These Shiny Economic Numbers May Be a Mirage
A backlog of inventory makes the U.S. look more productive, but it won’t last.
Clearing out the glut of inventory.
Photographer: Simon Dawson/Bloomberg
Friday was another strong day for U.S. economic data, with the unemployment rate falling to a new generational low. But hidden in another dataset from Friday, the widely followed Institute for Supply Management manufacturing report, is some evidence that economic bottlenecks may be producing quirks in the data, which will result in sunny reports in the second quarter but some unwelcome effects a couple months later as those bottlenecks clear. We may realize in retrospect that what looked like strong productivity growth in the second quarter actually was an early indication of inflation.
That manufacturing report indicated customer inventories were at 39.6, well below a reading of 50 that indicates a balanced reading. That was the lowest level for the indicator since December 2010. At the same time, readings for new orders and prices paid were both very high, indicating strong demand and high costs for materials that go into the production of manufactured goods.