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October 03, 2005
Just when we thought we had it figured out, the predictions of a hurricane-related slowdown take a hit from the latest data from the manufacturing sector. From the Institute for Supply Management:
Economic activity in the manufacturing sector grew in September for the 28th consecutive month, while the overall economy grew for the 47th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the 28th consecutive month in September based on the ISM data. The PMI made a strong move to the upside as New Orders and Production rose significantly. This move was supported by slower deliveries and growing order backlogs. While energy prices and the impact from Hurricane Katrina are major concerns, the manufacturing sector has regained significant momentum."
The advances were broad-based...
Of the industries reporting in September, 15 registered growth: Tobacco; Paper; Electronic Components & Equipment; Apparel; Instruments & Photographic Equipment; Wood & Wood Products; Chemicals; Primary Metals; Food; Textiles; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Furniture; Printing & Publishing; and Fabricated Metals.
... and the employment index continued to advance:
ISM's Employment Index registered growth in September for the third consecutive month. The index registered 53.1 percent in September compared to 52.6 percent in August, an increase of 0.5 percentage point. An Employment Index above 48.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
The price picture wasn't so cheery...
The ISM's Prices Index jumped again in September as the Prices Index rose to 78 percent, up from 62.5 percent in August. September's jump of 15.5 percentage points follows a jump of 14 percentage points from July to August.
... but it is worth pointing out that these reflect the prices producers pay, which may or may not manifest themselves at the consumer level.
The Commerce Department said Hurricane Katrina, which battered the U.S. Gulf Coast at the end of August, had no impact on the month's numbers and should have a minimal effect on construction spending for 2005 as a whole. This is because the hardest-hit states - Louisiana, Mississippi and Alabama - accounted for slightly more than 3 percent of total construction spending last year, the government said...
Despite a growing chorus of concern, the U.S. housing sector has shown little sign of cooling off from a multiyear rally that has seen home prices rise by double-digit percentages in some areas. Some economists expect 2005 to be another record year for sales and building, although they maintain the sector should begin to ease in 2006 as long-term interest rates rise and dampen demand.
I'm not sure, but I'd bet we said the same thing about this time last year. In any event, the betting now begins on whether this sentiment, from Bloomberg, will still look like truth when all of the month's data comes rolling in:
The Institute for Supply Management report suggests that economic recovery from Hurricanes Katrina and Rita may be more rapid than analysts expected.
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