November 2012 ISM Reports

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Manufacturing contracted slightly in November, with the Institute for Supply Management’s (ISM) PMI falling back to 49.5 percent -- from 51.7 percent in October (50 percent is the breakpoint between contraction and expansion). Bradley Holcomb, chair of ISM’s Manufacturing Business Survey Committee, was upbeat nonetheless. "The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (51.8 percent) corresponds to a 3.1 percent increase in real GDP,” Holcomb said. “In addition, if the PMI for November (49.5 percent) is annualized, it corresponds to a 2.3 percent increase in real GDP annually." Despite Holcomb’s optimism, the sub-indices exhibited widespread weakness; most showed either slower expansion or faster contraction. Only production and deliveries expanded at a faster pace, while imports contracted at a slower pace.
 

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The service sector report was much more upbeat. The non-manufacturing index (now known simply as the “NMI”) registered 54.7 percent in November, 0.5 percentage point higher than October’s 54.2 percent -- indicating faster growth. “Respondents' comments are mixed;” said Anthony Nieves, chair of ISM’s Non-manufacturing Business Survey Committee, adding, “however, the majority of survey respondents reflect a cautious optimism about current economic conditions.”
 

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Wood Products reported contracting activity once again; increased production contributed essentially all of the meager upbeat news for that industry. Paper Products’ expansion, on the other hand, was supported from nearly all sub-indices. Overall activity expanded in Real Estate, but changes were limited to new and backlogged orders. Construction and Ag & Forestry exhibited growth in employment and new orders.

Prices increased for a variety of commodities, including corrugated boxes/packaging, lumber and caustic soda. Some respondents reported gasoline and diesel as higher in price, and some as down in price. No relevant commodities were in short supply.


The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.