Econoday Report: ISM Mfg Index 1, 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 11/1/05 For Oct 2005

ISM Mfg Index, Level
Actual	59.1
Consensus	57.0
Consensus Range	54.2 to 59.0

Highlights
The Institute For Supply Management's manufacturing index edged only 3 tenths lower to 59.1 in October, holding onto the bulk of Katrina-related gains in September.

That was the good news. The bad news is there are signs of excessive pressure. The prices paid index jumped further after last month's near record hike, at 84.0 vs. 78.0 in September. Katrina tripped panic buying by purchasers, who sought out second and third suppliers on concern of shortages.

The supplier delivery index, which also jumped in September, indicated further disruptions and further slowing in October, rising to 61.7 from 59.3.

Signs of shortages may be evident in the inventory readings. Purchasers reported a slight contraction in their own inventories and said inventories at their customers were contracting further.

Order data were strong with new orders showing only slightly less growth at 61.7 vs. 63.8, and backlogs rising 5 tenths to 55.5. Activity in future months would appear to be strong.

Bonds edged lower and the dollar higher in initial reaction to the report, which points to hot conditions in the manufacturing sector. But conditions may be too hot for the comfort of Federal Reserve officials, who are certain to be concerned about the price gains and early evidence of bottlenecks.

Market Consensus Before Announcement
The ISM manufacturing index increased almost 6 points to 59.4 in September despite, or because of, hurricanes Katrina and Rita. The Philadelphia Fed's business outlook survey showed improvement in October, although the New York Fed's survey did not.

ISM manufacturing index Consensus Forecast for Oct 05: 57
Range: 54.2 to 59.0

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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