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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: FiveFour who wrote (973)3/1/2004 9:38:33 PM
From: mishedlo  Read Replies (1) of 116555
 
Brian Reynolds on ISM Numbers

The ISM Manufacturing index for February fell from 63.6 to 61.4, a little below the Bloomberg consensus of a 62.0 read. The components were very similar to the Chicago PMI, which does not happen often. New orders pulled back from 71.1 to 66.4, and production fell from 71.1 to 63.9. Employment rose from 52.9 to 56.3. Prices paid rose from 75.5 to 81.5, a reflection of what has been happening in the energy markets.

In our opinion, this report is even weaker than the headline would imply. We have been writing for several months about how inventories have been picking up steam as production has begun to outstrip consumption. We still think this augurs for at least a moderation in production in the months ahead, and we view today's softness in the orders component as further indication of this.

Initially, bond traders agreed with this view as the 10-year gained an eighth of a point on the soft headline. However, traders are focusing on the payroll component and, when that was released, Treasuries gave up those gains and went negative on the day by 3/16ths of a point. We think that, if orders remain soft in the coming months, then bond traders' fears of a surge in hiring might not come to fruition.

Mish
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