Ism Manufacturing December 2008

John Silvia, Chief Economist

[email protected] ● 704-374-7034 January 02, 2009

ISM Manufacturing: Economy Remains in Teeth of the Recession December’s ISM manufacturing index came in at 32.4, well within recession territory and consistent with levels of the 1980-82 recession period. Weakness remains in new orders, production and employment. The inventory correction is ongoing. Prices paid fell sharply to 1949 lows and suggests lower inflation ahead. Manufacturing Weakens as Production, Orders Decline

Employment Weakness, Input Prices Lower

• The ISM manufacturing index slid to 32.4 in December which confirming recessionary conditions in the manufacturing sector for the fourth quarter. • Orders have slowed sharply since the June peak. This suggests slower production going forward. Unfortunately, export orders have also dipped, suggesting less support for GDP.

• Employment dipped to 29.9, which is consistent with continued losses of manufacturing jobs. • Inventory retrenchment suggests further production cuts ahead. • Prices paid fell again which is consistent with lower input prices for manufacturers.

ISM Composite Index and Industrial Production Index, 3-Month Annual Rate

65

ISM Employment Index & Manufacturing Jobs 15.0%

Index, Thousands of Jobs

70

200

Monthly Change In Manufacturing Jobs In Thousands: Nov @ -85.0 (Right Axis)

65

60

10.0%

55

5.0%

50

0.0%

50

45

-5.0%

45

ISM Manufacturing Employment: Dec @ 29.9 (Left Axis)

150

60

100

55

50 0

40

-10.0%

-50

40

-100

35 35

-15.0%

Industrial Production - 3 Month Annual Rate: Nov @ -16.0% (Right Axis)

-150

30

ISM Manufacturing Composite - 3 Month Moving Avg: Dec @ 35.8 (Left Axis)

30

-20.0%

2000

2001

2002

2003

2004

2005

2006

2007

25

-200

1999

2008

ISM New Orders and Non-Def Cap. Gds Orders Ex-Aircraft

2001

2003

2005

2007

ISM Price Index and PPI - Finished Goods

Index, Percent Change 70

40%

65

30%

8%

100 90

6%

80 20%

60

4% 70

55

10%

50

0%

45

-10%

2%

60

0%

50 40

-2%

30 -20%

40

-4% 20

35

-30%

ISM - 12 Month Moving Average: Dec @ 42.2 (Left Axis)

30 92

94

96

98

00

02

04

06

Core Finished Goods PPI - 3 Month Annual Rate: Nov @ 3.9% (Right Axis)

10

-6%

ISM Prices Index: Dec @ 18.0 (Left Axis)

Nondefense Orders - Yr/Yr % Change of 3 MMA: Nov @ -3.1% (Right Axis)

-40% 08

0

-8% 93

95

97

99

01

03

05

07

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