Summary
The Institute for Supply Management reported this morning that its index designed to measure the economy's manufacturing activity came in at a reading of 53.6 in August (compared with a July result of 56.6). During August, there was a very large spike in the index's price component.
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ISM's report earlier today showed that its index designed to measure the economy's manufacturing activity ("PMI") fell to 53.6 in August. This was materially worse than a consensus forecast that had been looking for something around 57; it compared with a July result of 56.6. In August of 2004, the PMI stood at 59.6.
(NOTE: Overall index and sub-index readings above 50.0 indicate expansion; readings below 50.0 indicate contraction.)
There was softening in four of the PMI's more important components during August. New orders, production, employment and supplier delivers all fell, although all four retained readings in excess of the magic 50.0 level.
There was a major spike in the prices-paid component during August, which reversed July's decline, plus a lot more. The August price component came in at a reading of 62.5, up a sharp 14 points from July's 48.5.
I recently expressed surprise about July's price result. August's number appears far more realistic. Moreover, the July result was at serious odds with the price component of ISM's July service-sector index. ISM reported a July service price rise of 10.5 points, to a reading of 70.3.
In ISM's "What Respondents Are Saying" section of this morning's report, here are some comments relating to prices:
* "...Energy volatility is playing havoc with planning and pricing scenarios." (Chemicals).
*"Concerned with oil prices and the impact on the products that we buy." (Electronic Components & Equipment).
* "The worry is interest rates and oil prices. Business is very good, but these two items will eventually stall future growth." (Fabricated Metals).
Over the 12-month period ended August, the overall PMI registered a high of 59.1 (September of last year). Its low of 51.4 was set in May of this year. The 12-month average came in at 55.6, two points above August's result. The highest reading since January 2003 was 62.8, 9.2 points or more than 17% above August's reading; 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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08/05 53.6 62.5 36% 11% 53%
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%
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08/04 59.6 81.5 67% 4% 29%
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07/04 61.6 77.0 58% 4% 38%
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 August:
(NOTE: The number of consecutive months the commodity is listed is indicated after each item.)
Caustic Soda; Hydrochloric Acid; and Titanium.
Commodities Reported Up in Price During August:
Aluminum; Aluminum Products; Caustic Soda (16); Chemicals (19); Copper (3); Crude Oil; Diesel Fuel (12); Energy (7); Ferrous Scrap; Fuel; Fuel Surcharges (2); Gasoline (2); Natural Gas (37); Oil (4); Plastic Resins (7); Plastics (13); Resins (2); Steel* (23); and Titanium.
Commodities Reported Down in Price During August:
Corrugated Containers (3); Stainless Steel; Steel* (6).
*Reported as both up and down in price.
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