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ISM Mfg Index
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Definition
The Institute for Supply Management surveys more than 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where readings 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. (Institute for Supply Management) Why Investors Care
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| Released on
1/2/08
For
Dec 2007 |
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ISM Mfg Index - Level
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| Actual |
47.7
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| Consensus |
50.9
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| Consensus Range |
50.0
to
51.9
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| Previous |
50.8
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Highlights
Manufacturing slumped badly in December, at an index of 47.7 for a 3.1 point decline from November and the lowest reading since early in the current expansion. A sub-50 reading, the first in a year, indicates that responses were more negative than positive. The weakness is alarming because it is centered in orders with new orders at a very low 45.7 vs. 52.6 in November and backlogs, which in October began to signal weakness, at 43.0. The order readings, with odd exceptions for backlogs, are the weakest since 2003. New export orders are still above 50, at 52.5 but posted a stinging 6 point decline.
Weak orders point to weak production, which dropped to 47.3 from 51.9, and unfortunately more weakness in employment, at 48.0 vs. 47.8. But the weak conditions have done little to stem price pressures as prices paid remained little changed at an elevated 68.0. An increase in inventory is now a risk. Inventory readings were mixed showing lean conditions at respondent firms but an assessment of excess conditions at suppliers. Supplier deliveries are sending a very odd signal that conditions are slowing, in a reading that is likely to reverse given weakness in demand.
Treasury yields fell as did stocks and the dollar in reaction to the data. This together with weakness in Friday's employment report would certainly raise the question whether the economy is not already in recession.
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Market Consensus Before Announcement
The Institute for Supply Management's manufacturing index remained near a flat reading in November as the composite index slipped 1 tenth to 50.8. New orders also remained just above the break-even level, rising 1 tenth to 52.6. Export orders were somewhat stronger than overall new orders. Inflation is a growing concern as the prices paid index rose 4.5 points to 67.5. With government data on factory orders coming in weak over the last couple of months, markets will be looking for indications that manufacturing is staying in positive territory, and the ISM index will give the first clue for December at the national level.
ISM manufacturing index Consensus Forecast for December 07: 50.9
Range: 50.0 to 51.9
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Trends
![[Chart]](chart.gif)
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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. |
Data Source: Haver Analytics | Consensus Data Source: Market News International and Thomson Financial
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