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May ISM Twice Revised Ends near Consensus Prediction

Posted by Joseph Trevisani on Jun 2, 2014 2:03:00 PM

The normally staid Institute for Supply Management injected a bit of drama into a quiet market today by twice revising its headline index for the U.S. manufacturing sector, ending just one-tenth of a percent from the pre-release consensus.

After the final adjustment the purchasing managers index for May, also known as the ISM index was 55.4, just above the consensus of 55.5 from the Reuters and Bloomberg Surveys. The April result was 54.9.

The first release at the 10:00 am schedule was 53.2 and was reported widely as usual. The ISM index is considered a reliable indicator for the state of the overall economy.

Within about an hour after the release analysts from Pierpont Securities, Stone and McCarthy Research Associates, Deutsche Bank and others had noted the Institute appeared to have applied April's seasonal adjustment factors to the May figures.

Joseph LaVorgna the Chief U.S. economist at Deutsche tweeted that the correct number "should have been 55.4 not 53.2".  The first correction issued by the ISM was 56.0 and was updated by Bloomberg among others with the second and final statistic, 55.4 forwarded by the ISM several minutes later.

Four component indices were also revised though only once each. New Orders were initially 53.3 but that became 56.9; production was moved from 55.2 to 61.0; employment from 51.9 to 52.8 and supplier deliveries went from 52.5 to 53.2.

The remaining six categories were unchanged from the first release. Inventories were 53.0, April 53.0; customer inventories 46.5, April 42.0; Prices 60.0, April 56.5; backlog of orders 52.5, April 55.5; exports 56.5, April 57.0; imports 54.5, April 58.0.

Though the revised figures supported the contention that the U.S. economy will accelerate from its negative 1.0 percent annualized growth rate of the first quarter, there was limited response from the equity or currency markets. Equities did swing from negative to positive as the error in the ISM index was acknowledged, but the reversal was just 54 points from the bottom just after the release to the top following the corrections. 

The euro climbed as high as 1.3624 against the dollar after the release but began to fall before the correction was public, touching 1.3588 after the London close. The high had been 1.3644 overnight in Tokyo.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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