Summary
The production of goods is a valuable element in our assessment of the economy. Each month, the Federal Reserve provides a snapshot of output with its release of the Index of Industrial Production. This series aggregates the output of manufacturers, mines and utilities operating domestically. Another source of insight is the Institute for Supply Management (ISM), which provides a monthly report on manufacturing that both highlights current trends and provides a gauge of likely future activity.
Both measures are signaling growth, and, in the case of the ISM, spectacular activity.
Highlights
Ø Industrial Production has risen robustly and consistently since mid-2009, even as unseasonably warm weather occasionally reduced output from utilities. In recent months, the rate of growth evident in this measure is a healthy 4 - 6% -- a pace faster than the overall economy.
Ø According to the ISM report, the manufacturing sector has been on a tear since the end of 2008, and is near past peaks. These levels have historically been consistent with economic growth over 6% -- well above market expectations of the economy overall in this cycle.
Ø We are also carefully monitoring the New Orders subseries of the ISM report, which is shown in the chart below. New Orders provide insight into what lies ahead for the factory sector. Generally speaking, levels over 50 point to growth. Most recent levels also have been near previous highs, suggesting the prospects for continued strength in manufacturing are quite solid.
The opinions in this newsletter are for general information only and are not intended to give specific recommendations or advice. Certain information contained herein has been compiled from independent third party sources believed to be reliable. Hamilton Capital Management makes no representation about the accuracy, completeness or timeliness of the information contained herein or its appropriateness from any given situation.