I should wash my mouth out with soap for penning this headline - nobody should put any faith in surveys. But for the last three months, the surveys have been consistently and unanimously telling us the economy is now expanding.
First looking at manufacturing, the graphic below sums up the situation. Note that values above zero show expansion.
Figure 1 - Long Bars are Actual Data from Federal Reserve and US Census; Short Bars, Various Surveys
It is a very rare event recently that manufacturing surveys agree that expansion is occurring - and to have this going on for three months in a row should have a shock value. Most surveys are very volatile anyway - expanding one month, contracting the next.
One can argue that manufacturing is a very small part of the USA service based economy - less than 10% of employment and 20% of money flows. Yet manufacturing has a reasonable correlation to economic growth if compared to GDP.
Figure 2 - Year-over-Year Change GDP (blue line, left axis) and ISM Manufacturing (red line, right axis)
Big ISM movements usually foretell big GDP movements - this is now occurring (see red line).
An even higher correlation can be seen if GDP is compared to the ISM non-manufacturing business activity survey index - which represents 80% of the economy and 90% of employment.
Figure 3 - Year-over-Year Change GDP (blue line, left axis) and ISM Non-Manufacturing (green line, right axis)
At one point in my past life, I was a purchasing manager and prepared input to these surveys - or rather I had my secretary do it. Really, I do not trust surveys as opinion varies depending on what side of the bed one wakes up on. In many organizations, the purchasing manager may not be in the proper loop to really understand what is going on in a company. But when all the surveys are in agreement, it is hard to discount the very positive message they are sending.
My normal weekly wrap is in my instablog.