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Economy in Brief

ISM Factory Sector Index Strengthens to 2004 High
by Tom Moeller  March 1, 2018

The ISM manufacturing sector composite index jumped to 60.8 during February from 59.1 in January. It was the highest level since May 2004. A level of 58.6 had been expected 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 surge reflected higher inventories and supplier delivery indexes. The latter indicated the slowest speed of product delivery since September, and sharply slower speeds versus 2015. The production measure declined to the lowest level since October, while new orders eased to a three-month low.

The employment figure strengthened to the highest level in five months and was up sharply from the January 2016 low. During the last ten years, there has been an 87% correlation between the index and the m/m change in factory sector employment. An increased 28% (NSA) of respondents reported higher employment while a lessened 10% indicated a decline.

The prices paid index improved to 74.2, the highest level since May 2011. That was up from the 2016 low of 33.5. Fifty-one percent (NSA) of respondents reported paying higher prices while three percent paid less.

The export order index surged to 62.8, matching the highest level since May 2011. The import order index also strengthened to 60.5, the highest level since February 2007. The order backlog series also strengthened to the highest level since May 2004.

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) Feb Jan Dec Feb'17 2017 2016 2015
Composite Index 60.8 59.1 59.3 57.6 57.4 51.4 51.3
 New Orders 64.2 65.4 67.4 63.8 62.2 54.5 52.3
 Production 62.0 64.5 65.2 61.7 61.0 53.8 59.3
 Employment 59.7 54.2 58.1 54.5 56.8 49.2 50.7
 Supplier Deliveries 61.1 59.1 57.2 55.5 56.8 51.8 50.8
 Inventories 56.7 52.3 48.5 52.3 50.2 47.2 49.0
Prices Paid Index (NSA) 74.2 72.7 68.3 66.9 65.7 53.5 39.8
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