Today, David Rosenberg makes some rare, un-alloyed positive comments relating to yesterday’s big ISM number.
ISM ROARS AND SOARS
ISM soared to 58.4 in January from 54.9 in December — the consensus was
looking for a dip to 54.5. This is the strongest reading since August 2004 and is
distinctly late-cycle (normally the ISM is still struggling to get back to the 50 level
this close to the end of the recession). It took two years to get to this level
following the 2001 recession; it took three years to get there after the 1990-91
recession; and it took a mere six months this time around.
For the past three decades, an ISM of around 60 pretty well defined the cycle
peak for the industrial sector and here we are right near there and just two
quarters after the last negative GDP print. But that is the strange thing about
post-bubble credit collapses — to expect the unexpected.
72% of respondents posted “growth”, up from 11% a year ago.
• The components were higher right across the board — including employment
index, at 53.3, up from 50.2 in December and the best tally since April 2006.
Back in April 2006, payrolls rose 151k with manufacturing adding +7k jobs.
Watch the consensus numbers for Friday’s nonfarm payrolls start to be taken
up by the Street (ADP private sector employment is out on Wednesday at 8:15).
• Production soared in January, to 66.2 from 59.7 — highest since April 2004.
And inventories improved to 46.5 from 43.0 … looks like we could get more
oomph in Q1 from inventory restocking. In a separate item regarding
customer inventory levels, the share saying they are “too low” outnumbered
the share saying “too high” by a record 10 to 1 margin.
• Orders also made a new high, at 65.9 from 64.8 — again, the best since April
2004. Export orders jumped four points, to 58.5, which are the highest since
June 2008. Backlogs improved from 50 to 56 — the highest since April 2006.
Remember, the ISM, being a diffusion index and not much else, is useful but not
infallible. Recall that it also took a nice jump in December, to 55.9 and that
translated into no growth in the manufacturing for the month, -27k on factory
payrolls, and only +0.3% in durable goods orders, which didn’t even totally
recoup the 0.4% drop the prior month.
Of course, he has to make one exception to the all the good cheer
The ISM data took centre stage yesterday and while clearly positive for the
industrials we also saw U.S. construction spending come out for December and it
was really weak — down 1.2% mum (the consensus was at -0.5%) and we saw
down revisions too for the prior month (to -1.2% in November from -0.6% before).
Even with the most pro-housing macro policies ever concocted, the real estate
industry remains in complete disarray fully three years after the initial detonation.