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 11/1/07 For Oct 2007 | ||||||||||||
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Highlights
The Institute For Supply Management's index points to marginal rates of growth at most in the nation's manufacturing sector. The index slipped to 50.9 from 52.0 in September with production a real drag, down 5 points to 49.6. A reading just over 50 indicates a very slight rate of month-to-month growth. Order data were a little more positive with new orders at 52.5, down 9 tenths, and new export orders up 2.5 points to a 57.0 level that helps confirm strong demand from overseas. Much of this demand is focused in capital equipment where leadtimes are enormously strong at 123 days. But unfilled orders did fall back, down 5 points to 46.0.
One indication of weaker sentiment is a 4 point jump in the customer inventories index to 54.0, indicating that purchasers think inventories at other firms are too high. The inventory index rose nearly 6 points to a 47.2 level that indicates purchasers continue to pare back their stocks.
Prices paid are a concern, at 63.0 vs. 59.0 and reflecting high oil prices. But supplier deliveries continue to edge lower, at 50.6 to indicate free conditions in the supply chain that will help limit pricing power for goods. Employment edged firmer to a 52.0 level.
Financial markets showed little initial reaction to the report though it does point to slower growth ahead in the fourth quarter, at least for the manufacturing sector.
The Institute for Supply Management's manufacturing index dipped to 52.0 in September from 52.9 the prior month. New orders and production both slowed remained moderately positive. Cost pressures remain elevated but are slowing, with the prices paid index down 4 points to 59.0. The most recent ISM report was consistent with other surveys and manufacturing sector data showing a moderation in factory activity.
ISM manufacturing index Consensus Forecast for October 07: 51.5
Range: 50.0 to 53.0
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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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