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 3/3/08 For Feb 2008 | ||||||||||||
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Highlights
The ISM report shows incremental month-to-month weakness in manufacturing, results that are not dramatic but do inch up the risk of recession for the sector. The ISM manufacturing index fell a sizable 2.4 points to 48.3, but the news was better for new orders which slipped only 4 tenths to a 49.1 reading that just barely indicates month-to-month contraction. Strength is centered in export orders which at 56.0, and though down 2.5 points in the month, are getting a boost from a strong currency benefit. Import orders reflect weakness in domestic demand, at 47.5 for a significant 5 point drop. Backlog orders continue to show contraction, at 45.0 vs. January's 44.0.
Manufacturing purchasers are successfully cutting back on inventories, a good sign that the overall slowdown will not lead to inventory imbalances. Fewer purchasers are reporting delivery delays, which is expected, as are declines in employment, down 1.1 points to 46.0. Production is slipping, down nearly 5 points to a 50.7 level where the index may stabilize given the steady readings in new orders.
Inflation remains a problem with the prices paid index down 1/2 point to 75.5. Increases are centered in energy, long existing pressure that has largely not been passed through to final goods. There was little reaction to the data. The ISM's report on the non-manufacturing side will be posted on Wednesday.
The Institute for Supply Management's manufacturing index in January 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 indicators for future production are less optimistic with new orders at 49.5, a sub-50 reading, and with backlog orders in the negative also at a 44.0 level.
ISM manufacturing index Consensus Forecast for February 08: 48.1
Range: 46.0 to 50.5
![[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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