| ISM Mfg Index |
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Released On 8/1/2012 10:00:00 AM For Jul, 2012
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Prior | Consensus | Consensus Range | Actual |
| ISM Mfg Index - Level | 49.7 | 50.1 | 48.5 to 51.1 | 49.8 |
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Highlights
The US manufacturing sector is dropping, especially unfortunately orders. The ISM's composite headline index remains under 50, at 49.8 in July vs 49.7 in June. But the details show greater trouble with new orders at 48.0, up slightly from June's 47.8 but still showing monthly contraction. Export orders are an increasing and central negative, at 46.5 for a 1 point drop from June and reflecting weakness in both Europe and Asia. Manufacturers, lacking new orders, are working down their backlogs which are very low at 43.0 for a 1.5 point monthly decline.
Production is still growing as is employment but this won't go on for long if new orders don't start coming in. Inventories are thinning but only slightly while delivery times are shortening. Input prices, in a another reflection of weak demand, are contracting.
This report shows more weakness than the Markit Economics report earlier this morning and is likely to be a negative for the market today, at least ahead of the mid-afternoon FOMC statement. Following this report, the Dow is moving off opening highs.
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Market Consensus before announcement
The composite index from the ISM manufacturing survey in June declined to 49.9 (breakeven at 50) from 53.5 in May. Forward momentum hit the wall at the new orders index, at 47.8 in June versus 60.1 the month before to show contraction for the first time since April 2009 and the degree of the decline was the steepest since October 2001. For what it's worth, the October 2001 drop in orders was followed by an almost equal rebound the next month and was above the pre-drop level the second month afterwards.
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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
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![[Chart]](showimage.asp?imageid=22954)
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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.
Data Source: Haver Analytics
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