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 10/1/08 For Sep 2008 | ||||||||||||
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Highlights
The ISM manufacturing's index shows a major break down for the sector in September, falling more than 6 points to 43.5 vs. August's 49.9. A move of this degree is very rare for this index which is historically very stable. Similar moves have occurred only during extreme times, such as after September 2001 or during recessions. Money moved into safety in immediate reaction to the results with Treasury yields coming down.
New orders plunged in the report, down nearly 10 points to 38.8 from 48.3 in a reading that points to sustained overall contraction in the months ahead. Production also showed a severe decline, down more than 10 points to 40.8. Employment fell to 41.8 vs. 49.7 and points to more trouble for factory payrolls in Friday's jobs report. Prices paid confirms the lack of demand, showing very little pressure at 53.5 vs. 77.0. Backlog showed a severe decline as did inventories.
The only positive reading in the report is export orders which came in at 52.0, firm but nevertheless down 5 points in the month. Hurricanes certainly affected results as did the credit crisis. Today's results are certain to deepen talk of recession.
The Institute for Supply Management's manufacturing index was little changed in August, coming in at 49.9 versus 50.0 in July. Growth in production slowed slightly but remained in positive territory with a reading of 52.1. However, employment dipped fractionally to 49.7 from 51.9 in July. New orders and backlogs remained below 50 for the latest month. Prices paid continues to show severe pressure but did ease more than 11 points from July's astronomical reading of 88.5.
ISM manufacturing index Consensus Forecast for September 08: 49.5
Range: 48.0 to 51.1
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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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