More Than Weather Behind ISM Drop

February 03, 2014
By Knowledge Leaders Team in Uncategorized

This morning the January national ISM manufacturing index was released showing a drop from 56.5 to 51.3 in January from December. While there is likely some weather impact in the headline number, we don’t think weather is the dominant explanation.  One way we cross-check the ISM is by comparing it to the regional ISM manufacturing indexes.  We have created a diffusion index of the 12 regional ISM manufacturing indexes that shows how many are advancing or contracting over the previous three months. At -6, the diffusion index tell us that out of 12 districts, 9 are contracting and only 3 expanding over the past three months. Generally, when this diffusion index is contracting, like it is now, the ISM is under pressure.   Regional manufacturing indexes tell the same story as the ISM: there is more than weather behind the weakness.


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