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ISM index still strong

The ISM manufacturing index for February came in a bit weaker than expected, but as this chart shows, it is still very strong, and points to real economic growth in the current quarter of 4-5%. Since this is a diffusion index, the current reading says that 56.5% of respondents see things picking up. The prices paid index, in the next chart, shows that fully two-thirds of respondents report paying higher prices. Once again, we see strong evidence that deflation is dead at the producer level. Both of these indices strongly support an ongoing recovery, with no sign of the dreaded double-dip. The fact that so many are fearful of the double-dip means to me that pricing remains very conservative.

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