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Economy in Brief

U.S. ISM Factory Index Weakens to Two-Year Low
by Tom Moeller  September 1, 2015

The Composite Index from the Institute for Supply Management (ISM) fell to 51.1 during August following an unrevised decline to 52.7 in July. It was the lowest level since May 2013. An unchanged 52.7 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.

A decline in the orders component led the decline with a drop to 51.7, off from 63.9 twelve months ago. The production series followed. Its fall to 53.6 left it down from 63.1 just twelve months ago. At 51.2 the employment index was down sharply in the last two months but remained above its 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 but the supplier deliveries index improved, indicating slightly slower product delivery speeds.

The prices reading declined to 39.0, the lowest level since March. Six percent of respondents indicated higher prices while 28 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 July 2012 while imports also eased significantly. The orders backlog series recovered its July decline.

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) Aug Jul Jun Aug '14 2014 2013 2012
Composite Index 51.1 52.7 53.5 58.1 55.7 53.8 51.7
 New Orders 51.7 56.5 56.0 63.9 59.0 56.9 52.9
 Production 53.6 56.0 54.0 63.1 59.2 57.5 53.7
 Employment 51.2 52.7 55.5 57.4 54.5 53.2 53.8
 Supplier Deliveries 50.7 48.9 48.8 54.2 55.0 51.9 50.0
 Inventories 48.5 49.5 53.0 52.0 50.8 49.4 48.2
Prices Paid Index (NSA) 39.0 44.0 49.5 58.0 55.6 53.8 53.2
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