The Institute For Supply Management (ISM) reported that the Chicago Purchasing Mangers Index (PMI) showed an impressive uptick for September:
Growth in new orders picked up very sharply in the Chicago area during September, up 8.4 points to 65.3 for the strongest rate of monthly growth since April. Employment rose 8.5 points to 60.6 for its strongest rate of growth since May. The composite index, up 4.9 points to 60.4, shows its best reading since June. Other readings include a sharp rise in the rate of both production growth and inventory growth. Today’s report points to accelerating gains for next week’s ISM reports on the manufacturing and non-manufacturing sectors.
Tomorrow the ISM Manufacturing Index comes out and this Chicago report is one of the very few positive reports for some time. The problem is that most indicators for manufacturing are declining and that would lead us to believe that tomorrow’s report will be negative, or below the 50 level.
There are several things going on right now that do not look good for the manufacturing sector, which is a major key to economic recovery. One is that Europe is heading into recession and the euro is declining relative to the dollar which removes some of the advantage that U.S. manufacturers have had in exports. Export-driven manufacturing has accounted for most of manufacturing growth.
Also, China is also experiencing a decline and they also buy U.S. equipment. Also commodity exports would find less demand. Thus a worldwide recession would be bad for U.S. exporters of manufactured good such as durables like heavy equipment and machinery.
Let’s see what tomorrow’s report shows.