Summary
Today's report from the Institute for Supply Management showed a slight acceleration in manufacturing activity during November. Price pressures eased a bit during the month, but remained at levels high by historical standards.
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Earlier today, the Institute for Supply Management reported that its index measuring the economy's November manufacturing activity ("PMI") came in at a reading of 57.8, up from October's 56.8. The November result was a little better than a consensus forecast that was looking for something around 57.0.
This index is configured such that readings above 50.0 indicate sector expansion. Readings below this value are consistent with contraction.
The November rise in the PMI, albeit a small one, reversed three consecutive months of decline. And while the month's 57.8 reading denoted decent manufacturing-sector strength, it still remained comfortably below the index's most recent peak -- 63.6 in January of this year.
While the overall index continued to be reasonably buoyant, its price measure remained in territory continuing to qualify as "troublesome." The price component came in at a reading of 74.0. This was down 4.5 points from October, but 74.0 clearly remains troublesome by historical standards.
As in the overall index, readings above 50.0 indicate expansion. November was the 33rd consecutive month in which this measure showed rising prices. In May of last year, the recent trough, the price component stood at a much lower 51.5, versus the November 2004 result of 74.0.
ISM reported that 55% of its survey respondents reported higher prices during November, while 7% reported lower ones. The October results were 61% and 4%, respectively. However, the overall shift in skew from the trough during the summer of 2003 continues. For example, in August 2003, these numbers were 19%/13%.
To illustrate how the numbers have been trending, the following table examines overall and price data over the last 23 months. The final section of this section breaks out specific commodities that were up or down in price during November, as reported to ISM by its survey respondents.
NOTE: There are some revisions in table below from past missives, which have been incorporated into the above text.
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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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11/04 57.8 74.0 55% 7% 38%
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%
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12/03 63.4 66.0 37% 5% 58%
11/03 61.3 64.0 33% 5% 62%
10/03 57.1 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%
02/03 49.4 65.5 <------ NA ------>
01/03 53.0 57.5 <------ NA ------>
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On Friday (12/3), ISM will report its index covering activity in the economy's non-manufacturing sector. This measure's price component also has shown some disquieting results in recent months.
Commodities Reported Up in Price During November:
Acetone; Alcohols; Aluminum, 13th month; Aluminum Products, 2nd month; Benzene; Caustic Soda, 7th month; Chemicals, 10th month; Copper, 2nd month; Copper Products, 4th month; Corrugated Containers, 10th month; Diesel Fuel, 3rd month; Electricity, 3rd month; Energy, 11th month; Ethylene; Freight, 9th month; Fuel; Fuel Surcharges; Gasoline, 11th month; High Density Polyethylene (HDPE), 3rd month; Latex, 4th month; LDPE, 2nd month; Methanol; Motors; Natural Gas*, 28th month; Nylon; Oil, 3rd month; Oil-Based Products; Packaging, 6th month; Paper, 9th month; PET, 2nd month; Petrochemicals; Plastic Products (various forms), 10th month; Plastics, 4th month; Polyethylene — 3rd month; Propylene, 2nd month; Propylene Glycol; Resins, 4th month; Rubber and Rubber-Based Products; Stainless Steel, 3rd month; Steel, 14th month; Steel Products (various forms), 4th month; and Transportation.
Commodities Reported Down in Price During November:
Corn and Corn Products, 4th month; Eggs; Natural Gas*; and Steel.
*Reported as both up and down in price.
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