Last Update: 17-Apr-14 18:14 ET
- The ISM Manufacturing Index increased to 53.7 in March from 53.2 in February. The Briefing.com consensus expected the index to increase to 54.0.
- Extreme winter weather conditions were blamed for a deterioration in the ISM Manufacturing Index in January. Yet, as temperatures returned to normal, the ISM Manufacturing Index remains well below its Q4 2013 averages. That tells us that weakness in manufacturing activities were likely not tied to the adverse weather.
- Cyclical weakness likely caused the ISM to soften in the first quarter of 2014. There is unlikely a sizable amount of pent up demand that could cause a sudden surge to late 2013 levels.
- The internal components of the ISM index were better than the headline implies.Production, which contracted in February, returned to an expansion. The index increased 7.7 points to 55.9 in March from 48.2 in February. The increase in production corresponded with a slight increase in new orders (55.1 from 54.5). Order backlogs expanded for a second consecutive month as the index increased to 57.5 in March from 52.0 in February. That should keep production growth moving ahead even if new orders falter.
- The Employment Index fell to 51.1 in March from 52.3 in February.
- This is a highly overrated index. It is merely a survey of purchasing managers. It is a diffusion index, which means that it reflects the number of people saying conditions are better compared to the number saying conditions are worse. It does not weight for size of the firm, or for the degree of better/worse. It can therefore underestimate conditions if there is a great deal of strength in a few firms. The data have thus not been either a good forecasting tool or a good read on current conditions during this business cycle. It must be recognized that the index is not hard data of any kind, but simply a survey that provides broad indications of trends.
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