IB Net Payout Yields Model

Stat of the Day: Inventories Finally Growing

The March ISM easily beat consensus estimates of 57 because of surging inventories. The index came in at 59.6 versus 56.5 in February. The index was at its highest level since July 2004, but the most amazing number is that for the first time in 46 months inventories were actually built. With a reading of 55.1, manufacturers finally quit the liquidation process. So not only does the economy benefit from growth but also the rebuilding of the very depleted inventory stockpiles. Remember that for all the noise about the inventory benefits to Q1 GDP that was just because the quirky nature of the report where a smaller drop is beneficial.

With the employment index slipping slightly to from 56 to 55 and remaining below the overall index that should signal bullish corporate profits in Q1 and likly Q2.

  • The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the eighth consecutive month during March. The rate of growth as indicated by the PMI is the fastest since July 2004. Both new orders and production rose above 60 percent this month, closing the first quarter with significant momentum going forward. Although the Employment Index decreased 1 percentage point to 55.1 percent from February's reading of 56.1 percent, signs for employment in the sector continue to improve as the index registered a 10 percent month-over-month improvement, indicating that manufacturers are continuing to fill vacancies. The Inventories Index provided a surprise as it indicated growth for the first time following 46 months of liquidation — perhaps signaling manufacturers' willingness to increase inventories based on expected levels of activity."

MARCH 2010



PMI 59.6 56.5 +3.1 Growing Faster 8
New Orders 61.5 59.5 +2.0 Growing Faster 9
Production 61.1 58.4 +2.7 Growing Faster 10
Employment 55.1 56.1 -1.0 Growing Slower 4
Supplier Deliveries 64.9 61.1 +3.8 Slowing Faster 10
Inventories 55.3 47.3 +8.0 Growing From Contracting 1
Customers' Inventories 39.0 37.0 +2.0 Too Low Slower 12
Prices 75.0 67.0 +8.0 Increasing Faster 9
Backlog of Orders 58.0 61.0 -3.0 Growing Slower 3
Exports 61.5 56.5 +5.0 Growing Faster 9
Imports 57.0 56.0 +1.0 Growing Faster 7
OVERALL ECONOMY Growing Faster 11
Manufacturing Sector Growing Faster 8


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