Tuesday, September 1, 2009
I've been using this chart for the past 10-15 years, and it never ceases to amaze me how well the ISM manufacturing index tracks the growth of GDP. We've had a strong, V-shaped recovery in the ISM index, as this chart shows, and there is every reason now to expect that GDP growth in the current quarter will be 3-4%. The inventory cycle is now at work, as depleted inventories were met with firming demand. This, coupled with improving confidence, should help keep the economy growing for quite some time.
Manufacturing is turning up all over the globe, with news last night that China's manufacturing index also registered strong gains in August. All of this validates the message of rising commodity prices. I've always paid very close attention to real-time prices, since they can provide signals way in advance of the more traditional economic statistics and surveys.
Posted by Scott Grannis at 9:06 AM