Global| Feb 01 2008ISM Index Improved
by:Tom Moeller
|in:Economy in Brief
Summary
The Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity recovered last month. The m/m gain to 50.7 from a revised 48.4 in December (figures were revised back to 2005) contrasted with [...]
The Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity recovered last month. The m/m gain to 50.7 from a revised 48.4 in December (figures were revised back to 2005) contrasted with Consensus expectations for a slip to 47.5. Data points above 50 indicate growth in factory sector activity.
Last month's composite reading was the highest since August of last year.
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.
Strong gains in the production and in the inventory components accounted for most of the rise in the composite index. The orders and the vendor deliveries components also rose but to much lesser degrees.
The index of new export orders recovered all of the m/m decline during December. The latest was the highest level since last May.
The employment index declined sharply m/m to its lowest level since 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 jumped sharply m/m to its highest level since July 2006. 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.
| January | December | January '07 | 2007 | 2006 | 2005 | |
|---|---|---|---|---|---|---|
| Composite Index | 50.7 | 48.4 | 49.3 | 51.1 | 53.1 | 54.4 |
| New Orders Index | 49.5 | 46.9 | 52.4 | 54.3 | 53.4 | 57.4 |
| Prices Paid Index (NSA) | 76.0 | 68.0 | 53.0 | 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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