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Economy in Brief

U.S. ISM Factory Index Unexpectedly Falls to Three-Month Low
by Tom Moeller  August 3, 2015

The Composite Index from the Institute for Supply Management (ISM) fell to 52.7 during July following unrevised gains to 53.5 and 52.8 during the prior two months. Improvement to 53.8 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.

The employment index declined to 52.7 and reversed most its June gain. It nevertheless remained higher than an April low of 48.3. 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 fell sharply to a three-month low. The production series improved notably and new orders edged higher. The supplier deliveries index remained stable, continuing to indicate the quickest product delivery speeds since April 2012.

The prices reading eased to the lowest level since April. Nine percent of respondents indicated higher prices while 21 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 since March while imports also eased significantly. The orders backlog series declined sharply to the lowest level since late in 2012.

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) Jul Jun May Jul '14 2014 2013 2012
Composite Index 52.7 53.5 52.8 56.4 55.7 53.8 51.7
 New Orders 56.5 56.0 55.8 62.0 59.0 56.9 52.9
 Production 56.0 54.0 54.5 60.9 59.2 57.5 53.7
 Employment 52.7 55.5 51.7 56.3 54.5 53.2 53.8
 Supplier Deliveries 48.9 48.8 50.7 54.3 55.0 51.9 50.0
 Inventories 49.5 53.0 51.5 48.5 50.8 49.4 48.2
Prices Paid Index (NSA) 44.0 49.5 49.5 59.5 55.6 53.8 53.2
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