Manufacturing is not dead and growth is still alive. The equity markets were already higher ahead of the Institute for Supply Management this morning, but the ISM data is one more report showing evidence that growth is trying to hold up. Not robust growth, not at all. But no double-dip recession either.
The ISM data this morning came out above 50.0 on all sub-components. That is is above the green-line representing expansion, and that is true for the variations of each index where the exact 50.0 is not the cut-off line..
Headline data from ISM for all numbers came at 55.5 for July. That is below the 56.2 reading for June, but is above the 54.7 consensus data from Dow Jones and even more above the 54.0 reading that was expected by Bloomberg.
The production index was 57.0 versus 61.4 in June, the 14th month of growth.
The inventories index was 50.2, up from 45.8 in June. This was the first month of inventory builds after 3 straight months of contraction.
The new orders index was 53.5 versus 58.5 in June. This was the 13th consecutive month of growth in the New Orders Index.
The backlog of orders was 54.5, down 2.5 points from June. While this is mixed, over half of the respondents said there was no change from June.
There was also a solid number in prices, which was 57.5 versus 57.0 in June. NO DEFLATION there! This was the 13th consecutive month of gains in prices paid. That is pricing power, but not so high that it is inflationary pricing power.
The exports rose to 56.5 from 56.0 in June and the imports fell to 52.5 from 56.5 in June. That is 13th straight months of higher exports and the 11th month of import growth.
If you have been waiting and hoping for manufacturing job growth, this is showing that there could finally be some hope. The employment index hit 58.6 versus 57.8 in June. This represents the 8th consecutive month of growth and ten of eighteen manufacturing sectors showed that growth.
This is not robust growth. It is also far from a double-dip recession.
JON C. OGG
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