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Economy in Brief

ISM Manufacturing Index Improves Slightly in August
by Tom Moeller  September 1, 2021

• Factory activity remains weakest since January.

• Component movement is mixed.

• Pricing strength continues to ebb.

The Institute for Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity rose to 59.9 during August after falling to 59.5 in July. The reading remained below a March high of 64.7. A level of 58.5 had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 43% correlation between the composite index and the quarterly change in real GDP. Before the recent recession, there had been a 67% correlation.

The ISM stated, "All segments of the manufacturing economy are impacted by record-long raw-materials lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products."

Movement amongst the component series was mixed during August. The new orders reading improved to 66.7 after falling in July to 64.9. The production index rose to 60.0 after declining to 58.4. The inventories reading jumped to 54.2, its highest level since November 2018. Falling was the supplier deliveries reading to 69.5 from 72.5. It was the lowest level since January. A lessened 42.7% (NSA) of respondents reported slower speeds while 3.6% reported a quickening.

The employment index fell to 49.0 during August from 52.9 in July. A greatly lessened 20.3% (NSA) of respondents reported more hiring. An increased 21.5% reported fewer jobs.

The prices paid index fell to 79.4 last month, the lowest level since December. A greatly lessened 62.8% of respondents reported higher prices while an increased 3.9% reported them lower.

Amongst other ISM series not included in the composite, the order backlog figure rose moderately to 68.2 (NSA), but remained well below the high of 70.6 in May. The new export measure rose slightly to 56.6 from 55.7 but remained down versus a November high of 57.8. The imports index also rose slightly to 54.3 after falling sharply to 53.7 in July.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.

ISM Mfg (SA) Aug Jul Jun Aug'20 2020 2019 2018
Composite Index 59.9 59.5 60.6 55.6 52.5 51.2 58.9
 New Orders 66.7 64.9 66.0 66.2 54.0 51.2 61.6
 Production 60.0 58.4 60.8 62.4 53.8 51.3 60.9
 Employment 49.0 52.9 49.9 46.3 44.3 50.9 56.9
 Supplier Deliveries 69.5 72.5 75.1 58.2 61.6 52.9 62.0
 Inventories 54.2 48.9 51.1 44.8 48.8 49.9 52.9
Prices Paid Index (NSA) 79.4 85.7 92.1 59.5 54.0 49.1 71.7
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