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MAPI QuickPoint - A glance at a building block of worldwide business data  MAPI QuickPoint

Analysis on ISM Index: February Report ‘Encouraging’

The following is an analysis from Daniel J. Meckstroth, Ph.D., Chief Economist for the Manufacturers Alliance/MAPI, regarding the Institute for Supply Management (ISM) index for February 2010.

 “The Institute for Supply Management (ISM) reports that the index for February 2010 manufacturing activity was 56.5, somewhat lower than the 58.4 report in January.  Since an index value above 50 percent means that manufacturing activity is growing, the February report is encouraging,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.  “The severe winter weather along the East Coast and Toyota’s production shutdowns undoubtedly had a negative impact on manufacturing production in February.  According to the ISM report, the adverse events last month were offset by on-going improvement in economic activity and the inventory swing that occurs when firms have to slow their destocking, and eventually build stocks, due to continuing growth in orders. 

“Relatively small fluctuations in the indexes are normal for the indicator since there is a clearly discernable growth trend in the data,” he added.  “A unique aspect of the report , though, is how quickly the employment indicator has rebounded and signaled job growth.   Manufacturing is not known as being a sector that generates many jobs quickly in a recovery.  The employment indicator may be signaling that job cuts were overdone broadly and the labor market will shortly starting improving.”

 

 
  		   

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Durable-Goods Orders Rose Modestly in December
“The sector is regaining its footing again,” said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI. “An inventory swing is pushing up orders for materials and the resulting increase in production activity is having a positive impact on business equipment spending.” The durable-goods data was consistent with a moderate-paced recovery, Mr. Meckstroth said, though the level of production will probably taper off in future quarters. The overall increase was helped by a 3.6 percent rise in orders for cars and car parts. But aircraft orders dropped by 38.2 percent in December, after a 40 percent drop in November.
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Manufacturing surge fuels recovery hopes
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The lingering weakness "helps the poor, beleaguered exporter whose goods are becoming more competitively priced in the global market," said Cliff Waldman, an economist at the Manufacturers Alliance/MAPI. The greenback's slide is part of the reason that U.S. exports were 12 percent higher in October than in April, and is a factor in the nation's industrial output having risen steadily for five straight months. In a recent nationwide survey of major manufacturers that buy tools and parts from smaller suppliers, 47 percent said they were doing more business in the United States as a direct result of the dollar's decline, according to Mfg.com, a Web site that links suppliers and manufacturers.