April’s ISM manufacturing data has turned the manufacturing debate from “U or V-shaped recovery” into simply how sharp of a V-shaped recovery can we get.
The latest ISM index result, at 60.4 vs. 60 expected, is the strongest since 2004. It’s higher than March’s 59.6, continuing that month’s acceleration of activity. It is also much higher than December’s 54.9.
“The manufacturing sector grew for the ninth consecutive month during April. The rate of growth as indicated by the PMI is the fastest since June 2004 when the index hit 60.5 per cent. Manufacturers continue to see extraordinary strength in new orders, as the New Orders Index has averaged 61.6 per cent for the past 10 months. The signs for employment in the sector continue to improve as the Employment Index registered its fifth consecutive month of growth. Overall, the recovery in manufacturing continues quite strong, and the signs are positive for continued growth.”
Note how many parts of the index are not only growing, but doing so at a faster rate:
A key change shown in the above chart is how ISM’s inventory index flipped from growing to contracting. A few days back we discussed how falling inventories could be good news for future economic activity.
We’ve now had a solid uptrend from 43.2 in May 2009 to 60.4 in April 2010. The only major negative here seems to be that at some point growth can’t keep accelerating as it has recently. So prepare for some declines in the ISM going forward, even though it should remain pretty strong barring any global surprises.