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The ISM report for February arrived above consensus estimates, but at levels that were far from positive. The business conditions index, derived from surveys of purchasing and supply executives, declined for the fifth consecutive month, registering at 41.6 versus January’s 42.9. The price index declined for the fourth month in a row after the previous 65 consecutive months of increases while the new orders and employment indices also registered at negative levels.

The data, although grim, is not without some positives. It is interesting to note that the only industry in which surveyed respondents reported an increase in all three categories of prices paid, employment and new orders was Real Estate, where managers also reported decreased inventories for the month. This data appears at first blush to support the thesis spelled out in Howard Penney’s Feb. 24 post on the decelerating rate of declines in home sales; that the real estate market could be close to a bottom.

We will keep our eye on manager survey data as it arrives, constantly testing each investment thesis.

Andrew Barber