• February's ISM figure rose slightly to 35.8 from 35.6 in January. The increase was mainly driven by the "production" sub-index. We also saw a slight increase in the new orders - inventories ratio, as inventories declined to 37.0 and new orders were merely unchanged at 33.1. The price indices were unchanged at 29.0.
• The readings from the local indices have been very mixed this month with a deterioration in Philly Fed, Empire, Cincinnati and improvements in Richmond, Dallas and Kansas. Overall the local indices suggest an ISM reading of 35.6.
• Tomorrow we expect a small increase in the ISM index with a reading of 36.5, which is slightly higher than the consensus forecast of 36.0.
• Going forward, we still expect to see a recovery in the ISM over the coming quarters. With demand stabilising and inventories declining rapidly, manufacturing production will begin to stabilise in the coming months.
