June Institute for Supply Management

According to data from the Institute for Supply Management (ISM), the economy grew as the second quarter ended.  Unfortunately, the indicators still fell in the final month of the quarter.  Manufacturing dropped just a stitch to 55.3 from 55.4, and the non-manufacturing measure shaved off a little more, going from 56.3 to 56.0.  Nonetheless, both sides of output (services and manufacturing) had readings above 50.0 in each of the three months of the quarter.

There are signs within each release that suggests the best is yet to come for 2014; of course, the first half will not be a very tough benchmark to beat.  First, the new orders component of the manufacturing index jumped 2.0 points in the month to 58.9; this suggests acceleration in the months ahead for these industries because new orders came in faster than at any point thus far in 2014 and will need to be filled.  Then there are the new orders for non-manufacturing firms, and they moved up 0.7 to 61.2, a level last seen in January 2011.  Both ISM figures indicate improving conditions.

Before a more robust second half of the year is considered, a quick survey of the second quarter is in order.  Based on the ISM data, April through May should prove to have been a stronger period than the first three months of 2014.  To be fair, all of the first quarter ISM releases were greater than 50.0 (the breakeven level) as well, but the period’s final GDP tally was negative, so there is no guarantee that our economy grew in the second quarter.  However, the mean values of both ISM numbers were greater than the average tally from January through March, so the outlook appears promising.  (by C. Cox)