Tuesday’s economic reports brought a mixed view on the manufacturing segment in the United States. Manufacturing was better in the ISM report, but a tad worse in the purchasing managers index (PMI) report.
The key Institute for Supply Management (ISM) Manufacturing Index, which bucked the trends of late by rising more than expected, rose to 49.5 in February from 48.2 in January. This was a five-month high, but the reading was south of the 50.0 breakeven line, so it was in contraction.
Markit Economic released its final reading for February showing a final reading of 51.3. The prior month’s reading was 52.4, so this is a story of growth grinding to a stall.
U.S. economists now have much to factor in. A lot of dollar strength still is acting as an overhand. Also hurting is that international demand is weak, and most international economy watchers keep sliding their growth projections for international gross domestic product (GDP) lower and lower. A sharp inventory overhang is hurting as well, which may keep manufacturing demand a bit low until the inventories can be worked off.
Tuesday’s reports might be a perfect storm. They are strong enough for equity investors to feel safe, but they are also strong enough that they will let Federal Reserve presidents talk about being data-dependent while still jawboning about wanting to normalize interest rates.
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