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 1/3/07 For Dec 2006 | ||||||||||||
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Highlights
A quick rebound is what the manufacturing sector seems to have enjoyed in December as the Institute For Supply Management's index came in above expectations at 51.4, up from a 49.5 reading in November that raised talk at the time of contraction in the sector. New orders rose solidly to 52.1 vs. 48.7 and point to new demand for manufactured goods. Inventories offered more good news, down to 48.4 vs. November's 49.7. Slipping orders and rising inventories in prior months raised concern of inventory overhang.
In especially good news, prices paid dipped to 47.5 vs. 53.5 to indicate that month-to-month price pressures for raw materials are easing. The decline is in line with steady oil prices as well as softer overall demand. Employment, which has sagged for years in the manufacturing sector, was little changed at 49.7.
Treasuries dipped and the dollar firmed in immediate reaction to the data which, because of limited risk of new Federal Reserve hikes, is likely to prove a plus for the stock market.
The Institute for Supply Management's manufacturing index fell below the breakeven level of 50 in November, slipping to 49.5 in November from 51.2 in October. The last time the PMI was below 50 was April 2003. After last week's unexpected improvement in the Chicago PMI, markets will be watching to see if ISM's national index will rebound also.
ISM manufacturing index Consensus Forecast for December 06: 50.0
Range: 49.0 to 52.5
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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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