Econoday Economic Report: ISM Mfg Index July 2, 2012

2012 Economic Calendar

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ISM Mfg Index

Released On 7/2/2012 10:00:00 AM For Jun, 2012

	Prior	Consensus	Consensus Range	Actual
ISM Mfg Index - Level	53.5	52.0	51.0 to 53.4	49.7

Highlights
The status of the Philly Fed has just gone up. The ISM's manufacturing index shows contraction in June for the first time since July 2009. New orders, at 47.8, show contraction for the first time since April 2009 and the degree of the decline is the steepest since October 2001. Export orders, reflecting weakness in Europe and China, are a serious negative, at 47.5 for the first contraction since June 2009 and the lowest reading since April 2009. With a lack of new orders, manufacturers are working down backlogs which are at 44.5.

Inventories are coming down as are prices which show their greatest rate of monthly contraction since, once again, April 2009. Positives are continued growth in production and in employment though strength here won't last long without new orders. The Philly Fed for the last two months has been prominently signaling such a result as today's report. The Dow is falling in immediate reaction.

Market Consensus before announcement
The composite index from the ISM manufacturing survey slipped to 53.5 in May from 54.8 the prior month. The latest was still well within positive territory, indicating moderate growth. But details were even better. The ISM's new order index was up 1.9 points to 60.1 for the strongest rate of monthly growth since April of last year. This portends an improvement in manufacturing overall. More recently, the Markit flash PMI for manufacturing in June eased to 52.9 from 54.0 in May.

Definition
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. Why Investors Care

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

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