Investment Chart Kondratiev Wave

Investment Chart Kondratiev Wave

Wednesday, 1 February 2012

ISM topping at 56 over two months

Every year at this time the parts of the ISM index are revised and that changes the levels of the ISM, this to the annoyance of the quants that cannot back-test models with ISM because of all these changes. This year the orders component got a blow.

Almost all components of the ISM rose past month, but orders rose less than inventories (not good for the leading indicator for ISM of orders/inventories).
After the revisions the ISM landed almost exactly on the model values this month. According to this model some further rise of the ISM in the next two months to 56 could be very well possible and then a limited decline could occur.

At the site of the ISM they had some optimistic remarks from several sectors:
• Still seeing raw materials pricing moving down in general, but expect inflation later in the quarter." (Chemical Products)
• "Year starting a little slow, but customers are positive about increased business in 2012." (Machinery)
• "Once again, business continues to be strong." (Paper Products)
• "Pricing remains in check with the demand we are seeing. Supplier deliveries are on time or early." (Food, Beverage & Tobacco Products)
• "The economy seems to be slowly improving." (Fabricated Metal Products)
• "Business lost to offshore is coming back." (Computer & Electronic Products)
• "Business remains strong. Order intake is great — more than 20 percent above budget." (Primary Metals)
• "Indications are that 2012 business environment will improve over 2011." (Transportation Equipment)
• "Market conditions appear to be improving, with the outlook for 2012 better yet." (Wood Products)

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