Jan. ISM Manufacturing Preview
The ISM Manufacturing Index for January, released tomorrow at 10:00am EST, is expected at 47.3 after a recently revised reading of 48.4 for December. The Prices Paid index is forecast at 68.0, which would be unchanged from the previous month. Since underlying data on new orders, production, and employment are probably still getting hit by housing markets issues, the overall index is likely to disappoint.
If the manufacturing index comes in as expected, it would be the ISM’s 7th straight monthly decline. December’s 48.4 level — originally reported as 47.7 but revised this week — was the first sub-50 reading since Jan-06, and the lowest reading since Apr-03. ISM levels below 50 reflect a negative outlook.
Notable declines were evident across several subcategories in the December report: New Orders fell 6.9%, Production declined 4.6%, and Inventories fell 1.4%. Customers’ inventories bucked the downward trend, while Exports fell 6% and Imports rose 0.5%.
The ISM on Tuesday released annual seasonal factor revisions. Changes were relatively small for December, with the revised ISM composite index at 48.4 versus the previously reported 47.7. The “business activity” index for the ISM non-manufacturing report was revised to 54.4 from 53.9.
Tomorrow’s ISM release will be the first since the institute announced a re-jiggering of the composite index for the manufacturing survey. It still consists of the same 5 components (new orders, production, employment, deliveries, and inventories), but now each of the 5 has equal weight in the index. (Previously, the respective weights were 30%, 25%, 20%, 15% and 10%).
The non-manufacturing index report will now include a composite index, the ISM-NMI. (Previously, the headline release was the “business activity” component, which is the correlate of the production component in the ISM.) The composite index is made up of equal weights of the following four components:
1) Business activity (production)
2) New orders
3) Employment
4) Supplier deliveries