Monday, November 02, 2009

ISM Index: Strong V-Shaped Recovery Underway

NEW YORK (AP)A private measure of U.S. manufacturing activity grew in October at the fastest pace in more than three years, helped by government spending and higher demand from overseas. The better-than-expected reading is a positive signal for the fledgling economic recovery.

The Institute for Supply Management, a trade group of purchasing executives, says its
manufacturing index read 55.7 last month, compared with 52.6 in September. It's the third straight reading above 50, which indicates growth.

MP: This is the strongest level for the ISM index in three and one-half years, since April 2006, and is now at a higher level during the current economic expansion than during the 2002 economic recovery (see chart above).

Update 1: Graph has been updated with explanation of the shaded recession areas.

Update 2: According to Scott Grannis, the ISM rebound suggests we'll have Q4 real GDP growth of 4-5%.


At 11/02/2009 11:13 AM, Blogger Unknown said...

yeah, but isn't this the effect of export growth fueled by the lenghty trend of a declining dollar?

At 11/02/2009 12:31 PM, Anonymous Bennt Tell It Like It Is Man said...

Go cheap dollar! Go USA exports!
I never understood the attraction some people have for a "strong" dollar. I think they confuse the word "strong" with economic strength.
China has kept its currency cheap for decades, and they have boomed to the moon. Our industries are sickly at best.
Does anyone doubt that China in 20 years will start making airplanes and take away that market too?
Bernanke should run those printing presses until th plates melt. Mor money!
And there is no way we can pay off these debts we have built up. We need a long round of moderate inflation, and balanced federal budgets, to meet out obligations.

At 11/02/2009 2:18 PM, Blogger Frozen in the North said...


China is already making planes! Working with Airbus, Boeing, Embaraer and Bombardier. They even have their own narrow body aircraft 190 seats coming out in 2016!

At 11/02/2009 2:54 PM, Anonymous Benny said...

Yes, they are emerging as the dominant force in the world economy, but some dingdongs in the United States are talking about a "strong dollar."
Frankly, a really weak dollar might encourage Chinese investing in the US, and they can buy assets cheaply.
Help US exports.

At 11/02/2009 3:21 PM, Blogger juandos said...

How long will this last?

From the China Daily dated 11-2-'09: The Purchasing Managers' Index (PMI) of China's manufacturing sector rose to 55.2 percent in October, up 0.9 percentage points from the previous month, the China Federation of Logistics and Purchasing (CFLP) said on Sunday.

At 11/02/2009 3:42 PM, Anonymous gettingrational said...

Bennt (Benny?),

Airbus is making airplanes in China>
right now. They are producing A320s which is the competitor to the Boeing 737. The Chinese built A320 is a result of the ubiquitous system of joint ventures (tech transfer) in China.

At 11/02/2009 4:49 PM, Anonymous Benny Misspelled Bennt said...

Getting Rational:
China is an emerging giant. If you ever a chance, watch a Chinese-made film on the rise of Haier, the refrigerator guys.
China is actively pursuing industrial mobilization, not military mobilization.
In the US, we are pouring money into rural areas through subsidies, funding a gigantic military and two wars, and deindustrializing.
I do not see a good end for the USA in this scenario. I see a Banana Republic in the making.

At 11/02/2009 5:22 PM, Blogger QT said...

bent...sounds promising...a little attitude

Agree deficit spending has to stop particularly given the way the billions are being thrown around...Washington is a bigger problem than China by country mile. Pork flu?

Not buying the China is about to swallow us whole narrative nor the "manufacturing is the only source of wealth" scenario. The U.S. remains the #1 nation for innovation and the largest economy in the world.

China has a long way to go to catch up with huge environmental problems, civil unrest (70,000 protests a year), an aging demographic, a gigantic population to feed, etc. The greatest migration in human history is occurring in China..if you don't think that presents huge logistical problems, time for a visit to China.

At 11/02/2009 5:40 PM, Anonymous Anonymous said...

As Qt noted China has a huge demographic problem with a population aging faster than the US. If China did not have a boom now with the working age population about at a peak (UN data suggest this next year) it would never have a boom. By 2050 31% of chinese will be over 65 and only 48% will be working age.
Also due to the one child policy there is an in balance in the boy/girl ratio in China. Both can lead to social unrest. And the former suggests that China may follow the Japanese path only delayed by 20-40 years. Note that Japan is now said to be saving less than the US and has among the oldest populations in the world.
The US in contrast will have a younger population in 2050 than China. In fact there are questions if China can advance fast enough during this golden age of demographics to survive the coming changes.

At 11/02/2009 5:44 PM, Blogger KO said...

What do the grey vertical bars on the graph mean and why is there a sliver of white on the right side?

At 11/02/2009 7:53 PM, Blogger Craig Howard said...

A cheap dollar can be helpful in the short-run. But let's not forget why it's cheap: huge government budget deficits, artificially-low interest rates and lots of fake dollars.

If those conditions remain for long -- and we've no indication they won't -- capital will eventually go elsewhere and the export boom will be short-lived.

At 11/02/2009 7:53 PM, Anonymous Benny said...

A new saucy avatar makes it hard to argue with you.
Verily, China is huge and has huge challenges.
And things have looked dark for the USA before, especially the late 1970s (crime, inflation, failed war in Vietnam, stagnation, oil shocks, 18 percent mortgage rates etc).
Still, anytime I research a new tech area, there is gobs of R&D coming out from China and Korea (the Koreans are amazing on many levels). Lithium batteries (for cars) come to mind. These batteries will be perfected and made in the Far East.
I sense that Chinese culture is very strong, they have low crime rates, and they have good work ethics. Dr. Perry runs charts sometimes showing Asians in US outscore whites on IQ tests.
There are 1.2 billion Chinese.
The Far East is where the 21st century will happen.
When people (in the USA) make more money manipulating money and taxes than doing real productive work....
When your choices are the corrupt and subsidy-addled Republicans, or the social program crazy Democrats...
I sense history passing us by. Huge aircraft carrier fleets (11 of them) will not buy us overseas sales or commerce. They will not bring us the next great invention, or solve energy problems. They will cost gobs and gobs and gobs of money....and get us into foreign entanglements...

At 11/02/2009 8:40 PM, Blogger PeakTrader said...

A weaker dollar is needed to help correct global imbalances. For example, Europeans can raise their living standards substantially by selling their small houses, small autos, etc., exchange the Euros they receive for (more) dollars, move to the U.S., and buy bigger houses, SUVs, etc. It won't take long for them to be drinking Budweiser and watching American football on weekends :)

At 11/02/2009 8:48 PM, Blogger Arnie Kriegbaum said...

1. QT is right about China, though I think the much higher U.S. worker productivity is our main advantage.

2. The manufacturing index listed in this post indicates that manufacturing didn't start its big drop until many months into the actual recession. Wow. It must be really hard to see, or maybe it is just hard to put the brakes on production.

At 11/03/2009 1:59 PM, Blogger juandos said...

QT makes the very salient comment: "Not buying the China is about to swallow us whole narrative nor the "manufacturing is the only source of wealth" scenario."...

Note the following from The Business Insider: 10 Ways A China Blow-Up Will Slam America

'The country is expanding like crazy, and while this may look great in the short term, there are many signs that the country's economic path is unsustainable'...


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