Introduction
Today's report from the Institute for Supply Management represented the worst of two worlds. Based on the release, what you wanted to see moving along at a better pace in August in the manufacturing sector did not, while what you would not want to see accelerating -- prices -- did.
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Earlier today, the Institute for Supply Management reported that its index measuring the economy's August manufacturing activity during came in at a reading of 59.0, down from July's 62.0. The August result was below the consensus expectation, which was looking for something in the 60+ area. Overall, the report reflected the weakness that has shown up lately in some other indicators.
However, the index's price component came in at a reading of 81.5, up 4.5 points from July, and an overall value that surely would be considered "troublesome" from a historical perspective. Readings above 50.0 (in the main as well as the component indexes) indicate expansion.
August was the 30th consecutive month in which this measure showed rising prices. As recently as last October, the price component stood at a much lower 58.5, versus the August reading of 81.5.
ISM reported that 67% of its survey respondents reported higher prices during August, while 4% reported lower ones. The July results were 58% and 4%, respectively. Thus, the shift in skew from late last year continues. For example, in October 2003, the numbers were 26%/9%.
So you can see how the numbers have been trending, the following table examines overall and price data over the last 18 months.
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INSTITUTE FOR SUPPLY MANAGEMENT PMI INDEX
-- TOTAL INDEX AND PRICE COMPONENT
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Respondents Reporting
Higher, Lower, or
Unchanged Prices
Month/ Overall Price ---------------------
Year Index Index Higher Lower Unch.
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08/04 59.0 81.5 67% 4% 29%
07/04 62.0 77.0 58% 4% 38%
06/04 61.1 81.0 66% 4% 30%
05/04 62.8 86.0 74% 2% 24%
04/04 62.4 88.0 77% 1% 22%
03/04 62.5 86.0 73% 1% 26%
02/04 61.4 81.5 65% 2% 33%
01/04 63.6 75.5 54% 3% 43%
12/03 66.2 66.0 37% 5% 58%
11/03 62.8 64.0 33% 5% 62%
10/03 57.0 58.5 26% 9% 65%
09/03 54.7 56.0 21% 9% 70%
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08/03 55.0 53.0 19% 13% 68%
07/03 52.6 53.0 21% 15% 64%
06/03 50.4 56.5 26% 13% 61%
05/03 50.0 51.5 21% 18% 61%
04/03 46.2 63.5 37% 10% 53%
03/03 46.6 70.0 47% 7% 46%
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On Friday (9/3), ISM will report its index covering activity in the economy's non-manufacturing sector. In recent months, this measure's price component also has shown some disquieting results.
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