Tuesday, January 9, 2018

Manufacturing is off to a strong start

Last week brought the good news that the December ISM manufacturing index exceeded expectations (59.7 vs. 58.2), while the new orders subindex hit a 14-yr high. Some impressive charts:

Chart #1

Chart #1 compares the ISM manufacturing index to quarterly annualized GDP growth. The two tend to move together. As the chart suggests, the recent strength of the manufacturing index is consistent with very strong GDP growth in the fourth quarter. The market is expecting to see something on the order of 3%, but this chart says it could be 4% or better.

Chart #2

Chart #2 compares US manufacturing to that of the Eurozone. Both have been unusually strong of late. It's very likely that the world is in the midst of a relatively strong, synchronized growth phase.

Chart #3

Chart #3 shows the New Orders subindex of the ISM manufacturing survey. It's rarely been this strong. 

Chart #4

Not surprisingly, equity markets continue to do very well, both here and abroad, as Chart #4 shows.

3 comments:

steve said...

And with the 10 year note trading at a shade under 2.6% looks like a bond selloff may be imminent. Since the average investor lacks inertia, they could see some serious losses in their portfolio they are NOT used to seeing.

Benjamin Cole said...

Love the factories.

The sector seems to be on the improve.

https://fred.stlouisfed.org/series/OUTMS

Still, factory output is below 2007 levels. See above chart.

Blame Bush jr., blame Obama, blame it on the boogie. This country took a gut punch in 2008 and we are only clawing back now.

Unknown said...

Long-time reader, first-time commenter. Great blog. Thank you, Scott!