Business Press Spinsanity Over March's ISM Manufacturing Index

The Institute for Supply Management issued its March Manufacturing Report on Business today:

PMI at 48.6%

Economic activity in the manufacturing sector failed to grow in March, while the overall economy grew for the 77th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector failed to grow in March as the PMI fell below 50 percent for the second consecutive month.

Just because the ISM says the economy has grown won't necessarily make it so when Uncle Sam's Bureau of Economic Analysis releases the first quarter 2008 GDP report late this month, but it beats the alternative.

The real fun comes in looking over the reporting on the ISM results. Were they better or worse than "expected"? Well, it depends on who you ask.

Here's AP's Eileen Alt Powell, as of 11:35 a.m. (link is dynamic, so text may change at link; bolds are mine throughout):

The Institute for Supply Management said Tuesday that its manufacturing index registered 48.6 last month, compared with 48.3 in February. February's reading had been the weakest in five years.

Readings below 50 indicate contraction, while those above 50 show growth.

The latest index was roughly in line with expectations by Wall Street analysts surveyed by Thomson/IFR.

Powell has an interesting definition of "roughly in line" -- the index went up, while as you can see from this Google News partial capture, Thomson's expectations were that it would go down:


This might explain how Powell "somehow" forgot to report the predicted number.

Perhaps Ms. Powell got the hook, because a bit less than 2 hours later, Joe Bel Bruno had a different take (link is also dynamic):

Meanwhile, Wall Street got another boost when the Institute for Supply Management said its March index of national manufacturing activity rose to a reading of 48.6 - indicating a contraction, but a slower one than in February and tamer than many analysts had predicted.

Reuters surveyed its own set of economists, who predicted a bigger drop. But it waited until the fifth paragraph to tell us that, and, "cleverly," found an economist who assumes we're already in a recession (bold is mine):

..... "The ISM manufacturing index gave a choppy sideways picture of manufacturing which is better than might have been feared but doesn't give conclusive indication whether export strength will sustain overall activity in the face of domestic spending," said Pierre Ellis, senior economist at Decision Economics in New York.

"That kind of offset is critical to keep the recession relatively mild."

Wall Street cheered the report, however, since the reading on manufacturing was higher than the 47.5 foreseen in a Reuters poll of economists.

All reports sorely lacked historical context, so I'll provide some, from ISM's Manufacturing Index history:


The orange area shows that during the reportedly wonderful economy of 1998, there was a 7-month contraction in manufacturing. We're not there yet currently. It's a virtual certainty that no one was claiming a "manufacturing recession" during that time period, as one economist in Powell's article did to characterize the current situation (the idea of a sector being in a recession runs against the definition of the word in any event).

In 2000 (red area), there were three reported declines in the runup to the presidential election as the NASDAQ/dotcom bubble burst, followed by 15 more months of contraction traceable first, to that bubble, and then, to the 9/11 terrorist attacks. I don't recall anyone in the general or business press using the word "recession" during the initial three-month time frame.

The current 5-month semi-rough patch (green area) is not as serious as the other two -- yet. It would be nice if the business press weren't so presumptive about the idea that things will get worse (or even are that way already), when there's no good reason right now to believe that "worse" or "better" is the more likely outcome.

Cross-posted at

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