For those of us who follow economic statistics, this past week had a “Spaghetti Western” feel to it. In a phrase, it was the Good, the Bad and the Ugly.
The Good. The Institute for Supply Management released its report on manufacturing activity in February. After hovering around the “break-even level or 50 for about 4 months, the overall PMI index for manufacturing jumped to a level of 52.4 in February. This signals that the slowdown in manufacturing that took place in the 4th quarter appears to have been more of a temporary pause rather than the beginning severe downturn.
The Bad. The preliminary report by Commerce Department showed that the GDP rose a modest 2.2 percent in the 4th quarter. This is a major downward revision from the 3.5 percent rise reported in the advanced report last month. One of the main reasons for the deceleration in growth is that business investment was weaker in the fourth quarter according to last week’s report compared to the advanced report released last month.
Finally, the Ugly. The Commerce Department reported that new orders for durable manufactured products fell by 7.8 percent — the 2nd drop in the past 4 months. More worrisome is that non-defense capital goods orders (excluding the volatile aircraft sector) declined by 6 percent in January, marking the 3rd drop in the past 4 months as well as the single largest monthly decline since in 3 years. This is a signal that the slowdown in investment spending by businesses will continue into the 1st quarter of 2007.
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