ISM Index: Manufacturing Activity Cools A Bit In February

By Mar 1, 2012, 11:14 AM Author's Blog  

The modest retreat in the ISM manufacturing index for February may be nothing more than monthly noise, although a fall in this benchmark certainly won’t help sentiment after this morning’s disappointing news for personal income and spending in January. The Institute for Supply Management’s factory index slipped to 52.4, down from January’s 54.1 reading. Economists were expecting a rise, according to Bloomberg.

The ISM dip is all the more surprising given the strength in several regional Fed manufacturing surveys for February. Even so, today’s ISM number still reflects an expanding manufacturing sector (any reading above 50 indicates growth) and so it’s premature to read too much into this update. One number, as they say, a trend does not make. But it’s hard to forget that today’s ISM news comes after Tuesday’s news that new orders for durable goods dropped sharply in January.

The bottom line: the stakes are rising for the labor market to keep hope alive. As I noted earlier today, the latest weekly jobless claims report continues to hold at four-year lows and so there’s still a good case for arguing that the all-important recovery in jobs growth remains intact. The question is whether next week’s payrolls report for February will corroborate the rosy view for jobs? After today’s setbacks, it’s going to take that much stronger news on the jobs front to repair the damage and keep sentiment bubbing.

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