- by New Deal democrat
Because manufacturing is now of much less importance to the economy than in the decades before the Millennium, I now use a weighted average of the ISM services index (75%) as well as manufacturing (25%) as the primary forecasting tool. This economically weighted average, especially over a three month period, has been much more accurate since 2000.
In February the expansionary readings in the ISM services report continued, with the total index coming in at 53.5, and the more leading new orders subindex at 52.2. These aren’t strong, but they are expansionary. The three month weighted average of each was 53.4 and 52.6 respectively.
Here is a graph of both the headline number (blue) and the new orders subindex (gray) for the past three years:
It is interesting that the new orders component appears to be in a continued slight downtrend, but there is no indication that it will be below 50.0 and thus indicating contraction soon.
More importantly, since the three month total average in the manufacturing index was 50.1, and for the new orders subindex 51.9, that means the three month economically weighted average for the manufacturing and non-manufacturing indexees is 52.6 for the headline, and 52.4 for new orders.
In short, the economically weighted average of the two ISM indexes continues to forecast growth, if at somewhat a slow pace, in the months ahead.
