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
| Released on 2/1/08 For Jan 2008 | ||||||||||||
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Highlights
Led by a gain in production, the Institute For Supply Management's manufacturing index edged back over the 50 level to 50.7, up 2.3 points from December. Production jumped nearly 7 points to 55.2 in January, a good start to the manufacturing year. But the gain wasn't enough to lift employment, which like this morning's payroll report shows contraction at 47.1 for a 1.6 point dip.
Indicators for future production however are less optimistic with new orders at 49.5, a sub-50 reading but better than December's 46.9 level, and with backlog orders at 44.0, far below 50 but still up 1 point in the month. Export orders are a real plus, up 6 points to 58.5 and reflecting the soft currency and global demand for capital goods.
Recession is in the air after this morning's payroll report but the ISM data are positive and will bolster hopes that the economy is still above water. The results should help limit declines in the dollar and Treasury yields and may give the stock market a boost.
The Institute for Supply Management's manufacturing index has started to point to a possible decline in manufacturing as this composite index fell into negative territory with a reading of 47.7 in December, from 50.8 the month before. New orders were even weaker with a reading of 45.7 compared to 52.6 in November. Expectations are for another negative number in January. On a technical note, ISM starts using a new weighting methodology for the composite index with this release. Historical data are being revised.
ISM manufacturing index Consensus Forecast for January 08: 47.0
Range: 45.0 to 48.5
![[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. |
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