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Economy in Brief

U.S. ISM Factory Index Contracts Again
by Tom Moeller  February 1, 2016

Activity in the factory sector continued to contract in January for the fourth consecutive month. The ISM Composite Index of factory sector activity of 48.2 compared to 48.0 in December, revised from 48.2. The reading roughly equaled expectations for 48.0 in the Action Economics Forecast Survey. The data from the Institute for Supply Management (ISM) are diffusion indexes where a reading below 50 indicates decline.

Weakness in last month's composite index centered on another decline in the employment index. It fell to 45.9, and suggested the third month in the last four when payrolls fell. During the last ten years, there has been an 88% correlation between the index and the m/m change in factory sector employment. The inventory index held at 43.5, which indicated decumulation at nearly the fastest rate of the economic expansion. Improvement in the other activity indexes was evident. The new orders series rose to 51.5, suggesting a rise in orders for the first time in three months. the production also edged higher to a roughly neutral 50.2, about where it's been for three months. The supplier delivery index of 50.0 suggested that delivery speeds held roughly steady for the eighth straight month.

Lessened activity translated into a stable rate of price decline. The prices paid index of 34.7 was little changed m/m and reflected lower prices for the eighth straight month. Five percent (NSA) of industries reported higher prices while 38% reported lower. That figure was improved, however, from the price deflation realized by 15% of industries as recently as June.

The export order index declined to 47.0, its weakest level in four months. Orders backlogs suggested decline, as the index did all of last year.

The figures from the Institute for Supply Management can be found in Haver's USECON database. The expectations number is in Haver's AS1REPNA database.

Recent Monetary Policy is the title of today's speech by Fed Vice Chairman Stanley Fischer and it can be found here.

ISM Mfg (SA) Jan Dec Nov Jan '15 2015 2014 2013
Composite Index 48.2 48.0 48.4 53.9 51.3 55.6 53.8
 New Orders 51.5 48.8 49.0 54.1 52.6 58.9 56.8
 Production 50.2 49.9 49.8 57.7 53.5 59.2 57.5
 Employment 45.9 48.0 50.8 54.1 51.0 54.4 53.1
 Supplier Deliveries 50.0 49.8 49.6 53.3 50.7 55.0 51.9
 Inventories 43.5 43.5 43.0 51.0 49.0 50.8 49.4
Prices Paid Index (NSA) 33.5 33.5 35.5 35.0 39.8 55.6 53.8
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