ISM Recovery Report Hope: One Word... Plastics

Don’t look now, but it appears there is a green shoot in the economy. The ISM new orders index increased by 8.1%, with new orders recorded in Plastics and Computer Products. While the new orders diffusion index increased, we are still far from a full fledged recovery. But it does appear that perhaps some replenishing of inventories is occurring.

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In March, customer inventories increased and were regarded as too high, but at the manufacturing level inventories continued to contract. Among the sectors that reported decreases in inventory were the economically sensitive plastics, paper and transportation equipment industries. The plastics sector also saw an increase in new orders.

One of the primary ingredients used in the plastics and petrochemical industries is naphtha. Naphtha is bi-product of distilling oil and can be used as an additive for high octane gasoline or as an industrial solvent. Since the end of December, the prices of naphtha have increased in Japan, Singapore and Europe. Another green shoot? Perhaps.

Disclosures: none

Comments

[CautiousInv...:]

I'm not ready to read too much into yesterday's ISM release, but the increase in orders for computer products would square with my own belief that corporate Capex will need to play a very large role in revitalizing the economy.

I do not think we can expect much from the consumer because of low confidence, growing unemployment and increased rates of saving.

Apr 02 08:15 AM