If there was any doubt as to whether manufacturers (as opposed to consumers) were experiencing a V-shaped recovery, today's ISM Manufacturing Indices should have put that to rest.
Here's the summary from the ISM:
Manufacturing growth accelerated in January as the PMI registered 58.4 percent, an increase of 3.5 percentage points when compared to December's seasonally adjusted reading of 54.9 percent. This is the sixth consecutive month of growth in the manufacturing sector, and the highest reading for the Index since August 2004 when it registered 58.5 percent. Prior to this recent growth trend, the PMI declined for 13 consecutive months. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
Until today, since the end of 1982, the ISM Manufacturing index had registered readings of 58.0 or higher in only 36 of the ensuing 205 months: July 1985 - June 1986, August - December 1987, June and July 1988, May - November 1994, and November 2003 - August 2004.
All of the sub-indices moved in the right direction as well. New Orders, Production, and Employment all grew faster, increasing to 65.9, 66.2, and 53.3, respectively.
With regard to employment, the ISM noted:
This is the second month of growth in manufacturing employment, and the highest reading since April 2006 .... An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.Supplier Deliveries are sill slowing. Inventories are contracting as are Customers' Inventories.
The Backlog of Orders, at 56.0, started to grow again. This is one of the Leading Economic Indicators, and will register a positive in January.
Evidence that the "hoarding" of jobs may be reaching a breaking point can be found in the Employment sub-index, where 15% of the employers reporting hiring plans and 73% were planning to stay the same. Only 12% had plans to lay employees off. Previously where the first two categories reached 75%, that meant payrolls were set to expand. We are now at 88%. This dam of hoarded jobs must be breached soon.
In the last few months, both the ISM Manufacturing and Non-Manufacturing employment reports have been at odds with the BLS's nonfarm payrolls report, so I won't make any prediction about what this may portend. But it certainly isn't bad!
