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 6/2/08 For May 2008 | ||||||||||||
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Highlights
Momentum isn't building yet in the manufacturing sector but conditions are at least stable, according to the ISM's index which rose 1 point in May to a near 50 level of 49.6 that indicates little change from April. New orders were little changed at 49.7 but up nicely from the 46.5 level in May that was indicating contraction. Exports are the main driver for orders, up 2 full points to a 59.5 level that easily leads all components. Employment remains weak, little changed at 45.5 to indicate yet further month-to-month contraction.
Prices paid are astronomical, at 87.0 to indicate that the vast majority of purchasers are reporting month-to-month increases in the prices they pay for raw materials. Supply chain readings were stable with inventories on the thin side and deliveries still a bit slow.
The dollar firmed in reaction to the report which points to stability for the manufacturing sector and cuts the odds that the economy is headed to recession. The ISM report for the non-manufacturing sector, which has closely tracked results on the manufacturing side, is out on Wednesday.
The Institute for Supply Management's manufacturing index will give us a key update on the manufacturing sector for May. For April, the composite reading was steady and flat, coming in unchanged at 48.6 and just under the breakeven 50 level. However, new orders were contracting at a steeper rate, unchanged at 46.5 in the month but further below breakeven. Backlog orders were a positive in the report, ending six straight months of contraction with a 51.5 reading that was up 4 points in the month. Price pressures remain a problem as the prices paid index rose 1 point to 84.5, the worst reading since the peak of the expansion in 2004. More recently, manufacturing indicators have been mixed as overall industrial production fell 0.7 percent in April while new durables orders excluding transportation jumped 2.5 percent for the same month.
ISM manufacturing index Consensus Forecast for May 08: 48.5
Range: 47.0 to 50.4
![[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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