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 5/1/07 For Apr 2007 | ||||||||||||
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Highlights
The Institute For Supply Management's manufacturing index popped up a big 3.8 points to 54.7 in April for its best reading in nearly a year. New orders showed particular strength in a good sign for future conditions, at 58.5 vs. March's 51.6. Backlog orders further point to future strength, at 54.5 vs. 47.0. Employment also rose, to 53.1 vs. 48.7, as did export orders, at 57.0 vs. 55.5 in a reflection of continued foreign demand for capital goods. Supply chain data were tame showing little change in either inventories or delivery times.
But a negative was a big rise in prices paid, up 7.5 points to 73.0 in a reflection of high energy prices and possibly higher overall demand for raw materials. Limiting the impact of the increase in prices, however, is once again an absence of commodities in short supply.
The manufacturing sector has been flat over the last couple of quarters, dampening overall economic growth. But the sector, unlike housing, has not contracted and may now be poised to resume expansion. The combination of strength and higher prices is a negative for the bond market where Treasuries tumbled in initial reaction. The dollar firmed in reaction as the data pushes back chances for a Federal Reserve rate cut. The ISM's report on non-manufacturing, which has long shown more strength, will be posted on Thursday.
The Institute for Supply Management's manufacturing index was flat in March, coming in at 50.9 vs. February's modestly higher 52.3. New orders also slipped back to just above break even.
ISM manufacturing index Consensus Forecast for April 07: 51.0
Range: 49.5 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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