Global| Aug 01 2013U.S. ISM Factory Sector Index Reaches Highest Level in More Than Two Years
by:Tom Moeller
|in:Economy in Brief
Summary
Factory sector business heated up last month. The Composite Index of Manufacturing Sector Activity from the Institute for Supply Management jumped to 55.4 during July from an unrevised 50.9 in June. The figure was its highest level [...]
Factory sector business heated up last month. The Composite Index of Manufacturing Sector Activity from the Institute for Supply Management jumped to 55.4 during July from an unrevised 50.9 in June. The figure was its highest level since June 2011 and well surpassed consensus expectations for modest improvement to 51.8. Any figure above 50 indicates an increasing level of activity. During the last ten years, there has been a 69% correlation between the ISM index and the q/q change in real GDP.
Leading the rebound in the overall index was a surge in the production series to 65.0, its highest level since May 2004. A higher new orders index followed with a strong gain to 58.3. The export order index slipped m/m though its upward trend remained in place. Factory sector employment improved sharply, moving above break-even to 54.4, its highest level since June of last year. During the last ten years there has been an 88% correlation between the employment index and the m/m change in factory payrolls. The rate of supplier deliveries slowed as indicated by a rise in this index to 52.1. Widespread component strength caused the inventory index to fall sharply to 47.0.
The prices paid index declined sharply to 49.0, its lowest level in 12 months. Twenty percent of firms raised prices while 22 percent lowered them. During the last ten years there has been a 65% correlation between the index and the m/m change in the intermediate producer price index. The order backlog series fell to its lowest level since November but the imports series surged to its highest in over three years.
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 | Jul | Jun | May | Jul'12 | 2012 | 2011 | 2010 |
|---|---|---|---|---|---|---|---|
| Composite Index | 55.4 | 50.9 | 49.0 | 50.5 | 51.7 | 55.2 | 57.3 |
| New Orders | 58.3 | 51.9 | 48.8 | 47.5 | 52.9 | 56.4 | 59.2 |
| Production | 65.0 | 53.4 | 48.6 | 53.3 | 53.6 | 57.4 | 61.0 |
| Employment | 54.4 | 48.7 | 50.1 | 53.2 | 53.8 | 57.4 | 57.3 |
| Supplier Deliveries | 52.1 | 50.0 | 48.7 | 49.7 | 50.0 | 54.7 | 58.1 |
| Inventories | 47.0 | 50.5 | 49.0 | 49.0 | 48.2 | 50.1 | 50.8 |
| Prices Paid Index (NSA) | 49.0 | 52.5 | 49.5 | 39.5 | 53.2 | 65.2 | 68.9 |
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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