ISM manufacturing report: economy continues to grow at a modest pace

Despite all of the grim, dire, panicked predictions that the economy is headed for a recession, the ISM manufacturing report for March showed that the economy continues to expand at a modest pace. Although January showed a contraction of the manufacturing sector, February and March were both growth months.

Although the manufacturing growth rate was quite modest in March at 50.9 versus a neutral 50.0, the report notes that:

The past relationship between the PMI and the overall economy indicates that the PMI average for January through March (50.8 percent) corresponds to a 2.8 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for March (50.9) is annualized, it also corresponds to a 2.8 percent increase in real GDP annually.

And that feels about right and reflects that the U.S. economy is primarily a service economy. Everybody knows that the economy is not "booming" right now, but 2.8% real GDP growth is still quite decent and only very modestly below a decent growth rate of 3.0%.

The bottom line here is that the economy remains much stronger than all of the hand-wringers and bears claim.

I personally don't expect March to be a great month either, being a transition month as the housing weakness peters out, but I do expect to see an "up tick" in April, which will show up in the ISM reports in early May, a month from now.

-- Jack Krupansky