Global| Jan 03 2017ISM Index Jumps to Two-Year High; Prices Strengthen
by:Tom Moeller
|in:Economy in Brief
Summary
Manufacturing sector activity continues to strengthen. The ISM composite index of factory sector activity increased to 54.7 during December from an unrevised 53.2 during November. It was highest reading since December 2014. [...]
Manufacturing sector activity continues to strengthen. The ISM composite index of factory sector activity increased to 54.7 during December from an unrevised 53.2 during November. It was highest reading since December 2014. Expectations called for 53.8 in the Action Economics Forecast Survey. For all of last year the measure was little-changed at 51.5. During the last ten years, there has been a 75% correlation between the index level and the q/q change in real GDP.
Pricing power strengthened last month. The sharp rise in the prices index to 65.5 was to the highest level in over five years. Fully 38% of respondents reported higher prices while just seven reported them lower.
The new orders reading increased to 60.2, its highest level since November 2014. For all of last year, the orders index rose to an improved 54.7. Strengthened exports helped the orders' rise with the measure at 56.0, its highest since May 2014. The production measure strengthened to 60.3, also a two-year high, but the full-year reading of 54.0 was just slightly above 2014. Employment improved slightly. The reading of 53.1 compared to 52.3 in November and indicated the third consecutive month of expansion in manufacturing sector payrolls.
Holding back the rise in the overall ISM index was a decline in the supplier delivery measure to 52.9, indicating slightly swifter product delivery speeds. The inventory index also fell, but the sharp decline to 47.0 showed inventory decumulation at the quickest rate since May.
Amongst the sub-components, the order backlog measure held steady m/m, but rose for all of last year to the highest level since 2014. The imports index also was stable m/m, but for the full year fell to the lowest point since 2009.
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.
Financial Vulnerability and Monetary Policy from the Federal Reserve Bank of New York can be found here.
| ISM Mfg (SA) | Dec | Nov | Oct | Dec'15 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|---|---|
| Composite Index | 54.7 | 53.2 | 51.9 | 48.0 | 51.5 | 51.3 | 55.6 |
| New Orders | 60.2 | 53.0 | 52.1 | 48.8 | 54.7 | 52.6 | 58.9 |
| Production | 60.3 | 56.0 | 54.6 | 49.9 | 54.0 | 53.5 | 59.2 |
| Employment | 53.1 | 52.3 | 52.9 | 48.0 | 49.7 | 51.0 | 54.4 |
| Supplier Deliveries | 52.9 | 55.7 | 52.2 | 49.8 | 51.9 | 50.7 | 55.0 |
| Inventories | 47.0 | 49.0 | 47.5 | 43.5 | 47.2 | 49.0 | 50.8 |
| Prices Paid Index (NSA) | 65.5 | 54.5 | 54.5 | 33.3 | 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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