It is hard to overlook a dramatic increase in one of our most important economic statistics, the ISM Purchasing Managers Index (PMI). Observers were warning to be cautious when the December value came in at a weaker growth level of 54.3, down from the 58.5 level of November. Values over 50 indicate growth and under 50 indicate contraction. So, it was surprising when January came in at a level of 56.6, improving to close in on the November level! The current level of 56.6 is still below its 12-month average of 58.5, but the upward trend is a positive result.
Most interestingly, this growth in the PMI can be correlated to a 4% real GDP growth, so underlying strength in the economy seems robust if it can be maintained. Some observers are calling this the “Goldilocks” economy, harkening back to a time when stable interest rates, low inflation, strong job growth, strong dollar, and strong earning growth all coexist without any observed stresses. We shall see.