ISM Manufacturing Milestone: Growth Signals & Market Impact | Episode 116 | 04-01-2024

In today’s episode, Megan Horneman, Chief Investment Officer, discusses the latest developments in the manufacturing sector. After 17 months, we finally see a significant shift as the ISM Manufacturing Index enters expansion territory, marking a pivotal moment for the economy. Megan breaks down the key components driving this growth, including production and new orders, while also addressing concerns about inflationary pressures and their impact on market sentiment. As we navigate through this data, stay tuned for upcoming reports throughout the week, including the services report and the monthly jobs report. For further insights or inquiries, don't hesitate to contact us at podcast at Verdence dot com.

It's been 17 months, but we finally got a reading for manufacturing that's in expansion territory. Hello, I'm Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, Coming to you today, on Monday, April 1st and no, it's not an April Fool's Day joke we officially did get the ISM Manufacturing Index to cross into expansion territory. It's the first time in 17 months that we've seen this index cross into expansion territory. It's the first time in 17 months that we've seen this index cross into expansion territory and keep in mind the level that's considered expansion is a level of 50 or above. It came in at 50.3, which was a bit better than expected. The expectation was for 48.3. So let's dig into some of the details on that.

The strength in the index was primarily led by three different components. First of all, production. This is good news for first quarter GDP thus far. Again, it's a March reading. We've had weak readings in other months, but it is a good reading for production. It was the highest since June of 2022. And that does typically correlate with GDP. And when you look at new orders, they also moved into expansion territory. So that's good from a GDP perspective.

What the Fed's going to look at, and especially what the market's looking at today is that we're in that situation where good news is not always good news for the market. This is when you're looking at prices paid the prices paid components. This is what manufacturers are paying for input, for goods. It's the biggest jump we've seen since March of 2021. And it's the highest we've seen since September of 2022. So the markets are selling off on this, Bond yields are higher and that's because the Fed's going to look at this as hey. Hey, we don't have to cut rates so soon.

Let's continue to see the data. This is an inflationary data. This is not what they want to see. We'll continue to monitor this as it goes into the rest of economic data. It's a big week. This week, We'll get the kind of sister report to this manufacturing report. On Wednesday, when we get the services report that's going to be important to see the prices paid in there as well and then Friday, we'll get the monthly jobs report. That is typically always a market moving event. That's all we have today. If you have any questions or comments, please feel free to reach out to podcast at Verdence dot com. Thank you.