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Tuesday, October 2, 2012

ISM manufacturing data

The ISM number surprised to the upside this month.  Based on the regional surveys this is a bit surprising.  However, the move was within statistical norms from month to month changes.  Lets start with the main index chart.

The red circled areas are upticks in the ISM number from below 50 during or just in front of prior recessions.  There are several upticks bigger then the current one that did not mean the worst was over.  Given the regional data was still very poor last month this could be a short lived uptick.  We will just have to wait and see.  It is definitely not enough to signal an all clear yet.

Lets check out the new orders.

Chart courtesy of YCharts

That was a pretty good uptick in new orders.  There were similar upticks around this time of year the last two years.  That could be a normal seasonal pattern.  The overall  number is lower then the last two years. Will the uptick continue next month?

Here is the export orders index.

Chart courtesy of YCharts

The global economy was still a drag on export orders as they are still in contraction, but at a slower pace.  This chart is definitely worse then last fall when the recession scare turned out to be false.  Will it get into expansion mode again soon, or not?

How about a look at the employment and production indexes together.

 Chart courtesy of YCharts

This chart is a bit puzzling to me.  Over the history of the chart the production index has consistently been higher then the employment index until last year.  It looks like companies are really hesitating to lay people off.  Maybe they are optimistic about the future.  If production keeps contracting it seems unlikely they will be able to continue that policy.

Here is a comparison of the Chicago number with the national ISM number.  This was done before today's data.  Picture the red line ticking up this month.


There is a pretty good correlation between them.  They often tick up and down together, with occasional short term separation.  Will the national number tick down to follow Chicago next month or will Chicago tick up?

This ISM number seems like an outlier based on the other data of the last month.  Is this a temporary uptick or some economic strength beginning to develop?  This survey has done unexpected things in the past.  Here is a chart of the ISM number with the GDP year over year change.

As we moved more manufacturing offshore in the 2000s, we can see the ISM manufacturing number has had less correlation to strength in GDP.  The GDP data sure looks like a recession waiting to happen.   Will it end up dragging the ISM number down in the future?  Despite the initial short covering rally after the data was released, people sold into the strength.  I guess the market was not all that impressed.


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