ISM Numbers: Sunny Side Up?

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Perhaps I’m an optimist at heart (or, it may involve my genes) according to this recent Economist article entitled Sunny Side Up: Optimism is in the genes but I see something positive to talk about with regard to the latest Manufacturing ISM Report on Business.

For sure, the macro numbers are nothing to be happy about ” PMI at 35.8% (economic expansion used to be defined at 50%, this month’s survey results suggest, A PMI in excess of 41.2%, over a period of time, generally indicates an expansion of the overall economy”), with none of the 18 reporting industries reporting any growth and the number of new orders moving down by 0.1 percent to 33.1. And yet, being a glass half full kind of gal that I am, I believe there are some rather hopeful news nuggets to report.

First, production increased 4.2% to 36.3. Yes, we’re still woefully under the magic 50.4 reading (which indicates growth) but production has stepped up ever so slightly at least for two industries: petroleum and coal products and printing and related support activities. (Perhaps companies are gearing up for direct mail sales campaigns or just printing their annual reports?) Let’s watch the trend line. Second, backlog orders increased 1.5% from January. Again, the number still indicates a contraction, however, any improvement in the backlog number ought to help the other indicators.

Perhaps the most upbeat element of the report relates to the readings involving imports and exports. When we import more than we export, we create a trade deficit. Though the export reading held steady at 37.5 from January to February, the import number dropped by 4.5% to 32. This improves our trade situation. And though the biggest driving factor of our trade deficit remains our dependence on foreign oil (it makes up two thirds of the deficit according to this article), the improvement certainly helps.

From a metals perspective, all commodities dropped in price (except for caustic soda). In particular, aluminum, aluminum extrusions, copper, copper extrusions, stainless steel, stainless steel products, steel and steel products all had price declines. And while lower costs are helpful on the buy side, any upward ticks could also indicate when we’ve reached bottom. Take these ISM numbers then along with this earlier analysis to watch for signs of stabilization. And though I prefer my eggs over hard, I’m not fussy!

–Lisa Reisman

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