The Institute for Supply Management surveys nearly 400 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where reading above (below) 50 percent indicate an expanding (contracting) factory sector. Export orders, import orders, backlog orders and prices paid for raw and unfinished materials are also measured, but these are not included in the overall index. Why Investors Care
| Released on 4/2/07 For Mar 2007 | ||||||||||||
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Highlights
The manufacturing sector remains dead flat according to the Institute For Supply Management index which continues to hover near break-even, at 50.9 vs. February's comparatively high 52.3 which despite its moderate look may prove to be an outlier. New orders fell back in March, to 51.6 vs. 54.9 in February and point to slow conditions ahead. Backlog orders also fell sharply, to 47.0 vs. 51.5.
A good sign was a sharp fall in customer inventories, down five percentage points to 48.0 to indicate that supply managers are keeping inventories down. The inventory index, at 47.5, showed a sub-50 reading for an eighth straight time to also indicate that firms are reducing stocks. Prices paid rose to 65.5 from 59.0 in a high reading but one likely reflects energy more than over-heating.
Despite the rise in prices, Treasuries firmed in initial reaction to the data which leave unanswered the question when the manufacturing sector will resume growth.
The Institute for Supply Management's manufacturing index rose to 52.3 in February from 49.3 in January. The ISM index is likely to get more attention than usual by the markets due to concern over whether manufacturing is more than slowing and going into recession. Manufacturing data have been mixed with the Chicago Purchasing Managers index jumping in March and the Census Bureau's new durables orders being down outside of transportation.
ISM manufacturing index Consensus Forecast for March 07: 51.5
Range: 50.0 to 53.5
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The ISM manufacturing index (formerly known as the NAPM Survey) is constructed so that any level at 50 or above signifies growth in the manufacturing sector. A level above 43 or so, but below 50, indicates that the U.S. economy is still growing even though the manufacturing sector is contracting. Any level below 43 indicates that the economy is in recession. |
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