecast Survey. During the last ten years, there has been a 75% correlation between the ISM composite index level and the q/q change in real GDP.
Declines in the production and inventory indexes moved the overall index lower last month. Nevertheless, both remained up for the quarter. The new orders index also slipped in March, but was near the highest level of the economic expansion. The supplier delivery index rose and thus indicated a slower pace of product deliveries.
The employment measure strengthened to 58.9 last month. It's the highest level since June 2011, indicating net-positive jobs growth compared to declines during all of last year. Twenty-seven percent (NSA) of respondents raised employment levels while 11% lowered them. Twelve months earlier, 15% 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 remains strong. The March prices paid index increased to 70.5, its highest level since May 2011. Forty-seven percent of respondents raised prices, while six percent lowered them. One year earlier, 16% of firms were raising prices.
Amongst the sub-indexes, the new export series increased m/m to 59.0, a nearly three-year high. The imports index eased to 53.5, but was up sharply from twelve months earlier. The order backlog series also strengthened to a nearly three-year high.
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) | Mar | Feb | Jan | Mar'16 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|---|---|
| Composite Index | 57.2 | 57.7 | 56.0 | 51.7 | 51.5 | 51.4 | 55.6 |
| New Orders | 64.5 | 65.1 | 60.4 | 57.1 | 54.7 | 52.6 | 58.9 |
| Production | 57.6 | 62.9 | 61.4 | 55.7 | 54.0 | 53.5 | 59.2 |
| Employment | 58.9 | 54.2 | 56.1 | 48.5 | 49.7 | 51.0 | 54.4 |
| Supplier Deliveries | 55.9 | 54.8 | 53.6 | 50.4 | 51.9 | 50.7 | 55.0 |
| Inventories | 49.0 | 51.5 | 48.5 | 47.0 | 47.2 | 49.0 | 50.8 |
| Prices Paid Index (NSA) | 70.5 | 68.0 | 69.0 | 51.5 | 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.
More Economy in Brief
