Posted by Joseph Y. Calhoun, III

The ISM manufacturing index rose last month:

(Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in June for the 17th consecutive month, while the overall economy grew for the second consecutive month following seven months of decline, say the nation’s supply executives in the latest Manufacturing ISM Report On Business^®.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June. Most encouraging is the gain in the Production Index, which is up 12.1 percentage points in the last two months to 52.5 percent. Aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries, as the Customers’ Inventories Index remained below 50 percent for the third consecutive month. The Prices Index was unchanged from May, indicating that the supply/demand balance is improving. Overall, a slow recovery for manufacturing is forming based on the current trends in the ISM data.”

Overall, this is a good report. While the overall index remains below the 50 expansion line, the index is at a level that corresponds to overall economic growth. The production index has already risen above 50 and the employment index showed a large rise. The new orders were disappointing, falling back to 49.2 after getting over 50 last month.

The ISM is still rising and in the past this has been good news for the economy and the stock market. As I’ve pointed out on this blog many times, stocks tend to bottom with the ISM and continue to rise even if the index is below 50.