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 7/2/07 For Jun 2007 | ||||||||||||
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Highlights
Purchasers reported a third straight month of very strong growth in June as the Institute For Supply Management's manufacturing index rose 1 point to 56.0. New orders are especially strong, at 60.3 for a gain of 7 tenths and pointing to rising production and perhaps employment in the months ahead. Backlog orders are beginning to pile up, at 53.5 for a 1 point gain and further pointing to stronger activity ahead. Export orders, boosted in recent months by strong global demand along with the softening dollar, edged back 3 points from a near record level but still remain strong.
The deep strength in orders has yet to test the supply chain where inventory readings are stable and delivery times little changed. Prices paid, down 3 points to 68.0, are still high but continued lack of items in short supply is an important offsetting factor, suggesting that raw-material cost increases are narrow and are not the result of shortages.
Employment remains sluggish at only 51.1 but may improve as production picks up. Production is in fact very strong at 62.9 for a nearly 5 point jump. The contrast between employment and production may suggest that manufacturers are extending the workweek, perhaps the first step before they increase their payrolls.
Treasuries eased and the dollar firmed in limited reaction to today's results. Today's report is definitely on the side of strength, in some contrast to prior data from the Commerce Department and Federal Reserve which have pointed to less strength in the sector. If nothing else, the ISM report is signaling a turn higher in momentum.
The Institute for Supply Management's manufacturing index has strengthened over the last two months, coming in at a 55.0 reading in May. New orders have been especially strong, at 59.6 in May and at 58.5 in April. However, these numbers did not translate into similar strength for national data on industrial production and new factory orders for durables in May. Still, if the ISM numbers continue to hold up, then the official government statistics should follow. Most recently last week, the Chicago purchasers index remained strong in June with a 60.2 reading - only marginally below the 61.7 level for May.
ISM manufacturing index Consensus Forecast for June 07: 55.0
Range: 53.5 to 56.2
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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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