Summary
Today's report from the Institute for Supply Management showed some slowing in manufacturing activity during October. Price pressures rose a bit during the month, keeping them at historically high levels.
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ISM October Manufacturing-Sector Results
Earlier today, the Institute for Supply Management reported that its index measuring the economy's October manufacturing activity ("PMI") came in at a reading of 56.8, down from September's 58.5. The October result was below a consensus forecast that was looking for no change. (Briefing.com was looking for an even stronger 60.0.)
This index is configured such that readings above 50.0 indicate sector expansion. Readings below this value are consistent with contraction.
Thus, in October, the PMI fell for the third consecutive month. And while the month's 56.8 reading denoted decent manufacturing-sector strength, it was still almost 10 points below the index's most recent peak -- 66.2 in December of last year.
While the overall index continued to be reasonably buoyant, its price measure remained in territory surely qualifying as "troublesome." The price component came in at a reading of 78.5. This was up 2.5 points from September, with 78.5 clearly remaining troublesome from a historical perspective.
As in the overall index, readings above 50.0 indicate expansion. October was the 32nd consecutive month in which this measure showed rising prices. In October of last year, the price component stood at a much lower 58.5, versus the October 2004 result of 78.5.
ISM reported that 61% of its survey respondents reported higher prices during October, while 4% reported lower ones. The September results were 55% and 3%, respectively. Thus, the shift in skew from late last year continues. For example, in October 2003, the numbers were 26%/9%.
To illustrate how the numbers have been trending, the following table examines overall and price data over the last 20 months. The final section of this section breaks out specific commodities that were up or down in price during October, as reported to ISM by its survey respondents.
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INSTITUTE FOR SUPPLY MANAGEMENT PMI INDEX
-- TOTAL INDEX AND PRICE COMPONENT
--------------------------------------------
Respondents Reporting
Higher, Lower, or
Unchanged Prices
Month/ Overall Price ---------------------
Year Index Index Higher Lower Unch.
--------------------------------------------
10/04 56.8 78.5 61% 4% 35%
09/04 58.5 76.0 55% 3% 42%
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%
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10/03 57.0 58.5 26% 9% 65%
09/03 54.7 56.0 21% 9% 70%
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 Wednesday (11/3), 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.
Commodities Reported Up in Price During October
ABS, 2nd month; Aluminum, 12th month; Aluminum Extrusions, 3rd month; Aluminum Products; Benzene; Caustic Soda, 6th month; Chemicals, 9th month; Coal; Copper; Copper Products, 3rd month; Corrugated, 9th month; Crude Oil; Diesel Fuel / Fuel Oil, 2nd month; Electricity, 2nd month; Energy, 10th month; Freight, 8th month; Gasoline, 10th month; HDPE, 2nd month; Latex, 3rd month; LDPE; Lumber, 6th month; Machine Parts; Molded Plastic Components; Natural Gas, 27th month; Nickel; Oil, 2nd month; Packaging, 5th month; Paper, 8th month; PET; Plastic Products (various forms), 9th month; Plastic Resins, 3rd month; Plastics — 3rd month; Polyethylene, 2nd month; Polypropylene, 3rd month; Polypropylene Resin, 2nd month; Propylene; Resin, 3rd month; Stainless Steel, 2nd month; Stainless Steel Products (various forms), 4th month; Steel, 13th month; and Steel Products (various forms), 3rd month.
Commodities Reported Down in Price During October
Corn, 3rd month; and Cotton.
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Third-Quarter GDP (Advance Estimate)
As reported previously, the Commerce Department released its advance estimate of third-quarter real gross domestic product last Friday. Commerce reported that real GDP rose at an annual rate of 3.7% during the September quarter, versus a 3.3% rate during the second quarter.
I will soon get around to a more detailed analysis of third-quarter results. In the meantime, here is a statistical breakdown of them. (I have not had a chance to double-check the math.)
(NOTE: The updated numbers below will be posted to the "GDP" category on the GRA website, accessed through the "Data & Charts" link on the site's navigation bar.)
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ADVANCE ESTIMATE OF THIRD-QUARTER 2004
REAL GROSS DOMESTIC PRODUCT (Released
10/29 -- Billions of 2000 Chained Dollars
at Seasonally Adjusted Annual Rates)
--------------------------------------------------
3Q2004 2Q2004 Change/
Advance Final Impact
------------------------
Real GDP 10883.4 10784.7 3.7%
Inventory Change 48.1 61.1 -$13.0
Real Final Sales 10833.9 10722.3 4.2%
--------------------------------------------------
Components of GDP
-----------------
Personal Consumption 7658.9 7572.4 4.6%
Nonres. Fixed Investment* 1241.7 1207.9 11.7%
Resid. Fixed Investment 567.9 563.6 3.1%
Net Exports -598.0 -580.3 -$17.7
Government Purchases* 1953.1 1946.5 1.4%
--------------------------------------------------
Implicit Price Deflators:
Gross Domestic Product 1.3% 3.2% --
Gross Domestic Purchases 1.9% 3.5% --
--------------------------------------------------
*MEMO ITEMS
-----------
Government Purchases
--------------------
Total 1953.1 1946.5 1.4%
State & Local 1226.9 1228.3 -0.5%
Federal 726.1 718.1 4.5%
National Defense 490.6 479.9 9.2%
Nonresidential
Fixed Investment
----------------
Total 1241.7 1207.9 11.7%
Structures 242.5 241.7 1.3%
Equipment & Software 1009.9 975.5 14.9%
Info. Processing
Equip. & Software 571.5 565.4 4.4%
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MAJOR GDP COMPONENTS -- CHANGES BETWEEN
"ADVANCE" 3Q2004 AND "FINAL" 2Q2004 ESTIMATES
(Billions of 2000 Chained Dollars at
Seasonally Adjusted Annual Rates)
---------------------------------------------------
3Q2004 2Q2004
Advance Final Change
----------------------------
Real GDP 10883.4 10784.7 98.7
Inventory Change 48.1 61.1 -13.0
Real Final Sales 10833.9 10722.3 111.6
---------------------------------------------------
Personal Consumption 7658.9 7572.4 86.5
Nones. Fixed Invest. 1241.7 1207.9 33.8
Resid. Fixed Invest. 567.9 563.6 4.3
Net Exports -598.0 -580.3 -17.7
Govt. Purchases 1953.1 1946.5 6.6
---------------------------------------------------
REAL GROSS DOMESTIC PRODUCT (SEASONALLY
ADJUSTED ANNUAL RATES, 2000 CHAINED DOLLARS)
--------------------------------------------
Year Q1 Q2 Q3 Q4
----------------------------------------
2004 4.5% 3.3% 3.7% --
2003 1.9% 4.1% 7.4% 4.2%
2002 3.4% 2.4% 2.6% 0.7%
2001 -0.5% 1.2% -1.4% 1.6%
2000 1.0% 6.4% -0.5% 2.1%
1999 3.4% 3.4% 4.8% 7.3%
1998 4.5% 2.7% 4.7% 6.2%
-----------------------------------------
MEMO ITEM: Annual change in real GDP
before and after the "comprehensive
revision" published by the Commerce
Department on 12/10/03.
----------------------------------------
1929-2002 1959-1992 1992-2002
---------------------------------
After 3.4% 3.4% 3.2%
Before 3.4% 3.4% 3.2%
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