“It could well be that the headline ISM index was a bit of a freak show,” says Gluskin Sheff & Associates economist David Rosenberg, regarding a surprise increase in the venerable ISM U.S. Purchasing Manager’s Index this morning.
While expressing respect for the venerable barometer, Rosenberg told me in a phone call this afternoon that it’s hard to believe a report where three coincident indicators — production, employment and inventories — are growing faster when forward-looking indicators, such as new orders, are growing slower.
“As good as an index as the ISM is, it doesn’t always give you completely the accurate story at any moment in time,” says Rosenberg.
“The whole report belied reality,” insists Rosenberg, which reality is that, as inventories and production build, they are building into a spending slowdown. That, he thinks, foreshadows “a much deeper descent in [the ISM] in the coming months.”
“Even if the ISM is correct,” adds Rosenberg, “in its standalone assertion that the economy just went into boom mode in the month of August, then just think of the implications of a rising inventory situation going into a spending slowdown.”
---Tiernan Ray, Barrons; My ISM post today here.