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 9/4/07 For Aug 2007 | ||||||||||||
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Highlights
July's pop in durable goods orders isn't pointing to a rising rate of growth in the manufacturing sector, at least according to the ISM's manufacturing report which showed a second month of slowing rates of growth. The ISM manufacturing index dipped from 53.8 in July to 52.9 in August. The index hit a 14-month peak in June at 56.0. A slowdown in inventory accumulation underscored the month's softness with the inventory index falling to 45.4 from 48.5. The Bureau of Economic Analysis pegs 42.4 as the split between accumulation and depletion. A second inventory index, the customer inventory index, also indicates that manufacturers are cautious on stocks, with the index down 2 points to 49.0 reflecting that slightly more respondents say inventories at their suppliers are too low than too high.
Order readings also point to slowing rates of overall growth. New orders slipped 2.2 points to a still very solid 55.3 while backlog orders fell 1.5 points to 50.5, indicating the very slightest of month-to-month growth. Export orders continue to be strong, up 1/2 point at 57.0 and reflecting the strength of foreign currencies and demand for U.S. manufactured goods, which are mostly capital goods. Other readings included a 1.1 point rise in employment to 51.3 and a slight easing in prices paid to 63.0.
There was little reaction in the financial markets to the report, though the results, pointing to slowing, may give a lift to Treasury prices through the session and may weigh on the dollar and stocks.
The Institute for Supply Management's manufacturing index slipped in July to 53.8, down 2.2 points from June but still pointed to firm conditions. The composite index is likely to hold to a healthy level given that new orders in this survey were still solid in last month's report. The Commerce Department's durable goods orders was very strong for July, also pointing to strength in the manufacturing sector.
ISM manufacturing index Consensus Forecast for August 07: 53.0
Range: 51.0 to 56.5
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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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