posted on 03 April 2017
Written by Steven Hansen
The ISM Manufacturing survey marginally slowed but remained in expansion. The key internals were mixed but in expansion. The Markit PMI manufacturing Index, also released today, is in positive territory and marginally declined.
The ISM Manufacturing survey index (PMI) marginally declined from 57.7 to 57.2 (50 separates manufacturing contraction and expansion). This was slightly at expectations from Bloomberg / Econoday which were 56.0 to 58.5 (consensus 57.1).
Earlier today, the Markit PMI Manufacturing Index was released:
Relatively deep penetration of this index below 50 has normally resulted in a recession.
The noisy Backlog of Orders improved and remains in expansion. Backlog growth should be an indicator of improving conditions; a number below 50 indicates contraction. Backlog accuracy does not have a high correlation against actual data.
Excepts from the ISM release:
It is interesting to note that ISM Manufacturing represents less than 10% of USA employment, and approximately 20% of the business economy. Historically, it could be argued that the production portion of ISM Manufacturing leads the Fed's Industrial Production index - however the correlation is not strong when looking at trends.
However, holding this and other survey's Econintersect follows accountable for their predictions, the following graph compares the hard data from Industrial Products manufacturing subindex (blue bar) and US Census manufacturing shipments (red bar) to the ISM Manufacturing Survey (purple bar).
Caveats on the use of ISM Manufacturing Index:
This is a survey, a quantification of opinion - not facts and data. However, as pointed out above, certain elements of this survey have good to excellent correlation to the economy. Surveys lead hard data by weeks to months, and can provide early insight into changing conditions.
Many use ISM manufacturing for guidance in estimating manufacturing employment growth. Econintersect has run correlation coefficients for the ISM manufacturing employment and the BLS manufacturing employment data series above going back to 1988, using quarterly data. The coincident correlations are actually negative, but poor (r = -0.2 to -0.4 for various time periods examined). See here for definitions.
Before 2000 the ISM employment data had a weak positive correlation to the BLS data 4 to 7 quarters later (r values above 0.6). Since 2000 the correlations for ISM manufacturing employment as a leading indicator for the BLS manufacturing employment have been between 0 and 0.3 for r (correlation coefficient). These values define correlations as none to poor.
In other words, ISM employment index is not useful in understanding manufacturing jobs growth.
The ISM employment index appears useful in predicting turning points which can lead the BLS data up to one year.
>>>>> Scroll down to view and make comments <<<<<<
Permanent link to most recent post on this topic
Econintersect Economic Releases
|.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet|
|Asia / Pacific|
|Middle East / Africa|
This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved