September 1, 2009

ISM Manufacturing Goes Positive for the First Time in 19 Months

Filed under: Economy,Taxes & Government — Tom @ 2:38 pm

This is good news, and should be celebrated:

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in August, following 18 consecutive months of contraction, and the overall economy grew for the fourth consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.

….. The August index of 52.9 percent is the highest since June 2007. The 4 percentage point increase was driven by significant strength in the New Orders Index, which is up 9.6 points to 64.9 percent, the highest since December 2004. The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand.”

The news, seen in conjunction with ISM’s manufacturing index history, shows that if you work long hard at (figuratively) killing something like manufacturing, you can hurt it badly:

ISMhistory0108thru0809

But if you fail to finish the job, your target will eventually get up (expand).

Readers will note that 13 of the full months involved in the 18-month manufacturing contraction streak occurred during the POR (Pelosi-Obama-Reid) Economy, now the POR (Pelosi-Obama-Reid) Recession/”Repression” As Normal People Define It, and that the index stayed very close to breakeven until September 2008.

While an expansion reading is indeed welcome, the fact remains that there will have to be many, many months of expansion in manufacturing before we even get back to where we were before the POR Economy’s architects began doing their damage in June of last year. If you look at the full history of the index, you see that October 2008 – March 2009 was only the fourth time it has ever spent six straight months below 40 (the other three were an eight-month period during 1948-1949, six months during 1974-1975, and a 13-month span in 1981-1982).

As to ISM’s claim that the overall economy has grown for four straight months, I hope they’re right. But since two of those months (May and June) occurred during a quarter in which Uncle Sam says the economy contracted, that assertion seems doubtful. The first time ISM told us that in its assessment the overall economy was NOT growing was in its October 2008 report. It seems that the ISM’s folks lean a bit towards overoptimism. That said, if ISM AND the government are both saying we’re in growth mode, as was the case during the second quarter of 2008, I’m inclined to believe them over the National Bureau of Economic Research, which still insists that we have been in continuous recession since December 2007.

Something to watch: The Prices element of the report leaped from 55.0 to 65.0 in August, possibly foreshadowing serious inflation.

Something to wait for: ISM Non-Manufacturing repot, which comes out Thursday.

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3 Comments

  1. I’m sure we’ll hear Obama claim this was due to him and the “stimulus” package any minute now…despite the fact most of it is still unspent.

    Comment by zf — September 1, 2009 @ 3:59 pm

  2. [...] by Tempe Guy on September 1, 2009 This is good news , and should be celebrated: (Tempe, Arizona) a ‘ Economic activity in the manufacturing sector expanded in August, following 18 consecutive months of contraction, and the overall economy grew for the fourth consecutive month, say … Go to Source [...]

    Pingback by ISM Manufacturing Goes Positive for the First Time in 19 Months — Tempe in Motion — September 1, 2009 @ 7:31 pm

  3. [...] ISM Manufacturing Goes Positive for the First Time in 19 Months – Bizzy Blog [...]

    Pingback by High CSQ » Blog Archive » The economy IS starting to improve — September 3, 2009 @ 1:26 am

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