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 5/1/08 For Apr 2008 | ||||||||||||
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Highlights
Steady and flat are the best words to describe the ISM manufacturing report where the main index was unchanged at 48.6 in April, just under the breakeven 50 level to indicate very slight month-to-month contraction in business conditions. New orders unfortunately are contracting at a steeper rate, unchanged at 46.5 in the month. Export orders remain the standout component in the report, up 1 point to 57.5 to indicate significant expansion, expansion tied to global infrastructure demand and demand for U.S. goods tied to the ever more competitive dollar. Import orders in contrast came in at 48.0, up 3 points in the month but nevertheless indicating slowing demand for foreign supplies, a reflection of soft demand at home and the rising expense of foreign goods. Backlog orders are a positive in the report, ending six straight months of contraction with a 51.5 reading that's up 4 points in the month.
Supply chain readings are mixed, showing a second month of meaningful extension for deliveries at 54.0 for a 4 tenth gain. Slowing deliveries are a puzzle given slowing demand but may be tied to short supplies for certain chemicals and metals. Slowing deliveries may also be tied to price pressures which are as severe as ever at 84.5, up 1 point in the month and the worst reading since the peak of the expansion in 2004. Inventories showed a gain at respondents' firms but a big decline for supplier firms. Other readings included a new decline in employment, down almost 4 points to 45.4.
Markets showed no significant reaction to the report which again points to steady conditions for the sector which appears to be skirting recession but not dipping into recession.
The Institute for Supply Management's manufacturing index is still pointing toward contraction in the manufacturing sector, although not by much. The manufacturing sector continued to slip lower in March, according to the ISM index which came in at a sub-50 level of 48.6, up 3 tenths from February but still indicated month-to-month contraction. The index has now come in below 50 in three of the last four reports and new orders in the March report moved further into negative territory, suggesting no improvement for April. However, the worst news in the March report was prices paid which jumped 8 points to 83.5 for its worst reading in nearly four years, reflecting higher commodity prices.
ISM manufacturing index Consensus Forecast for April 08: 48.0
Range: 45.5 to 49.3
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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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