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Economy in Brief

ISM Factory Sector Index Slips from Its 13-Year High
by Tom Moeller  November 1, 2017

Activity in the manufacturing sector remained strong last month, but edged down from its September high. The ISM manufacturing sector composite index fell to 58.7 during October from September's unrevised reading of 60.8. It was the fourteenth straight month of increased factory sector activity. The reading was up from 48.6 in January 2016, which was the lowest level since 2009. A level of 59.4 had been expected in the Action Economics Forecast Survey. During the last ten years there has been a 75% correlation between the level of the index an q/q growth in real GDP.

The new orders index fell to 63.4 from its six-month high of 64.6. As a result, the supplier delivery series fell to 61.4, indicating slightly quicker product delivery speeds. The production series also declined modestly and the inventories index fell sharply following two months of strength.

The employment figure eased slightly, but still signaled the thirteenth straight month of payroll expansion. During the last ten years, there has been an 88% correlation between the index and the m/m change in factory sector employment. Twenty-five percent (NSA) of respondents reported higher employment while seven percent indicated a decline.

The prices paid index declined to 68.5 from its six-year high of 71.5. Forty-three percent (NSA) of respondents reported paying higher prices while six percent paid less.

The export order index slipped from its June high, but remained up sharply versus all of 2015. The import order index slipped and remained below its July high. The order backlog series held steady and 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) Oct Sep Aug Oct'16 2016 2015 2014
Composite Index 58.7 60.8 58.8 52.0 51.5 51.4 55.6
 New Orders 63.4 64.6 60.3 54.1 54.7 52.6 58.9
 Production 61.0 62.2 61.0 54.4 54.0 53.5 59.2
 Employment 59.8 60.3 59.9 51.8 49.7 51.0 54.4
 Supplier Deliveries 61.4 64.4 57.1 52.2 51.9 50.7 55.0
 Inventories 48.0 52.5 55.5 47.5 47.2 49.0 50.8
Prices Paid Index (NSA) 68.5 71.5 62.0 54.5 53.5 39.8 55.6
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