12/04/2006

The ISM Schism -- Part II

Hello:

In early October, we commented that "[t]he Institute for Supply Management (ISM) report came in below expectations today...indicat[ing] that the economy might be cooling off more than "the experts" anticipated."

On Friday, Bloomberg news reported that "[m]anufacturing in the U.S. unexpectedly shrank last month for the first time in more than three years. The Institute for Supply Management's factory index fell to 49.5 [in November], from 51.2 in the prior month. A reading below 50 signals contraction in an industry that accounts for 12 percent of gross domestic product."

So we have an apparent slowdown in manufacturing, which accounts for approximately 12% of the economy. We still have a schism in that the market is remaining relatively strong. Perhaps it is the anticipation of a possibly robust holiday shopping season that is allowing for the continuing ISM schism, because consumerism accounts for approximately 80% of the economy. Cyber-Monday, the online shopping equivalent of Black Friday, was considered to be quite strong, thus supporting the concept that retail figures are affecting the market direction more so than the ISM figures.

Due to the Pension Protection Act of 2006, employers may automatically enroll employees into the company's 401(k) plan, as long as they provide a notice explaining the participant's right to opt out of the plan or to change the rate of the contribution. Does your organization have a traditional 403(b), or one of the newer 401(k) plans designed for non-profit organizations?

Terri G. Millson, CIMA, CIMC President