Last month I noted that the ISM Manufacturing index indicated that the manufacturing sector was still contracting, albeit at a slower pace. The latest data from the month of April show the same phenomenon. likely, the index has already hit bottom.
Here’s what the Institute for Supply Management says in its release:
WHAT RESPONDENTS ARE SAYING …
- “International customers are having trouble getting cash for new orders, even though they need/want the equipment.” (Computer & Electronic Products)
- “Starting to see some signs of increased production and demand from some automotive customers.” (Fabricated Metal Products)
- “Business conditions continue to be soft, but agriculture-related products are still quite bullish.” (Machinery)
- “We are optimistic that things will change for the better in 3Q.” (Chemical Products)
- “Starting to hear of slight upticks in orders from some sectors of our business but not all.” (Electrical Equipment, Appliances & Components)
The chart below, also in the release, should give you a feel for how broad-based the improvement in the sector is. Note the purging of customer inventories. It might even suggest that the purge has gone too far. That is extremely bullish for Q3 GDP, if not Q2.
Now compare this to a chart from December when things were the worst.
My conclusion is that we have hit bottom in manufacturing. Apparently, Goldman’s Jim O’Neill is right.
Source
Manufacturing ISM Report On Business® – ISM