A stronger-than-expected ISM manufacturing report helped get the stock market off to a good start for the year.
As the chart above shows, the ISM manufacturing index is pretty representative of strength in the broader economy. Today's December ISM report is consistent with fourth quarter GDP growth of 3-4%, and that is somewhat better than the market had been expecting. The Atlanta Fed's GDPNow forecast for the fourth quarter had been 2.5%, and today it rose to 2.9%.
Export orders, shown in the chart above, were usually strong in December, a good sign that overseas economic activity is picking up. It's also encouraging that export orders have strengthened even as the dollar has strengthened (normally a stronger dollar would be expected to make life more difficult for U.S. exporters). This further suggests that animal spirits are rising both here and abroad.
The chart above provides confirmation of this, in that it shows that manufacturing conditions in both the U.S. and the Eurozone have improved quite a bit in recent months. A synchronized strengthening of economic conditions around the world is a very welcome development.