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 59.1 in October, down slightly from a September result of 59.4. However, October saw another large increase 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 slightly in October, to 59.1. This compared with a September reading of 59.4.
* October's result was better than a consensus forecast that had been looking for something around 57. In October of 2004, the PMI stood at 57.5.
(NOTE: Overall index and sub-index readings above 50.0 indicate expansion; readings below 50.0 indicate contraction.)
* During October, two of the PMI's more important components weakened a little, but remained strong overall. These were new orders and production. The key employment component firmed a bit. The speed of supplier deliveries was reported as showing further slowing, however, and customers' inventories showed additional contraction during October. These areas could be signaling developing bottlenecks and further upward pressure on prices.
* In fact, there was another large increase in the index's prices-paid component during October, to 84.0, up a sizable 6.0 points from the September reading of 78.0. In turn, September was up 15.5 points from August, which was up 14.0 points from July. Thus, over the last three months, the price component rose 35.5 points, or 73.2%!
* In ISM's "What Respondents Are Saying" section of today's report, here are some comments on prices or price-related areas:
* "We are seeing an increase in the number of chemical products being placed on allocation and order control." (Chemicals).
* "Concern over the price of oil and its effect on the future prices of commodities. Existing inventories are being depleted and we are seeing some significant price increases in some commodities." (Electronic Components & Equipment).
* "Most price increase letters I have ever seen." (Instruments & Photographic Equipment).
* "Refrigerated freight a significant issue - unable to find available trucks. Sugar prices are skyrocketing." (Food).
* Over the 12-month period ended October, 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 55.8, 3.3 points below October's result. The highest reading since January 2003 was 62.8 (occurring in January of 2004), 3.7 points or 6.3% above October'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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10/05 59.1 84.0 70% 2% 28%
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%
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12/04 57.3 72.0 52% 8% 40%
11/04 57.6 74.0 55% 7% 38%
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10/04 57.5 78.5 61% 4% 35%
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09/04 59.1 76.0 55% 3% 42%
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 October:
(NOTE: The number of consecutive months the commodity is listed is indicated after each item.)
Copper; Fuel Oil (2); Natural Gas; Polyethylene; Polyethylene Resin; Resins (2); Steel; and Tires.
Commodities Reported Up in Price During October:
Alcohol; Aluminum (3); Aluminum Extrusions; Butadiene; Caustic Soda (18); Chemicals (21); Copper (5); Copper Products; Diesel Fuel (14); Electric Components; Electricity; Energy (9); Freight (2); Fuel Oil (2); Fuel Surcharges (4); Gasoline (4); High Density Polyethylene; Natural Gas (39); Oil (6); Paper; Plastics (15); Plastic Resins (9); Polyethylene; Polyethylene Film; Polypropylene; PVC; Resins (4); Specialty Chemicals; Steel (25); Sugar; and Transportation (2).
Commodities Reported Down in Price During October:
Nickel.
On Thursday (11/3), ISM will release data covering the economy's service-sector activity during October.
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