ISA Quarterly Economic Report indicates slower expansion

The latest ISA Quarterly Economic Report indicates slower growth than last quarter, but the distributor and manufacturer indexes are still in positive territory. The ISA-Distributors (ISA-D) index decreased from 68.86 percent to 56.77 percent, while the ISA-Manufacturers (ISA-M) index went from 68.01 percent last quarter to 61.69 percent this quarter. While both indexes were above 50 percent, which indicates growth or expansion, the drop from the first quarter is cause for some concern.

A similar trend can be seen in the Institute for Supply Management’s (ISM) Purchasing Manager Index (PMI), where the index fell from 55.57 percent to 55.17 percent in the past month. Viewed from a monthly perspective, there are several interesting observations. For instance, both the Manufacturing and Service sectors reported a bleaker view for the forthcoming months. In May 2006, respondents said that compared to May’s orders, anticipated new orders would drop in June. This was borne out as predicted when June ’06 new orders dropped. In June, respondents indicate that anticipated new orders for July will drop. Respondents also indicated that anticipated business conditions, a broader descriptor for overall business conditions, would worsen in July.

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