Thursday, October 1, 2009
Today's ISM report came in a touch weaker than the market was expecting, but as this chart shows, it is still pretty strong. (In my experience no indicator ever moves in a straight line; even in very strong economic conditions there can be the odd monthly setback.) By my estimation, the September ISM index level is fully consistent with economic growth of 3-4% in the third quarter. Note the fairly strong correlation between the ISM index and quarterly GDP growth rates in this chart.
As this next chart shows, the prices paid component of the ISM index still shows that a preponderance of those surveyed are seeing higher prices. The return of pricing power has been rather quick in the wake of this recession, another reason to call this a V-shaped recovery.
Posted by Scott Grannis at 7:16 AM