Last Update: 28-Aug-15 18:15 ET
- The ISM Manufacturing Index fell to 52.7 in July from 53.5 in June. The Briefing.com Consensus expected the index to increase to 53.7.
- The drop came despite improvements in most of the regional Federal Reserve manufacturing surveys.
- Production growth remained strong, as the related index increased to 56.0 in July from 54.0 in June. Continued gains, however, are not certain.
- The growth in production was the result of strong new orders (56.5 from 56.0) along with the paring down of manufacturer backlogs. The latter component is what is unsettling.
- For a second consecutive month, the backlog of orders index has contracted. The situation, however, got noticeably worse in July as the index dropped to its lowest level, 42.5, since November 2012.
- Without a steady supply of unfilled orders, production will be highly reliant on notoriously fickle new orders growth to stay positive.
- The Employment Index declined to 52.7 in July from 55.5 in June.
- This is a highly overrated index. It is merely a survey of purchasing managers. It is a diffusion index, which means that it reflects the number of people saying conditions are better compared to the number saying conditions are worse. It does not weight for size of the firm, or for the degree of better/worse. It can therefore underestimate conditions if there is a great deal of strength in a few firms. The data have thus not been either a good forecasting tool or a good read on current conditions during this business cycle. It must be recognized that the index is not hard data of any kind, but simply a survey that provides broad indications of trends.
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