The chart on the left shows some tendency for the ISM to rise and break out of its current downtrend. It may be too soon to conclude that it has but there are a number of important straws in the wind that give rise to optimism. These include, that construction has showed signs of a reversal or slowing in its weakness, that consumer confidence has been revived after a dip and that job growth is now on firmer footing. With the inventory cycle seeming to have played out substantially in Q1 and with GDP having taken a big hit to growth from that and from the trade deficit, the future looks less forbidding and less baited with traps.

The ISM this month put is main readings on firm ground. All readings save one are above their averages since 1999. Most have readings at or above the 60^th percentile of their range over that same period (inventories and order backlogs are exceptions).

Price pressures, export orders and overall orders are the strongest of these series evaluated relative to their respective means. While these are a good set of signals for the future, they should also raise an inflation warning because of the elevated price reading. A counterpoint to that, however, is that supplier deliveries are the low component reading as we have seen in a number of regional MFG surveys. By itself it suggests that there is no tightness causing shipments to lag so fears that overheating may bring – or be brining - inflation may be incorrect or premature. It may be that it is oil and related products that are responsible for the elevated price reading.

The strong import reading is reassuring about domestic growth overall. Import diffusion resides 5% above its average reading; that should suggest that domestic demand is expected to remain solid. One remaining problem however is the above average lag time - 11% over average - for capital expenditures. Firms are lagging their capital expenditures and that is not a good sign. This reading tells us that capital spending may continue to lag in the months ahead.

THE ISM reading was not so buoyant on the jobs front, still as a percent of its average and range the reading is solid. Nonetheless MFG continues to shed jobs, as we saw earlier in the employment report for the month.

On balance, the ISM is a solid report. It raises a few question marks on capital spending and inflation. But by and large the report shows broad-based strength while the weakness in the supplier delivery readings suggests that bottle neck issues are still some ways off. Its most leading components are among its strongest.