This growth is largely the result of Fed money pumping last year, especially that in the 4th quarter. However, a change in direction may not be too far ahead for the PMI. Since the first of the year, much of QE2 money pumping has ended up back at the Fed as excess reserves. If this trend in money flow, out of the system and into excess reserves, does not reverse itself, just as Keynesian trend followers start to turn bullish because of data like this ISM report, the stock market and economy are likely to turn downward.
As of right now, though, of the 18 manufacturing industries tracked by the ISM, 14 are reporting growth in February, in the following order: Apparel, Leather & Allied Products; Petroleum & Coal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; Textile Mills; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Paper Products; Wood Products; and Miscellaneous Manufacturing.
The four industries reporting contraction in February are: Plastics & Rubber Products; Primary Metals; Nonmetallic Mineral Products; and Furniture & Related Products.
As for the inflation picture it continues to heat up. Even if Fed money growth slows at this point, there is enough money in the system to push prices higher for some time. The latest ISM data show:
Commodities Up in PriceGot that? No commodities reported down in price.
Aluminum (6); Aluminum Products (2); Brass (3); Brass Products (2); Cocoa; Copper (7); Copper Based Products (4); Corn (6); Diesel (3); Fuel Oils (2); Gasoline; Nickel; Plastics (2); Plastic Products (2); Plastic Resins (4); Polyethylene; Polyethylene Resin (2); Polypropylene (2); Rubber Products; Soybean Oil (4); Stainless Steel (4); Stainless Steel Products (2); Steel (6); Steel — Hot Rolled; Steel Products (3); Steel Surcharges (2); Sugar (2); Sulfuric Acid; and Wheat.
Commodities Down in Price
No commodities are reported down in price.
Ben Bernanke may not be concerned about inflation, but you should be.