Monday, May 3, 2010
The Institute for Supply Management's April index of manufacturing activity was a bit stronger than expected, but more importantly, it is telling us that the 3.2% growth rate of first quarter GDP was most likely depressed by bad weather. For the past four months, the ISM manufacturing index has been pointing to GDP growth of 5-6%. Thus, we could see a very strong rebound in second quarter GDP growth. That would be consistent with all the other V signs out there, such as commodity prices and export orders, with the latter shown in the next chart:
Furthermore, the employment index in April jumped to 58.5, its highest level since early 2005. And in yet another reminder that deflation risk is no longer a concern, the ISM prices paid index rose to 78, a level it has rarely exceeded in the past. There is a whole lot more life in the economy than what was reflected in last week's Q1 GDP release, and there are budding signs of reflation as well.
Posted by Scott Grannis at 8:01 AM