 | The ISM Manufacturing Index Declined to 50.7 in April |
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| Posted Under: Data Watch • ISM |
Implications: Another plow horse report today for manufacturing. The ISM manufacturing index declined to 50.7, slightly better than consensus, and is still showing expansion in the factory sector. According to the Institute for Supply Management, an index level of 50.7 is consistent with real GDP growth of 2.7% annually. Both new orders and production have picked up in the past three months, a good sign going forward for further manufacturing gains. The worst news in today's ISM report was that the employment index declined to 50.2, the lowest level since November 2012, confirming our forecast that the manufacturing sector probably lost jobs in April (we think 10,000) which will be reported in Friday's Employment report. On the inflation front, the prices paid index declined to 50.0 in April from 54.5 in March. Given loose monetary policy, we expect inflation to gradually move higher. In other news this morning, the ADP Employment index, which measures private payrolls, increased 119,000 in April. This is a bit softer than the consensus expected gain of 150,000. But plugging today's report into our payroll models suggests a gain of 170,000 nonfarm and 180,000 private. The official Labor report will be released Friday morning. In still other news this morning, construction declined 1.7% in March (-3.2% including revisions to prior months), well short of the consensus expected gain of 0.6%. Time will tell, but for now, it appears that unusually cold March temperatures held down building activity. Despite the weather, home building continued to grow in March. However, commercial construction declined 1.5% and government construction fell 4.1%, the steepest drop in more than a decade. The Case-Shiller index, which measures home prices in the 20 largest metro areas, increased 1.2% in February (seasonally-adjusted) and is up 9.3% from a year ago. The gain in February was the largest for any month since the peak of the housing boom in 2005. Recent price gains have been led by Las Vegas, Phoenix, San Francisco, and Los Angeles.
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