ISM has 50 in its sights

August 3, 2009

The latest data out on U.S. manufacturing is encouraging to say the least. Coupled with a similar improvement in Europe and it’s easy to get caught up in the giddy feeling that has definitely gripped the stock market.

The Institute for Supply Management reported that its headline U.S. manufacturing index hit 48.9 in July, above expectations and just shy of 50 – the breakeven point between expansion and contraction. New orders and production were both above that threshold, which points to future growth.

From the report:

Overall, it would be difficult to convince many manufacturers that we are on the brink of recovery, but the data suggests that we will see growth in the third quarter if the trends continue.

Alan Ruskin at RBS notes that the auto sector in particular should provide a nice boost, at least temporarily, to the manufacturing sector as the clunkers program will juice demand for new cars.

Still, whether this turns into a full fledged recovery ultimately will depend on the consumer, who continues to battle the blues that often accompany poor job prospects.

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