- by New Deal democrat
April data started out as usual with the ISM manufacturing index. There was some good news, but mainly bad news.
The good news was that the headline ISM number (blue in the graph below) remained positive, and was unchanged at 52.7 (recall that any number above 50.0 indicates expansion). The more leading new orders subindex (gray) did rose from 53.5 to 54.1, suggesting the modest Boom - probably 90% of which is related to AI data center construction - will continue. The three month averages, which smooth out a little volatility, were steady at 52.6 and slightly lower at 54.5, respectively:
I am convinced that all of the activity surrounding AI data center construction and operation, and the affluent consumer spending secondary to the (narrow) stock market Boom associated with it are the only things keeping the US economy from being in recession at present. In any event, this number suggests continuing expansion in the goods producing sector for the next few months.
That was the good news. Now here’s the bad news.
First, the “less bad” trend in goods producing employment over the past few months reversed in April, with the employment subindex declining -2.3 to 46.4, the lowest number in four months:
Further, as the above graph shows, the longer term downtrend in manufacturing employment may have reasserted itself.
But that wasn’t even the worst news, which was in the prices paid subindex, which rose sharply, by 6.3, to 84.6, the highest number since May of 2022, and one of the 6 highest numbers in the entire past decade:
This is a very sharp inflationary pulse, which is going to pass right through into consumer prices for goods.
With this kind of inflationary pressure, I am skeptical of how long the AI Boom can continue to resist a possible consumer implosion.
