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Economy in Brief

ISM Factory Sector Index Backpedals
by Tom Moeller  August 1, 2017

The ISM factory sector composite index fell to 56.3 during July from June's unrevised reading of 57.8. The index has been close to this level all year, but remained well above the 2015 low of 47.9. A level of 56.4 had been expected in the Action Economics Forecast Survey.

Declines in the component series were numerous. The new orders series fell m/m to 60.4, down from the February high of 65.1. The production index also eased to 60.6, but remained up from 54.0 averaged last year. The supplier deliveries index declined to 55.4, indicating, a quicker pace of product delivery speeds. Nevertheless, speeds have been slowing since early last year. Working the other way, the inventories series rose to 50.0, up sharply from late-2015.

The employment figure declined m/m to 55.2, also up from a low of 46.2 early in 2016. Payrolls have been expanding for ten straight months. During the last ten years, there has been an 87% correlation between the index and the m/m change in factory sector employment. Twenty-four percent (NSA) of respondents reported higher employment while 10% indicated a decline.

The prices paid index jumped to 62.0, its highest level in three months, but remained below the March 2017 high of 70.5. Thirty-three percent (NSA) of respondents reported paying higher prices while nine percent paid less.

The export order index eased to 57.5, down slightly from the March high of 59.5, but up sharply from 48.6 during all of 2015. The import order index rose to a three-year high of 56.0. The order backlog series eased to 55.0, but also remained up sharply from the 2015 low.

The ISM figures are diffusion indexes where a reading above 50 indicates increase. The figures from the Institute for Supply Management can be found in Haver's USECON database. The expectations number can be found in Haver's AS1REPNA database.

ISM Mfg (SA) Jul Jun May Jul'16 2016 2015 2014
Composite Index 56.3 57.8 54.9 52.3 51.5 51.4 55.6
 New Orders 60.4 63.5 59.5 56.1 54.7 52.6 58.9
 Production 60.6 62.4 57.1 54.8 54.0 53.5 59.2
 Employment 55.2 57.2 53.5 49.3 49.7 51.0 54.4
 Supplier Deliveries 55.4 57.0 53.1 51.8 51.9 50.7 55.0
 Inventories 50.0 49.0 51.5 49.5 47.2 49.0 50.8
Prices Paid Index (NSA) 62.0 55.0 60.5 55.0 53.5 39.8 55.6
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