ISM index is above 50, at 52.9% for August, this is good news

The Industrial Supply Management report is out and it's pretty good news! Manufacturing is finally expanding. Any reading above 50 indicates growth. The bad news is they are still laying people off, employment is still contracting. New Orders are way up, to 64.9 from 55.3 last month.

Economic activity in the manufacturing sector expanded in August, following 18 consecutive months of contraction, and the overall economy grew for the fourth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®. The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The year-and-a-half decline in manufacturing output has come to an end, as 11 of 18 manufacturing industries are reporting growth when comparing August to July. While this is certainly a positive occurrence, we have to keep in mind that it is the beginning of a new cycle and that all industries are not yet participating in the growth. The August index of 52.9 percent is the highest since June 2007. The 4 percentage point increase was driven by significant strength in the New Orders Index, which is up 9.6 points to 64.9 percent, the highest since December 2004. The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand."



% change


PMI 52.9 48.9 +4.0 Growing From Contracting 1
New Orders 64.9 55.3 +9.6 Growing Faster 2
Production 61.9 57.9 +4.0 Growing Faster 3
Employment 46.4 45.6 +0.8 Contracting Slower 13
Supplier Deliveries 57.1 52.0 +5.1 Slowing Faster 3
Inventories 34.4 33.5 +0.9 Contracting Slower 40
Customers' Inventories 39.0 42.5 -3.5 Too Low Faster 5
Prices 65.0 55.0 +10.0 Increasing Faster 2
Backlog of Orders 52.5 50.0 +2.5 Growing From Unchanged 1
Exports 55.5 50.5 +5.0 Growing Faster 2
Imports 49.5 50.0 -0.5 Contracting From Unchanged 1
OVERALL ECONOMY Growing Faster 4
Manufacturing Sector Growing From Contracting 1

*Number of months moving in current direction

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It is good news but...

it is only ONE month and like you said employment is still contracting.

We will see what happens after the effects of CFC wear off. - Financial Information for the Rest of Us.

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sectors reporting growth

Eleven of the 18 manufacturing industries reported growth in August. These industries — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Computer & Electronic Products; Transportation Equipment; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Chemical Products.

The six industries reporting contraction in August — listed in order — are: Primary Metals; Plastics & Rubber Products; Furniture & Related Products; Wood Products; Food, Beverage & Tobacco Products; and Machinery.

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Good news with a caveat

This is certainly good economic news, but I have to wonder about one thing: how much of this upturn is due to federal government spending? For instance, if we subtracted cash-for-clunkers, would the ISM index still be positive?

I'm not the only one wondering this.

Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff. The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.
“If we have a recovery at all, it isn’t sustainable,” Kevin Harrington, managing director at Clarium, said in an interview at the firm’s New York offices. “This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.”
A focus on misleading indicators is driving markets, macro managers say.
Clarium watches the unemployment rate that accounts for discouraged job applicants and those working part-time because they can’t find full-time positions, Harrington said. July joblessness with those adjustments was 16 percent, according to the Department of Labor, rather than the more widely reported 9.4 percent.
The housing data isn’t as rosy as some see it, Harrington said. As existing U.S. home sales rose 7.2 percent in July from the previous month, distressed deals including foreclosures accounted for 31 percent of transactions, according to the National Association of Realtors, a Chicago-based trade group.

It seems curious that the stock market today is dropping when we are seeing some of the first legitimately good news, as opposed to the "less bad" news we've been subject to for months.

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The reason why we should all care about the effect of the cash-for-clunkers program and the $8K credit for first-time home buyers can be summed up here.

“We pulled a lot of people into the market who would otherwise not be in the market,” John Casesa, managing partner of consultant Casesa Shapiro Group LLC in New York, said on Bloomberg Radio. “It was a sales splurge.”
Auto dealers whittled their inventory after purchases of almost 700,000 vehicles through the Car Allowance Rebate System. Sustaining August’s sales pace will be a struggle for the rest of the year now that the government cash is gone, Casesa said.
“Dealers are saying as soon as the program ended everything stopped dead,” he said. The demand was “a total pull-ahead” of sales that would have been made in future months, not a permanent rebound in the market, Casesa said.

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auto sales

Ford reports a 17% rise for August, but....

do you see the total number, as in SAAR? I thought it supposed to be released today...

I think there are a bunch of indexes out today, home sales...

so one can figure out how many sales happened that were not CfC.

I think and it's one of those posts I need to research out, takes time, so I haven't gotten to it...

but I believe a lot of the Stimulus is going to be deployed in Q4/Q4, so I fully expect Q3/Q4 GDP to be about the "G" and not the "I" or "C" or "E".

As far as the stock market goes, from what I can tell it's irrational exuberance. I mean it doesn't make a hell of a lot of sense to me that it's soaring at all. So count me clueless and if someone wants to write a post on that one (I know you're said suckers rally), feel free.

I mean we know that the markets do not reflect overall economic reality, over and over again...but which non-reality is causing this I do not know.

I do see a bunch of people, as usual saying "emerging markets are the place for growth" just got seriously burned yesterday on China, which dropped 7% and some are calling a Ponzi scheme.

Also, China, all through their Stimulus, just shot up in manufacturing output like a rocket.

Ya all, I hope others write posts more. Lately I'm becoming the sole "feed the pig" on posts, which is a lot of work for one person plus it kind of biases the site to just my style and views (which is pretty sarcastic!).

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Less posting

I don't know about everyone else, but one reason I'm writing less is because school has started. Another reason is because I've been going to job interviews (with one real job prospect. Cross-fingers).

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we need to get the others back

Just invite over anyone you see who is fairly objective, well cited, rational, insightful to come over and join the fun.

Rebel, Tony, Commongood (I know there are more), please consider picking some specialty topic and write up a little instapopulist.

Good luck on the job hunt. Just yesterday I saw a segment on how Americans are 2x applying for temp. farm labor jobs...
very amusing in some ways because these jobs were proclaimed to be "jobs American's can't do" because "they were too physically demanding" by John McCain.

Anyway, they are hard and pay little so I'd say that shows how bad it is.

You are in school?

yeah, I am working, more than full time in case people want to know plus trying to feed the pig and make sure the statements are accurate. Just the other day I made a whopper mistake being too tired.

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More on auto sales

The media has spilled a lot of ink talking about the 21% increase in auto sales by Ford. What they haven't talked about is that the projection was for a 39% increase.
Also, Chrysler was expected to have a 5% increase, but instead had a 15% drop.

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CR on the cost of tax credits

read this on tax credit, plus SAAR estimates...

but the most astounding calculation is the 1st time home buyer tax credit he is calculating to be $43k per house!

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There is a lot of quotes, no specifics, in the index saying the cash for clunkers drove up their demand.

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