Monday, April 02, 2012

ISM Report: Manufacturing Comeback Continues; Real GDP Growth in Q1 2012 Could Be 3.6 to 3.7%

From today's ISM report on U.S. manufacturing, which came in above consensus expectations:

"Economic activity in the manufacturing sector expanded in March for the 32nd consecutive month, and the overall economy grew for the 34th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

Manufacturing continued its growth in March as the PMI registered 53.4 percent, an increase of 1 percentage point when compared to February's reading of 52.4 percent (see chart above). A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting."

According to ISM's Bradley Holcomb, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (53.3 percent) corresponds to a 3.6 percent increase in real GDP. In addition, if the PMI for March (53.4 percent) is annualized, it corresponds to a 3.7 percent increase in real GDP annually."

MP: The ISM production and employment indexes are showing strength, and are both listed as "growing faster" for March.  Likewise, the "overall economy" and "manufacturing sector" are both described by the ISM as "growing faster" for March, suggesting that economic growth will continue and possibly accelerate in the months ahead.  The above-expected strength in U.S. manufacturing activity according to today's ISM report provides additional support that America's industrial sector is at the forefront of the economic expansion.


At 4/02/2012 2:30 PM, Blogger Jon Murphy said...

What's really good news about this report is how many of the components of the Index are also above 50.0. 7 out of 10 are reporting better conditions. Of the three that are not, Inventories are reporting "Unchanged", Supplier Deliveries are 48.0, which technically is "contraction" but realistically is "unchanged", and Customer Inventories is in contraction.

At 4/02/2012 2:34 PM, Blogger Buddy R Pacifico said...

A little more texture on the ISM from

"The ISM report for March just came out at 53.4. Since 1948, the ISM has been between 53.0 and 54.0 a total of 48 times. Not once has been during a recession."

At 4/02/2012 5:24 PM, Anonymous Anonymous said...

The correlation between the ISM manufacturing report and GDP growth has completely broken down the past couple years.

At 4/03/2012 9:54 AM, Blogger morganovich said...

this is just manufacturing thry to play catchup. unlike gdp, it is still in recovery, not expansion.

the worrying aspect of this most recent report was the drop in new orders.

i have real doubts that we see GDP at 3.6% in q1 unless the BEA plays more statistical tricks to get there. that owuld be a huge jmp from q4 which was, in reality, sub 1% growth. the only way they reported 3%+ was by using a gdp deflator that was 1/3 the level of CPI.

(1.1 vs 3.3)


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