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Economy in Brief

U.S. ISM Factory Index Improves
by Tom Moeller December 1, 2011

Manufacturing activity seems to be gaining a firmer footing. The Institute for Supply Management reported that its November Composite Index of factory sector activity rose to 52.7, its highest since June, from an unrevised 50.8 in October. The latest reading was slightly better than Consensus expectations for improvement to 52.0. The reading was the twenty-eighth consecutive monthly figure above the break-even level of 50.

Most of the index's five components rose m/m, with the strongest gain in production to its highest since April. The new orders series also posted a sharp increase to its highest since April. The inventories index rose moderately. To the downside was the supplier deliveries series, as well as employment which matched this cycle's low. During the last ten years there has been an 89% correlation between the employment series level and the m/m change in factory sector payrolls.

The price index rose to 45.0 but remained below the break-even level of 50 for the second month. Nineteen percent of firms raised prices, still nearly the least since the recession's end, while twenty-nine percent lowered them, near the high. 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 to 50.0, its lowest level since the recovery began. Reflecting weakness in the U.S. economic recovery, the imports series fell below break-even, also the lowest level since recovery began.

The ISM figures are diffusion indexes and can be found in Haver's USECON database. The expectations data are in the AS1REPNA database.

ISM Mfg Nov Oct Sep Nov'10 2010 2009 2008
Composite Index 52.7 50.8 51.6 58.2 57.3 46.3 45.5
 New Orders 56.7 52.4 49.6 59.6 59.3 51.7 42.1
 Production 56.6 50.1 51.2 58.2 61.1 50.5 45.1
 Employment 51.8 53.5 53.8 59.0 57.3 40.6 43.1
 Supplier Deliveries 49.9 51.3 51.4 58.1 58.1 51.5 51.6
 Inventories 48.3 46.7 52.0 56.1 50.8 37.1 45.5
Prices Paid Index (NSA) 45.0 41.0 56.0 69.5 68.9 48.3 66.5
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