Global| Jul 02 2012U.S. ISM Factory Index & Prices Fall To Lowest in Roughly Three Years
by:Tom Moeller
|in:Economy in Brief
Summary
Factory sector activity hasn't shown this much weakness since the end of the last recession. What's worse is that momentum is down. The June ISM Composite Index of industrial sector activity dropped to 49.7 from an unrevised 53.5 in [...]
Factory sector activity hasn't shown this much weakness since the end of the last recession. What's worse is that momentum is down. The June ISM Composite Index of industrial sector activity dropped to 49.7 from an unrevised 53.5 in May. The decline compared to Consensus expectations for a lesser decline to 52.0. The figure was the first below the break-even level of 50 since July of 2009. During the last ten years there has been an 80% correlation between the index level and the three-month change in factory sector production.
The largest component series decline was new orders. Its 12.3 point drop to 47.8 was to its lowest reading since the recession. That was followed by the second consecutive monthly decline in the production series to 51.0 and a two point drop in inventories to 44.0. The employment component was under less downward pressure and slipped to 56.6. During the last ten years there has been an 88% correlation between the level of the index and the m/m change in factory sector payrolls. Working the other way, the supplier deliveries series ticked up m/m to a still-low 48.9, indicating fast delivery speeds.
The price index fell sharply to 37.0, its lowest since April 2009. Just 7 percent of firms raised prices while 33 percent lowered them. During the last ten years there has been an 83% correlation between the index and the m/m change in the core intermediate producer price index.
The separate index of new export orders fell sharply to 47.5, its lowest since the recession's end. The imports series was steady at 53.5.
The figures from the Institute For Supply Management (ISM) are diffusion indexes and can be found in Haver's USECON database. The expectations data are in the AS1REPNA database.
| ISM Mfg | Jun | May | Apr | Jun'11 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|---|---|
| Composite Index | 49.7 | 53.5 | 54.8 | 59.7 | 55.2 | 57.3 | 46.4 |
| New Orders | 47.8 | 60.1 | 58.2 | 53.6 | 56.4 | 59.2 | 52.0 |
| Production | 51.0 | 55.6 | 61.0 | 55.9 | 57.4 | 61.0 | 50.8 |
| Employment | 56.6 | 56.9 | 57.3 | 61.0 | 57.4 | 57.3 | 40.7 |
| Supplier Deliveries | 48.9 | 48.7 | 49.2 | 55.2 | 54.7 | 58.1 | 51.6 |
| Inventories | 44.0 | 46.0 | 48.5 | 53.5 | 50.1 | 50.8 | 37.1 |
| Prices Paid Index (NSA) | 37.0 | 47.5 | 61.0 | 68.0 | 65.2 | 68.9 | 48.3 |
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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