Encouraging ISM Numbers Provide Economic Optimism

ISM Indices Offer Glimmer of Economic Hope

One good month does not make a trend, but all trends do start out with that first good step. That's why March's upward steps for both ISM Indices offer investors some bullish hope, and give the economy something to build on going forward.

 Those who follow the ISM (Institute for Supply Management) Indices -- the services one as well as the manufacturing one -- will likely know neither have been especially encouraging of late. The manufacturing-oriented index has been trending lower since late-2014, while the services version of the index has been in a slump since the middle of last year. With the ISM Manufacturing Index surging from 49.5 to 51.8 last month though, while the ISM Services Index rose from 53.4 to 54.5, at least this particular measure of economic strength looks encouraging.

It remains to be seen if either of these upticks will follow-through in April. Both ISM Indices were up, but rose in the shadow of a 1.7% decline in Factory orders for February. Construction spending was down in February as well. Neither jibe with the uptick of the ISM readings.

The proper explanation is the most obvious one. That is, the economy remains in limbo, with some aspects looking better while others are deteriorating. While March's ISM Indices are reason for hope, they can't do it by themselves. Next week's capacity utilization and industrial productivity readings for March will lend or take away credence for this week's economic data. Ditto for next week's retail sales and inflation data for March.