Wednesday, January 2, 2013

ISM indices point to moderate growth

The December ISM manufacturing indices point to an economy that continues to grow at a moderate pace. Given the prevailing mood of pessimism, they provide some encouragement, at least in so far as they showed no signs of any deterioration.

The December ISM manufacturing index was a bit stronger than expected (50.7 vs. 50.5), and as the chart above shows, it is consistent with overall economic growth of about 2-3%, which is roughly the speed at which the economy is probably growing currently.

The U.S. economy continues to do better than the Eurozone economy, as this chart comparing ISM indices for the U.S. and Eurozone manufacturing sectors suggests. The Eurozone is in a recession, but it is comforting to see that conditions there are not deteriorating.

December export orders strengthened, after a period of weakness that lasted from June through November. This provides some confirmation for the thesis that overseas economies are not deteriorating further and suggests that they may even be recovering.

The December employment index improved somewhat, in a mildly encouraging sign.

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