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Economy in Brief

U.S. ISM Index Gains to Three-Month High
by Tom Moeller  April 1, 2014

Moderate improvement in manufacturing sector activity continued last month following a harsh winter. The Composite Index of Manufacturing Sector Activity from the Institute for Supply Management improved to 53.7 during March from an unrevised 53.2 in February. It was the highest reading since December but remained below the November peak. The latest reading just missed expectations for 54.0 as measured by the Action Economics Forecast Survey. Any figure above 50 indicates an increasing level of activity in the factory sector. During the last ten years, there has been a 76% correlation between the ISM index and the q/q change in real GDP.

A sharp recovery in production to 55.9 accounted for most of the gain in the total index while new orders rose moderately to 55.1. Other component indictors remained weak as the inventories figure was unchanged at 52.5. To the downside, the supplier deliveries index fell to 54.0, indicating the quickest delivery speeds since December. The employment reading fell moderately to 51.1. During the last ten years there has been an 88% correlation between the employment index and the m/m change in factory payrolls. The new export orders index improved to 55.5, the highest level since November, and the imports index gained to 54.5, but was below the August high of 58.0.

The prices paid index series slipped again to 59.0 but remained near the highest level since February 2013. Twenty eight percent of firms raised prices while ten percent lowered them. During the last ten years there has been a 67% correlation between the index and the m/m change in the intermediate producer price index.

The figures from the Institute For Supply Management (ISM) are diffusion indexes and can be found in Haver's USECON database. The expectations number is in the AS1REPNA database.

Thoughts on Accommodative Monetary Policy, Inflation and Financial Instability is the title of last week's speech by Chicago Fed President Charles Evans and it is available here.

ISM Mfg Mar Feb Jan Mar'13 2013 2012 2011
Composite Index 53.7 53.2 51.3 51.5 53.9 51.8 55.2
 New Orders 55.1 54.5 51.2 51.7 57.2 53.1 56.4
 Production 55.9 48.2 54.8 53.9 57.7 53.8 57.4
 Employment 51.1 52.3 52.3 52.1 53.2 53.8 57.4
 Supplier Deliveries 54.0 58.5 54.3 50.4 51.9 50.0 54.7
 Inventories 52.5 52.5 44.0 49.5 49.4 48.2 50.1
Prices Paid Index (NSA) 59.0 60.0 60.5 54.5 53.8 53.2 65.2
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