Unexpected, or surprising strength, always grabs investors’ attention. It screams the right message – the economic recovery gains traction. Unfortunately, the analysis fails to reveal that liquidity (inflation) is driving growth. In other words, real (inflation adjusted) growth remains weak. ISM’s prices paid (PP) to national purchasing manager’s index (PMI) ratio illustrates this trend since 2008. Today’s economic recovery, positioned as the Great Recession buster, is simply following in the footsteps of the previous liquidity driven recovery from 2001 to 2008. The only exception being is that this recovery will have greater amplitude or price distortions as the number, size, and duration of the liquidity injections have increased substantially.
ISM Prices Paid Index (PP) to National Purchasing Manager's Index (PMI) Ratio:
Headline: Manufacturers see fastest growth since 2004
Activity at American manufacturers expanded in February at the fastest pace since 2004, though companies have grown more concerned about rising inflation, according to a closely followed index released Tuesday.
The Institute for Supply Management said its manufacturing gauge rose to 61.4% in February from 60.8% in the prior month. Any reading over 50 indicates that more manufacturers are expanding instead of shrinking.
Source:
marketwatch.com
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