February ISM Manufacturing Index Forecast
Regional PMI Surveys point to a marginal increase to 47.7.
The regional Manufacturing PMIs (Chicago, Dallas, Empire State (New York), Kansas City, Philadelphia, and Richmond) provide valuable information about the upcoming ISM Manufacturing Index.
For February, the regional PMI-based estimate equals 47.7. This would be a marginal increase compared to January, but at the same time, marginally lower than the 48.0 expected (Bloomberg survey.)
What you should know about the ISM:
It’s not just a solid forecaster of GDP growth.
There is a strong link with financial markets and not just equities.
When the ISM Manufacturing Index rises, independent from what level, equities tend to perform better, and bonds worse, than average in the next three months. If the ISM Manufacturing drops, the opposite is the case.
Based on the historical relationship with the S&P 500 Index, the ISM must rise by April to signal any upside for US equities.
However, underlying data have been pointing to a lower, not higher, ISM Manufacturing.
Yet, recent Macro data have come in better than expected. This likely means bad news for stock markets as economic resilience has slowed (reversed in the case of core PCE) the inflation trend.
That was not a bad call! ISM Manufacturing exactly matching my forecast. However, most focus will be on the ISM Manufacturing Prices Index, which spiked back above 50. Disinflationary pressures are dwindling.