Lackluster manufacturing report

Today's ISM manufacturing report was lackluster. Nothing to cheer about, nothing to fret about. It suggests the economy is still plodding along at a 2% growth rate.

The ISM manufacturing index met expectations, but as the chart above shows, it is consistent with overall economic growth of only 2% or so.

Export orders softened, but remain reasonably healthy. The New Orders index rose marginally, but remains relatively soft.

Manufacturers' plans to increase hiring also softened, and now point to very slow growth going forward. There's a widespread lack of confidence and an unwillingness to invest revealed her.

Conditions in the Eurozone are still weak, but they don't appear to be deteriorating further.

We're stuck in a slow-growth world. Doomsters will undoubtedly use the airplane analogy to suggest that with economies moving along at just above stall speed, they are vulnerable to collapse. I don't think that analogy is valid: what causes economic collapse is not slow growth, but major mistakes in fiscal and monetary policy, whose consequences are poorly understood and for which markets are almost totally unprepared. Today there remains an abundance of skepticism about fiscal and monetary policy, and a widespread shortage of optimism.

If anything, markets have been blindsided by recovery. Four years ago, no one expected that conditions today would be as good as they are. Conditions are far from ideal, of course, but they are much better than expected.