Manufacturing Index Confirms Stock Market’s Narrowness

Posted by Patrick O'Connor on 7/1/08 11:01 am

Today’s national manufacturing report from the Institute for Supply Management reinforces that there are very few areas in the stock market worth being long. Most of the hot spots are benefitting from the weak dollar, like commodities.

High Frequency Economics
By Dr. Ian Shepherdson

The May ISM manufacturing index rose for the second straight month to 50.2 from 49.6, above the consensus 48.5. The manufacturing sector refuses to roll over, despite the plunge in auto sector activity, the collapse of all things related to the housing market, and the weakness in most of the regional surveys. But note that the rise in the headline index is due to gains in two of the lagging components, delivery times and inventories.

The key new orders index dipped a trivial 0.1 and, while it is off its April low of 46.5, the June reading of 49.6 is hardly a raging boom. Exports continue to lead the way, with the orders index down a point but still very strong at 58.5; thank goodness for the weak dollar. But note employment slipped to a five-year low of 3.7 from 45.5; layoffs are rising.

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