Implications: Manufacturing came in softer than expected in February, but remains solidly above 50, signaling continued expansion in the factory sector. The ISM manufacturing index has now remained above 50 for 31 straight months and just in case you still think a double-dip is possible, the new orders index, although lower than last month, came in at a healthy 54.9 suggesting more growth in manufacturing ahead. The employment index moved down slightly to 53.2 but remains solidly above 50, confirming other positive news on the labor market. The one sub-index that remains weak is inventories. The reluctance of manufacturers to accumulate inventories may hold back GDP in the short term, but we view this reluctance as temporary and indicative of better future growth. On the inflation front, the prices paid index rose to 61.5 in February, the highest level since June 2011. Monetary policy is very loose. As a result, this index will move higher in the months ahead. In other news this morning, construction declined 0.1% in January, but was up 1.3% including upward revisions for prior months. The slight dip in January itself was due to commercial construction, led down by power plants and manufacturing facilities. Still, these two categories are up in the past year by 28% and 38%, respectively. Home building was up 1.8% in January, the sixth straight monthly gain. Single-family home building is up eight months in a row, and all without the temporary support of a homebuyer tax credit, like back in 2009-10.
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Posted on Thursday, March 1, 2012 @ 10:49 AM
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