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Economy in Brief

ISM Factory Sector Index Strengthens
by Tom Moeller  January 3, 2018

The ISM manufacturing sector composite index increased to 59.7 during December and recovered November's decline. For all of last year, the index rose to 57.4, its highest level since 2004. A level of 58.2 had been expected for December in the Action Economics Forecast Survey. During the last ten years, there has been a 76% correlation between the level of the index and q/q growth in real GDP.

Last month's improvement was led by a higher new orders reading which increased to the highest level since January 2004. The production measure also rose to the highest level since May 2010. The inventories index increased slightly while the supplier delivery index suggested slightly slower product delivery speeds.

The employment figure indicated slower growth in payrolls as it fell to a five-month low. During the last ten years, there has been an 87% correlation between the index and the m/m change in factory sector employment. Twenty percent (NSA) of respondents reported higher employment while nine percent indicated a decline.

The prices paid index recouped its November decline and remained well above the 2015 low. Forty-one percent (NSA) of respondents reported paying higher prices while three percent paid less.

The export order index increased to its highest level in six months, continuing to indicate firm export growth. The import order index surged to the highest level since April 2014. The order backlog series rose slightly.

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) Dec Nov Oct Dec'16 2017 2016 2015
Composite Index 59.7 58.2 59.7 54.5 57.4 51.5 51.4
 New Orders 69.4 64.0 63.4 60.3 62.7 54.7 52.6
 Production 65.8 63.9 61.0 59.4 61.2 54.0 53.5
 Employment 57.0 59.7 59.8 52.8 57.0 49.7 51.0
 Supplier Deliveries 57.9 56.5 61.4 53.0 56.8 51.9 50.7
 Inventories 48.5 47.0 48.0 47.0 50.2 47.2 49.0
Prices Paid Index (NSA) 69.0 65.5 68.5 65.5 65.8 53.5 39.8
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