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Economy in Brief

U.S. ISM Index Reverses Earlier Deterioration
by Tom Moeller   November 01, 2010

Today's release that the Composite Index from the Institute for Supply Management rose to 56.9 last month lifted it back to its highest since May. Moreover, the gain beat Consensus expectations for near-stability at 54.0. Finally, the latest level was the fifteenth consecutive figure above the break-even 50 and was up from the low of 32.5 reached in December '08. (Any figure above the break-even point of 50 suggests rising activity.) The ISM data is available in Haver's USECON database.

Improved readings for new orders and production provided the impetus for the October gain. The new orders index rose 7.8 points to its highest level since May. Thirty-six percent (NSA) of firms reported higher orders versus 26 percent in September. The production index followed with a 6.2 point rise, also to its highest since May. Thirty-seven percent of firms reported higher production. The employment index finished the gains with a modest increase to 57.7, its eleventh consecutive month above 50. At the back-end of the factory activity indication were declines in both the inventories and supplier delivery indexes, the latter to its lowest in over a year.

Perhaps running counter to the notion of factory-sector improvement was a sharp decline in the imports index to its lowest level in a year. Offsetting that was a rise in the export order index to 60.5 which was its highest level since May. During the last ten years there has been an 88% correlation between the level of the index and the quarterly change in merchandise exports. An improved 30 percent of respondents reported higher export orders while nine percent reported orders lower.

The separate index of prices paid held high at 71.0 after the September jump to 70.5. October was its highest level since May. It remained down from the April high of 78.0 but up from the December '08 low of 18.0. Forty-nine percent of respondents reported higher prices while just seven percent indicated lower prices. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.

The ISM data are available in Haver's USECON database.

ISM Mfg October September August Oct.'09 2009 2008 2007
Composite Index 56.9 54.4 56.3 55.2 46.2 45.5 51.1
  New Orders 58.9 51.1 53.1 58.3 51.6 42.1 54.3
  Employment 57.7 56.5 60.4 51.8 40.5 43.3 50.5
  Production 62.7 56.5 59.9 62.2 50.4 45.2 54.1
  Supplier Deliveries 51.2 52.3 56.6 56.3 51.4 51.6 51.2
  Inventories 53.9 55.6 51.4 47.3 37.1 45.5 45.4
Prices Paid Index (NSA) 71.0 70.5 61.5 65.0 48.3 66.5 64.6
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