Summary
The Institute for Supply Management is approaching its next monthly reporting cycle. In early September, ISM will make available the results for its indexes that track the economy's manufacturing and service-sector activities, with data that will be current through August. In preparation, this missive updates these two measures' results through July.
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Introduction
On September 1st, the Institute for Supply Management will release results for its index that tracks the economy's August manufacturing activity. This will be followed on September 6th by the release of ISM data on August service-sector activity. ISM is a private-sector trade organization that is held in high regard, so its monthly data receive significant attention and are accorded much respect within the research community.
The July and 2005 year-to-date performance for both ISM measures show an economy possessing strength, but where that strength has not gained momentum, on balance. Thus, with the continued upward march in energy prices, the ISM series will receive even closer scrutiny, to see if they shed light on what high energy prices might be doing to sap economic strength.
As the next reporting cycle approaches, the consensus forecast is that both ISM indexes for August will show a modest improvement from July.
Manufacturing Data
ISM's report earlier this month showed that its index designed to measure the economy's manufacturing activity ("PMI") rose to 56.6 in July. This was a couple points better than a consensus forecast that had been looking for something around 54.5; it compared with a June result of 53.8. In July of 2005, the PMI stood at 61.6.
(NOTE: Overall index and sub-index readings above 50.0 indicate expansion; readings below 50.0 indicate contraction.)
There was a surprisingly large decline (at least to me) in the prices-paid component, to a reading of 48.5, versus 50.5 in June. In July of last year, the price measure stood at a much higher 77.0. (See specific price commentary at the end of this section.)
For the 12 months ended July, the PMI registered a high of 59.6 (August of last year). Its low was 51.4, occurring in May of this year. The 12-month average came in at 56.1, similar to July's result. The highest reading since January 2003 was 62.8, 6.2 points or almost 11% above July's result; it occurred in January of 2004.
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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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07/05 56.6 48.5 24% 27% 49%
06/05 53.8 50.5 22% 21% 57%
05/05 51.4 58.0 32% 16% 52%
04/05 53.3 71.0 52% 10% 38%
03/05 55.2 73.0 51% 5% 44%
02/05 55.3 65.5 38% 7% 55%
01/05 56.4 69.0 45% 7% 48%
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12/04 57.3 72.0 52% 8% 40%
11/04 57.6 74.0 55% 7% 38%
10/04 57.5 78.5 61% 4% 35%
09/04 59.1 76.0 55% 3% 42%
08/04 59.6 81.5 67% 4% 29%
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07/04 61.6 77.0 58% 4% 38%
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06/04 61.2 81.0 66% 4% 30%
05/04 62.6 86.0 74% 2% 24%
04/04 62.3 88.0 77% 1% 22%
03/04 62.3 86.0 73% 1% 26%
02/04 62.1 81.5 65% 2% 33%
01/04 62.8 75.5 54% 3% 43%
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12/03 62.1 66.0 37% 5% 58%
11/03 61.3 64.0 33% 5% 62%
10/03 57.7 58.5 26% 9% 65%
09/03 55.1 56.0 21% 9% 70%
08/03 55.6 53.0 19% 13% 68%
07/03 52.5 53.0 21% 15% 64%
06/03 50.4 56.5 26% 13% 61%
05/03 49.8 51.5 21% 18% 61%
04/03 46.1 63.5 37% 10% 53%
03/03 46.4 70.0 47% 7% 46%
02/03 49.9 65.5 <------ NA ------>
01/03 52.8 57.5 <------ NA ------>
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Commodities Reported in Short Supply During July:
(NOTE: The number of consecutive months the commodity is listed is indicated after each item.)
Bearings.
Commodities Reported Up in Price During July:
Caustic Soda (15); Chemicals (18); Copper (2); Corrugated Containers*; Diesel Fuel (11); Energy (6); Freight; Fuel Oils; Fuel Surcharges; Gasoline; Natural Gas (36); Natural Rubber; Oil (3); Plastic Resins (6); Plastics (12); Resins; and Steel* (22).
Commodities Reported Down in Price During July:
Aluminum Products (3); Corrugated Containers* (2); High Density Polyethylene; Low Density Polyethylene; Polypropylene; and Steel* (5).
*Reported as both up and down in price.
Service-Sector Data
ISM's report released earlier this month showed that its index designed to measure the economy's service-sector activity fell unexpectedly in July, to 60.5. This was down from June's reading of 62.2. The consensus forecast had been looking for something around 61.0. In July of 2005, this index stood at 63.4.
(NOTE: The service-sector data operate in the same manner as the manufacturing index. Overall index and sub-index readings above 50.0 indicate expansion; readings below 50.0 indicate contraction.)
There was an unexpectedly large jump in the prices-paid component, to a reading of 70.3, versus 59.8 in June. In July of last year, the price measure stood at 72.4. (See specific price commentary at the end of this section.)
For the 12 months ended July, the service-sector index registered a high of 63.9 (December of last year). Its low was 58.5, occurring in May of this year. The 12-month average came in at 60.9. As was the case with the manufacturing index, the 12-month service-sector average was similar to July's result.
This series' most recent high was 66.9, occurring in April of 2004. This was 6.4 points or 10.6% above July's result.
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INSTITUTE FOR SUPPLY MANAGEMENT
NON-MANUFACTURING 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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07/05 60.5 70.3 39% 3% 58%
06/05 62.2 59.8 27% 5% 68%
05/05 58.5 57.9 27% 5% 68%
04/05 61.7 61.9 41% 2% 57%
03/05 63.1 65.6 43% 1% 56%
02/05 59.8 66.4 43% 3% 54%
01/05 59.2 66.6 37% 4% 59%
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12/04 63.1 73.6 38% 5% 57%
11/04 61.3 73.2 38% 4% 58%
10/04 61.5 74.0 44% 3% 53%
09/04 58.7 68.8 35% 3% 62%
08/04 59.3 70.1 40% 4% 56%
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07/04 63.4 72.4 45% 5% 50%
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Commodities Reported in Short Supply During July:
(NOTE: The number of consecutive months the commodity is listed is indicated after each item.)
Roofing Materials/Shingles.
Commodities Reported Up in Price During July:
Airfares (4); Air Freight; Asphalt/Asphalt Products (5); Building/Construction Materials/Supplies (3); Cement; Concrete (2); Construction/Construction Services (3); Contract Labor; Copper (23); Corn; #1 Diesel Fuel (5); #2 Diesel Fuel (7); Electronic/Electrical Parts (2); Energy; Food/Food Products; Freight Charges/Shipping; Fuel (20); Fuel-Related Surcharges; Gasoline (20); Hotel Rates/Costs (8);IT Consultants/ Contractors/Support; Lighting/Lighting Products; Natural Gas (2); Paper/Paper Products (18); Petroleum Products; Petroleum-Related Products; Pipe/Pipe Conduit (2); Plastics; Printer Cartridges; Printer Supplies/Toner; Printing; Travel; and Unleaded Gasoline.
Commodities Reported Down in Price During July:
Beef (2); Computers and Peripherals (2); Frozen Beef Knuckles/Trim; Lumber
-- Pine, Spruce and Treated; PVC/PVC Pipe; Steel; Steel Pipe and Fittings (4); and Telephone Equipment.
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