Let me repeat last month’s analysis of ISM Manufacturing survey: The Institute for Supply Management (ISM) has a terrible track record of inconsistency. In April 2011, for the second month in a row, they consider improving data less good.
Forget all the bells and whistles which comprise the ISM survey. Focus on the two elements that show the economy is improving – new orders and backlog. Anybody who understands manufacturing knows orders cannot be less good while having a massive jump in backlog. Somebody must have gotten up on the wrong side of the bed. As the unadjusted data shows both improved in April
“The recent trend of rapid growth in the manufacturing sector continued in April as the PMI registered above 60 percent for the fourth consecutive month. The New Orders and Production Indexes continue to drive the PMI, as they have both exceeded 60 percent for five consecutive months. Manufacturing employment appears to have developed significant momentum, as the Employment Index readings for the first four months of 2011 are the highest readings in the last 38 years. Inventory growth also took place in April after two months of destocking; however, the inventory restocking would appear to be necessitated by the strong performance in new orders. While the manufacturing sector is definitely performing above most expectations so far in 2011, manufacturers are experiencing significant cost pressures from commodities and other inputs.”
There are no indications that manufacturing will not be supporting further economic growth.