Econoday Report: ISM Mfg Index 3, 2005

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2005 U.S. Economic Events & Analysis

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ISM Mfg Index

Definition
The Institute for Supply Management surveys nearly 400 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where reading 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. Why Investors Care

Released on 10/3/05 For Sep 2005

ISM Mfg Index, Level
Actual	59.4
Consensus	52.0
Consensus Range	49.5 to 56.0

Highlights
In an important and early indication on the effects of hurricanes Katrina and Rita, the Institute For Supply Management's manufacturing index jumped to 59.4 in September from 53.6 in August.

Orders, boosted in part by rebuilding demand, rose sharply in the month, with new orders at 63.8 vs. 56.4 and backlogs at 55.0 vs. 50.5. Production showed little disruption from the hurricanes, rising to 63.1 from 55.9.

What will catch the special attention of the bond market, the prices paid index jumped to 78.0 from 62.5. This gain represents both costs related to fuel and, importantly, demand pull from purchasers who are stocking up inventories on concern of future shortages.

Delivery times slowed sharply, to 59.3 from 50.5. This likely reflects both transportation disruptions and the surge in overall demand. Inventories contracted at a slower rate, at 49.6 vs. 45.7.

The employment index, which will offer a guide to expectations for Friday's payroll report on factory jobs, rose to 53.1 from 52.6.

Bonds fell back on the report while the dollar firmed. The ISM data suggest that rebuilding demand and concern of shortages are driving a burst of activity.

Market Consensus Before Announcement
The ISM manufacturing index decreased 3 points to 53.6 in August, back to the lows seen earlier this spring. September data will incorporate the impact of Katrina and Rita, so this reading should be interpreted cautiously.

ISM manufacturing index Consensus Forecast for Sept 05: 52
Range: 49.5 to 56

Trends

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.

Data Source: Haver Analytics

2005 Release Schedule

Released On: 1/3 2/1 3/1 4/1 5/2 6/1 7/1 8/1 9/1 10/3 11/1 12/1

Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

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