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 59.4 in September (compared with an August result of 53.6). However, during September, there was another very large spike in the index's price component. It was probably this aspect of the report that turned stock prices lower immediately after the release.
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* ISM's report earlier today showed that its index designed to measure the economy's manufacturing activity ("PMI") rose to 59.4 September. This compared with an August reading of 53.6.
* September's result was significantly better than a consensus forecast that had been looking for something around 52. In September of 2004, the PMI stood at 59.1
(NOTE: Overall index and sub-index readings above 50.0 indicate expansion; readings below 50.0 indicate contraction.)
* During September, three of the PMI's more important components strengthened. These were new orders, production and employment. The speed of supplier deliveries was reported as showing further slowing, however, and customers' inventories showed additional contraction during the month. These areas could be signaling developing bottlenecks and more upward pressure on prices.
* In fact, there was another major spike in the index's prices-paid component during September, to 78.0, up a whopping 15.5 points from the August reading of 62.5. In turn, August was up 14 points from July. Thus, over the last two months, the price component rose 29.5 points, or 60.8%!
* This was the first ISM report that included the possible effects from Hurricane Katrina. In ISM's "What Respondents Are Saying" section of this morning's report, here are some comments that related specifically to Katrina:
* "Hurricane Katrina has presented some real challenges in getting raw materials, some of which are manufactured in the region and others that are transported through the port of New Orleans." (Chemicals).
* "Record sales in August 2005 and increased backlog. Expect increased orders from the [Katrina] rebuilding." (Electronic Components & Equipment).
* "Hurricane Katrina clean-up and reconstruction will have a huge impact on our business. Customer orders have begun to increase substantially." (Instruments & Photographic Equipment ).
* Over the 12-month period ended September, the overall PMI registered a high of 59.4 (September 2005). Its low of 51.4 was set in May of this year. The 12-month average came in at 55.6, 3.8 points below September's result. The highest reading since January 2003 was 62.8 (occurring in January of 2004), 3.4 points or 5.7% above September's reading.
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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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09/05 59.4 78.0 60% 4% 36%
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%
==========================================
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%
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09/04 59.1 76.0 55% 3% 42%
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08/04 59.6 81.5 67% 4% 29%
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 September:
(NOTE: The number of consecutive months the commodity is listed is indicated after each item.)
Castings; Fuel Oil; Hydrochloric Acid (2); Hydrogen; and Resins.
Commodities Reported Up in Price During September:
Adhesives; Aluminum (2); Aluminum Products (2); Caustic Soda (17); Chemicals (20); Copper (4); Crude Oil (2); Diesel Fuel (13); Energy (8); Freight; Fuel (2); Fuel Oil; Fuel Surcharges (3); Gasoline (3); Natural Gas (38); Oil (5); PET; Petrochemicals; Petroleum-Based Raw Materials; Plastic Resins (8); Plastics (14); Plywood; Propylene; Resins (3); Steel* (24); Transportation; and Yeast.
Commodities Reported Down in Price During September:
Corrugated Containers (4); Linerboard; Steel* (7); and Wheat.
*Reported as both up and down in price.
On Wednesday (10/5), ISM will release data covering the economy's service-sector activity during September.
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