The ISM number is an important number. According to my "Secrets of Economic Indicators" (1)...."It is the first piece of news on the economy of of the gate every month and the most influential statistic released by the private sector."Note that there are two of these surveys--one for the manufacturing sector and one for the service sector. According to Bauomohl, the manufacturing survey grabs the most attention.
Look at the table. You can see why readings below 50 are cause for concern. We should watch this data very closely.
Did you know? Federal Reserve Officials are briefed on the data before it is reported.
The Survey is sent out to 400 member companies around the country and represents 20 different industries. Corporate purchasing managers are asked if activity is rising, falling or unchanged in the following:
- New orders
- Production
- Employment
- Supplier deliveries (speed of delivery)
- Inventories
- Customers' inventories (they guess and their customer's inventories)
- Commodity prices
- Backlog of orders
- New export orders
- Imports
(1) Bernard Baumohl, Wharton School Publishing, 5th edition, copyright 2005,
2 comments:
This blog entry is really interesting, Leisa. (Ditto your entry on Santayana, btw.)
Russell noted in a previous comment that we pretty much know what's happening; that it's just a matter of getting the timing right.
Do you think I'm right in my thought that a good time to begin buying good companies' stock (I'm thinking value investing) is once the ISM number is below 50, preferrably well below 50?
I'm not really qualified to say. However, the stock market generally does a 30% correction prior to a recession (and we've not had a correction of that magnitude). Some say the odds of a recession are 40% now, so that means we might have 40% chance of a 30% correction. Accordingly, I would wait and initiate new long positions, unless it is in a favored defensive sector. But I've been wrong all year!
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