Monday, March 1, 2010

ISM index still strong

The ISM manufacturing index for February came in a bit weaker than expected, but as this chart shows, it is still very strong, and points to real economic growth in the current quarter of 4-5%. Since this is a diffusion index, the current reading says that 56.5% of respondents see things picking up. The prices paid index, in the next chart, shows that fully two-thirds of respondents report paying higher prices. Once again, we see strong evidence that deflation is dead at the producer level. Both of these indices strongly support an ongoing recovery, with no sign of the dreaded double-dip. The fact that so many are fearful of the double-dip means to me that pricing remains very conservative.


CDLIC said...

3/1/10: The Baltic Dry Index is considered by many to be at least temporarily unreliable, due to the large supply of new ships – contracted for in better times - coming to market. The new ships hitting the market and competing for freight is skewing the supply and demand picture, and therefore shipping prices.

A better indicator for world trade may be the actual traffic through the Panama Canal , a major transshipment point for Chinese goods, among others. The following comes from Casey Research reader and correspondent Dennis Miller who likes to follow the news in Panamanian newspapers…

Container traffic drops

The Panamanian port system mobilized 4.2 million containers in 2009, a drop of 8.8 percent compared to the year before.

Colón Container Terminal recorded a fall of 27.4 percent, the largest decrease. Manzanillo International Terminal handled 12.2 percent fewer containers during the year, although there was an upturn in the transport of machines and vehicles.

According to a report of the Maritime Authority of Panama, the only ports that recorded an increase in comparison with the previous year were Bocas Fruit Company, located in Almirante, and Cristóbal in Colón.

Scott Grannis said...

CDLIC: The supply of ships is definitely increasing, and that may be suppressing the signal from the Baltic. But the data you cite about the Panama Canal is not very useful. Everything contracted last year on a year over year basis. What would be important to know is how things performed in the second half of the year. I would bet that traffic picked up, just as all global trade has picked up significantly over the past 6-8 months.

FWIW, the Baltic Dry index is up 7.5% in the past week. Things are still moving along nicely.