Weekly Market Insight • ISM Manufacturing Index • 8/01/11

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ISM Manufacturing Index
Values > 50 = Expansion
August 01, 2011
Source: Institute for Supply Management, Grubb & Ellis
The manufacturing sector skidded last month to its slowest pace in two years. The Institute for Supply Management’s purchasing managers index fell from 55.3 in June to 50.9 in July, barely above the threshold level of 50 that indicates expansion. More worrisome, new orders, a forward-looking component of the index, slipped to 49.2 in July. There are two bright spots: Inventories fell to 49.3, meaning that manufacturers do not have excess inventories on hand that might weigh down future production. Also on the bright side, the prices index plunged in the past two months and, at 59.0, is just slightly ahead of its level a year ago. This means that the run-up in energy and commodity prices that boosted manufacturer’s input costs earlier in the year are waning, which should help keep overall inflation in check. Along with last Friday’s disappointing report on GDP, the ISM reading points to slower economic growth. Talk of another recession has increased, but the index would have to drop below 43 over several months to signal a recession. For commercial real estate, the slowing economy may portend a pullback in leasing activity, which was surprisingly firm in the second quarter. Look for the economy to muddle through the second half of the year.
Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.

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Robert Bach
Senior Vice President, Chief Economist

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About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
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