Global| Sep 04 2018ISM Factory Sector Index Strengthens; Prices Ease
by:Tom Moeller
|in:Economy in Brief
Summary
The ISM composite index of activity in the factory sector increased to 61.3 during August from 58.1 in July, which was unrevised. The latest level was the highest since May 2004 as each of the index components improved. A reading of [...]
The ISM composite index of activity in the factory sector increased to 61.3 during August from 58.1 in July, which was unrevised. The latest level was the highest since May 2004 as each of the index components improved. A reading of 57.6 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 increased to 65.1 after falling to 60.2 in July. The production figure improved to 63.3, its highest level since January, following a decline to 58.5. The inventories series rebounded to a five-month high of 55.4 from 53.3. The supplier deliveries index improved modestly m/m to 64.5. Its sharp increase from a low of 49.2 in February 2016 indicates significantly slower product delivery speeds.
The employment series improved m/m to 58.5 but remained below the high of 59.8 reached last August. Twenty-seven percent (NSA) of respondents reported improved hiring while ten 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, which is not part of the overall index, fell to 72.1 (NSA), the lowest level since December. It remained well above the January 2016 low of 33.9 when just five percent of respondents reported higher prices and 37% reported them lower. In comparison, 51% of firms reported higher prices last month and seven percent indicated declines.
Amongst the other ISM series which are not in the composite, the export order series eased to a ten-month low of 55.2, down from February's high of 62.8. The imports index fell to 53.9, nearly the lowest level in nine months, but up from the December 2015 low of 46. The capital expenditure leadtime series rose to 144, its highest point since April.
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) | Aug | Jul | Jun | Aug'17 | 2017 | 2016 | 2015 |
|---|---|---|---|---|---|---|---|
| Headline Index | 61.3 | 58.1 | 60.2 | 59.3 | 57.4 | 51.4 | 51.3 |
| New Orders | 65.1 | 60.2 | 63.5 | 61.8 | 62.2 | 54.5 | 52.3 |
| Production | 63.3 | 58.5 | 62.3 | 62.0 | 61.0 | 53.8 | 59.3 |
| Employment | 58.5 | 56.5 | 56.0 | 59.8 | 56.8 | 49.2 | 50.7 |
| Supplier Deliveries | 64.5 | 62.1 | 68.2 | 57.4 | 56.8 | 51.8 | 50.8 |
| Inventories | 55.4 | 53.3 | 50.8 | 55.7 | 50.4 | 47.5 | 49.4 |
| Prices Paid Index (NSA) | 72.1 | 73.2 | 76.8 | 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.
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