Monday, March 1, 2010

Stat of the Day: February ISM Inventories Continue Decline

The February ISM came in at a respectable 56.5 today. This was lower then the 58.4 from January and the 57.9 expected by economists. Some suggest the weakness was due to the snow which I don't understand why the economists didn't figure that out before hand. Regardless, its still a number showing significant growth in the manufacturing sector.

The impressive stat is that inventories continue to be used up coming in at 47.3 which was slightly better then the 46.5 last month but still contracting. It was the 46th consecutive month that inventories have been trimmed. Considering the overall PMI has been positive for 7 consecutive months it seems unlikely that inventories can be cut much farther. Any company able to trim now has to be seeing some impressive margins.

Both Caterpillar (CAT) and Terex (TEX), discussed on Q4 earnings call about how they spent all of 2009 producing alot less then they sold. Both forecasted huge production growth as inventories have become too lean and any orders must be met with production. That suggests to us that the ISM Manufacturing should be touching 60 pretty soon.

Also, worth noting was that customer inventories came in at 37. This number is way too low for an expanding economy. It did bounce sharply off 32 last month.



MANUFACTURING AT A GLANCE
FEBRUARY 2010


Index
Series
Index
February
Series
Index
January
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 56.5 58.4 -1.9 Growing Slower 7
New Orders 59.5 65.9 -6.4 Growing Slower 8
Production 58.4 66.2 -7.8 Growing Slower 9
Employment 56.1 53.3 +2.8 Growing Faster 3
Supplier Deliveries 61.1 60.1 +1.0 Slowing Faster 9
Inventories 47.3 46.5 +0.8 Contracting Slower 46
Customers' Inventories 37.0 32.0 +5.0 Too Low Slower 11
Prices 67.0 70.0 -3.0 Increasing Slower 8
Backlog of Orders 61.0 56.0 +5.0 Growing Faster 2
Exports 56.5 58.5 -2.0 Growing Slower 8
Imports 56.0 56.5 -0.5 Growing Slower 6
OVERALL ECONOMY Growing Slower 10
Manufacturing Sector Growing Slower 7

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