July 5 Follow-up — Comparing Economies: Two Respected Measures Put Bush 43′s at or Near the Top
The Institute for Supply Management’s latest Manufacturing Report on Business came in at 56.0 for June, up from 55 last month, and beating forecasts expecting no change. Any reading over 50 indicates expansion.
Every category within the June index is in “growing” or “faster” mode except Inventories, which have been contracting for a remarkable 11 straight months, and Customers’ Inventories, described as “too low.”
After a late-2006 and early-2007 hiccup, that’s five months in a row of expansion, and 47 out of the past 49. Only two other periods in the 60 years of the ISM Manufacturing Index have a track record beating the current 47-of-49 — August 1975 through July 1979 (48 straight months) and April 1961 through December 1966 (68 of 69 months, including a streak of 51). The Reagan-Bush years had a run of 42 expansions out of 43 months from October 1985 through April 1989, which included a streak of 33. A full history of the index is here.
After a mediocre first-quarter average of 50.8, the second quarter’s Manufacturing Index averaged 55.2. If the Non-Manufacturing Index continues in its more robust expansion mode (even with the housing sector, most of which is included in the Non-Manufacturing Index, trying to drag it down), there’s a good chance we will find there was pretty decent GDP growth in the second quarter. I’m guessing 3.0%, with potential for an upside surprise.