The ISM manufacturing was a much better 48.9 up from 44.8 in June and vs estimates of 46.5. It’s the highest since Aug ’08 when it was at 49.3. It was last above 50 in Jan ’08. New Orders shot above 50 to 55.3 from 49.2 (most since July ’07) while Backlogs got to 50, up 2.5 points. The Employment # rose almost 5 points to 45.6. Prices paid rose 5 pts to 55, the highest since Aug ’08. Inventories rose 2.7 points but remain low at 33.5 while Customer Inventories fell 1 point to the lowest level since Oct ’05. Export Orders rose 1 point to 50.5 and is above 50 for the first time since Sept ’08. The ISM said “Overall, it would be difficult to convince many mfr’s that we are on the brink of recovery, but the data suggests that we will see growth in the Q3 if the trends continue.” ISM is a diffusion index so measures the direction of improvement, not the degree. The # adds to the 2nd half recovery theme with the pace being the key question. ISM said “if the PMI for July is annualized, it corresponds to a 2.4% increase in real GDP annually.”

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