Manufacturing Is Off To A Strong Start

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Includes: AIRR, FIDU, FXR, IFLY, INDF, IYJ, JHMI, RGI, SIJ, UXI, VIS, XLI
by: Calafia Beach Pundit

Last week brought the good news that the December ISM manufacturing index exceeded expectations (59.7 vs. 58.2), while the new orders subindex hit a 14-yr high. Some impressive charts:

Chart #1

Chart #1 compares the ISM manufacturing index to quarterly annualized GDP growth. The two tend to move together. As the chart suggests, the recent strength of the manufacturing index is consistent with very strong GDP growth in the fourth quarter. The market is expecting to see something on the order of 3%, but this chart says it could be 4% or better.

Chart #2

Chart #2 compares US manufacturing to that of the eurozone. Both have been unusually strong of late. It's very likely that the world is in the midst of a relatively strong, synchronized growth phase.

Chart #3
Chart #3 shows the New Orders subindex of the ISM manufacturing survey. It's rarely been this strong.
Chart #4

Not surprisingly, equity markets continue to do very well, both here and abroad, as Chart #4 shows.