Global| May 01 2008ISM Factory Sector Index Unchanged, Prices Surged
by:Tom Moeller
|in:Economy in Brief
Summary
For April, the Institute of Supply Management (ISM) reported its Composite Index of Manufacturing Sector Activity remained unchanged from March at 48.6. That was slightly better than Consensus expectations for a decline to 48.0 but [...]
For April, the Institute of Supply Management (ISM) reported its Composite Index of Manufacturing Sector Activity remained unchanged from March at 48.6. That was slightly better than Consensus expectations for a decline to 48.0 but the index remained below the break even level for activity of 50 for the fourth month in the last five.
The index's average level of 49.0 so far this year was its lowest since early 2003.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by being constructed using all of the absolute positive changes in activity added to one half of the no change in activity measures.
The new orders index also was unchanged m/m and remained below the break even level. It was near the lowest level since the recession year of 2001. Production rose very slightly but remained low at 49.1. The inventory component rose sharply to its highest level since January.
The new export orders sub-series rose slightly to a better-than-break even 57.5 and so far this year it is up slightly from the last two years.
The employment index fell sharply m/m to 45.4 which was its lowest level since mid 2003. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.
The prices paid index surged to its highest level since early 2004. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.
| ISM Mfg | April | March | April '07 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|
| Composite Index | 48.6 | 48.6 | 52.8 | 51.1 | 53.1 | 54.4 |
| New Orders Index | 46.5 | 46.5 | 58.1 | 54.3 | 55.4 | 57.4 |
| Employment Index | 45.4 | 49.2 | 52.3 | 50.5 | 51.7 | 53.6 |
| Prices Paid Index (NSA) | 84.5 | 83.5 | 73.0 | 64.6 | 65.0 | 66.4 |
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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