ISM Data Supports Japan & US Recovery Back Underway

July 1, 2011 by Jon C. Ogg

The weakness we saw through much of the second quarter may have already started to turn around. The slowing was likely due to major supply chain issues and disruptions in orders and in sales that followed the Japanese quake, subsequent tsunami, and nuclear meltdown.  This belief is supported by a higher ISM report.

The Institute for Supply Management reported that June manufacturing index rose to 55.3%. This was above the May reading of 53.5% and well above the 51.8% expected by economists surveyed by Dow Jones.

The prices-paid index was 68.0%, down considerably from the 76.5% reading in May. That is a sign that wholesale inflation is truly abating and a signal that consumers will not have to swallow a heavy dose of inflation in consumer goods.

What is interesting is that the employment component also rose, up to 59.9% in June from 58.2% in May. That won’t be enough to create any massive change in unemployment. The 400,000+ weekly jobless claims is going to likely keep a lid on that and the continued lack of conviction from CEOs and CFOs is capping that as well.

New Orders rose slightly to 51.6% in June from 51.0% in May; the production index rose to 54.5% from 54.0%; and the inventories component rose to 54.1% in June from 48.7% in May. That inventory figure may be from a lack of sell-through activity or it could be a building anticipation that orders will start to pick up. The readings for new orders and production are still low enough that there will be some debate over whether or not this is real business recovery anticipation or not.

What we are seeing now is hopefully a slight recovery from the weakness we started seeing in April and May economic data. Japan appears to be coming back on-line, but China is still capping its growth as seen in recent weak manufacturing data there.

QE2’s end should already be priced into the markets, but bond yields and stocks are likely to continue rising if the business climate truly signals a stronger recovery.  Stay tuned.

JON C. OGG

Take This Retirement Quiz To Get Matched With A Financial Advisor (Sponsored)

Take the quiz below to get matched with a financial advisor today.

Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.

Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the
advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future

Take the retirement quiz right here.