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 8/1/07 For Jul 2007 | ||||||||||||
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Highlights
The ISM manufacturing index slipped in July to 53.8, down 2.2 points from June but still pointing to firming conditions. New orders slowed a bit but are still at a solid 57.5, down 2.8 points from June. Production slowed to 55.6 vs. 62.9, while employment also slowed, to 50.2 vs. 51.1. Backlogs remain firm at 52.0, down 1.5 points.
Prices showed no increasing pressure with the prices paid index at 65.0 vs. 68.0. This index often looks elevated, reflecting high raw material costs that for the most part are not passed on to final goods. There are in fact no commodities in short supply, another factor pointing to stable pricing conditions.
Supply chain data showed increasing levels of inventory, perhaps reflecting slower production in the month as well as restocking in anticipation of future production. Customer inventories rose 4 points to 51.0, indicating that manufacturers believe inventories at their suppliers are increasing. The inventories index itself rose to 48.5 vs. 45.3. Deliveries slowed a bit but not significantly, to 52.0 vs. 49.7.
Financial markets showed no significant reaction to the report, which however may help Treasuries through the day and may hurt the dollar a bit. This report has shown special strength in prior months, a factor that limits the impact of July's lower readings.
The Institute for Supply Management's manufacturing index rose to 56.0 in June from 55.0 in May. New orders were especially strong, improving to 60.3 in June from 59.6 the prior month. Exports have been particularly robust and this is likely to continue given the weak dollar.
ISM manufacturing index Consensus Forecast for July 07: 55.0
Range: 54.0 to 56.7
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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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