Update: What does the ISM mean for the market? In an earlier post, we pointed out that the market tends to bottom at the same time as the ISM. The ISM ticked slightly higher this month, for the third consecutive month. While this does not constitute a trend, this could be the beginning of the bottoming process.
The US manufacturing sector contracted significantly in the month of March, but the nation’s manufacturers cut back on production at a slower pace than expected, according to the Institute of Supply Management’s manufacturing index. The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last. The PMI came in at 36.3%, up from 35.8% in February. Economists were happy to see this, as a trend may be developing. The PMI rose once again for the third consecutive month, bouncing off its cyclical lows of 32.9% in December. Readings above 50% indicate growth, and anything below, contraction.
The Last 12 Months
|Mar 2009||36.3||Sep 2008||43.4|
|Feb 2009||35.8||Aug 2008||49.3|
|Jan 2009||35.6||Jul 2008||49.5|
|Dec 2008||32.9||Jun 2008||49.5|
|Nov 2008||36.6||May 2008||49.3|
|Oct 2008||38.7||Apr 2008||48.6|
|Average for 12 months – 42.1
High – 49.5
Low – 32.9
The March new-orders index rose significantly, to 41.2% from 33.1% in February. The production index rose to 36.4% from 36.3%. Both are off multi-decade lows. The employment index rose to 28.1%, from 26.1%.
Inventories (32.2%) were lower for the month, as businesses are trying to de-leverage and clear out excess product.
Norbert Ore, chair of the ISM factory survey committee:
The rapid decline in manufacturing appears to have moderated somewhat, as the PMI remains in the mid-30s for a third consecutive month. While the PMI is slightly higher in March, the New Orders Index offers greater encouragement, as it rose above the 40-percent mark for the first time in seven months. The Production Index showed no benefit as yet from the improvement in new orders, as it continued to decline at a rate similar to March.
“[The data] simply says we’re finding ourselves somewhere near the bottom,” Ore said.
“But survey respondents appear generally pessimistic about recovery in 2009.”
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