Editorial of the Day: Wall Street Journal on Manufacturing’s Continued Expansion (UPDATED for National PMI Report)

One thing about Journal editorials, especially about the economy, is how many times you’ll see news in them that you would have expected to see elsewhere and didn’t.

In yet another example, it’s a good thing The Journal noticed this, because the business press virtually ignored it yesterday (subscriber-only editorial; link to AP story, which did not appear at the “My Way” links I check almost daily, was added by me):

The imminent death of the current economic expansion has been predicted with regularity, most recently after Friday’s news that second-quarter growth slipped to an annual rate of 2.5% from 5.6% in the first. But then yesterday, like a rebuttal, came the Chicago purchasing managers’ index for July showing robust growth in Midwest manufacturing. Will the real economy please stand up?

The PMI index blew away the economic consensus by climbing to 57.9 in July from 56.5 in June. That’s 39 months — three years and three months — in a row above 50, the level that signals expansion. New orders hit 60, up from 57.2, despite contracting inventories, and even the employment component inched up to 50.5. The index is a sign that the economy entered the third quarter with more momentum than front-page reports have been claiming. And it’s especially hopeful as a sign that business spending and exports can help to offset some of the declines in housing caused by rising interest rates.

The WORM (Worn-Out Reactionary Media) meme that the economy is “slowing down” is now officially suspect.

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UPDATE: The Journal’s editorial addressed the report out of the Chicago region. This morning, the Institute for Supply Management released their national report for July 2006. Note that the overall PMI went up from 53.8 to 54.7, further refuting the “slowing down” meme noted earlier:

UPDATE 2: Aw, this AP report on today’s national PMI release is ridiculous (bold is mine):

ISM: Manufacturing Sector Expands More Quickly, Even as Prices Rise
Tuesday , August 01, 2006

NEW YORK — The nation’s manufacturing sector expanded in July at a faster clip than in June, while companies paid significantly more for raw materials, a trade group said Tuesday.

The Institute for Supply Management, based in Tempe, Ariz., said its manufacturing index registered 54.7 in July, above the 53.8 June reading and stronger than analysts’ estimates of 53.5 to 53.8.

A reading of 50 or more indicates expansion, while below 50 indicates contraction. The July figure represented the 38th consecutive month of growth.

The prices paid index jumped 2 percentage points to 78.5 in July from 76.5 in the previous month, signaling that rising prices for everything from fuel to paper could begin to eat into manufacturers’ profits.

Sorry, AP — The report DID NOT say that “companies paid significantly more for raw materials”:

In July, the ISM Prices Index was 78.5 percent, indicating manufacturers are paying higher prices on average when compared to June. While 39 percent of supply executives reported paying the same prices and 2 percent reported paying lower prices, the majority of respondents (59 percent) reported that prices were higher than the preceding month.

All we can say is that most companies were paying more; nothing credible can be said about whether those amounts were “significantly more.” I guess that’s another meme the WORMs are working on/rooting for — “accelerating inflation.”