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Economy in Brief

U.S. ISM Manufacturing Index Improves to Best Level Since January
by Tom Moeller  July 1, 2015

Factory sector activity is strengthening. The Composite Index from the Institute for Supply Management (ISM) rose to 53.5 following an unrevised increase to 52.8 in May. It was the highest level in five months. Nevertheless, the latest figure remained below the August 2014 high of 58.1. Improvement to 53.1 had been expected in the Action Economics Forecast Survey. During the last ten years, there has been a 73% correlation between the level of the index and the q/q change in real GDP.

Leading last month's rise was strength in the employment index as it rose to the highest level since December. During the last ten years, there has been an 89% correlation between the index level and the m/m change in factory sector payrolls. The inventories reading also was strong as it increased to the highest level in twelve months. The new orders index improved slightly but the production series backed off. The supplier deliveries index fell and indicted the quickest product delivery speeds since April 2012.

The prices reading held steady at the highest level since October. Fourteen percent of respondents indicated higher prices while 15 percent reported them lower. During the last ten years, there has been an 85% correlation between the index and the m/m change in the core intermediate PPI.

The export order index fell to the lowest level in three months while imports also backpedaled. The orders backlog series declined to the lowest level since January.

The figures from the Institute For Supply Management (ISM) are diffusion indexes. A reading above 50 represents growth in factory sector activity. They can be found in Haver's USECON database. The expectations number is in the AS1REPNA database.

ISM Mfg (SA) Jun May Apr Jun '14 2014 2013 2012
Composite Index 53.5 52.8 51.5 55.7 55.7 53.8 51.7
 New Orders 56.0 55.8 53.5 59.1 59.0 56.9 52.9
 Production 54.0 54.5 56.0 59.9 59.2 57.5 53.7
 Employment 55.5 51.7 48.3 53.9 54.5 53.2 53.8
 Supplier Deliveries 48.8 50.7 50.1 52.7 55.0 51.9 50.0
 Inventories 53.0 51.5 49.5 53.0 50.8 49.4 48.2
Prices Paid Index (NSA) 49.5 49.5 40.5 58.0 55.6 53.8 53.2
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