 | The ISM Manufacturing Index Increased to 54.9 in April |
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| Posted Under: Data Watch • ISM |
Implications: Following temperatures, the ISM index, a measure of manufacturing sentiment around the country, continued to move higher in April. The index now shows manufacturing activity expanding at the fastest pace since the end of 2013, with seventeen of the eighteen manufacturing industries surveyed reporting growth in April. While not quite back to the levels we saw in mid-to-late 2013, the index has stood in expansion territory for eleven consecutive months, and we expect the index to continue to show strength as companies ramp up production and make up for time lost to bad weather. According to the Institute for Supply Management, an overall index level of 54.9 is consistent with real GDP growth of 3.9% annually. While yesterday's Q1 GDP report showed real growth at a tepid 0.1%, we expect to see a strong rebound in Q2. On the inflation front, the prices paid index fell to 56.5 in April from 59.0 in March. Still, little sign of inflation, but we don't expect this to last given loose monetary policy. The employment index jumped to 54.7 in April from 51.1 in March. Plugging today's data into our models, our forecast for tomorrow's employment report are solid gains of 231,000 and 232,000 for nonfarm and private payrolls, respectively. In other news this morning, construction increased 0.2% in March. The gain in March was primarily due to a rise in home building offsetting a decline in government construction of schools and colleges. However, revisions for January and February were negative. As a result, it now looks like real GDP shrank at a 0.1% annual rate in Q1 versus the official report yesterday that it grew at a 0.1% rate. Either way, Q1 is in the rear-view mirror and real GDP is set to accelerate sharply in Q2.
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