Room For Upside In Tomorrow's ISM Report?

by: Tim Duy

Calculated Risk has the run down on tomorrow's employment report, opting to bet on the high side of the forecast. Likewise, I am inclined to bet on the high side of the ISM forecast of 50.7, up from 50.5 the previous month. A couple of things to keep in mind:

1. Industrial production firmed in recent months:Ip

Those that thought the mid-year slowdown in production bolstered their case for an imminent recession need to head back to the drawing board.

2. Core durable goods orders are stronger:Neworder

A significant portion of the sharp slowdown this year has been reversed. Eventually, this will impact the ISM index.

3. The Chicago PMI surprised on the upside, gaining sharply to 55.6 from 50.0 in December.

4. The Markit PMI has tended to the strong side in recent months:


All in all, it looks like manufacturing is shaking off some of those mid-year doldrums. Consequently, I would expect the ISM index to come in ahead of expectations.

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