The March CMI should provide cautious expectations of consistent future growth. It was hoped that the February reading was the outlier, rather than a grim thesis for the rest of 2014, but a holding pattern due in part to the effects of a harsh winter is preferred to a decline, leaving room for some optimism about the economy in months to come.
Most of the factors comprising the March CMI stayed the same from the previous month, especially where the unfavorable factor index is concerned, with a few notable exceptions. Those looking for positive information are most likely to find it in categories like amount of credit extended.
“A rise in amount of credit extended is better news than it might seem, as it suggests some anticipation for better days ahead,” said NACM Economist Chris Kuehl. “That credit was being extended despite the drop in applications for credit is a good sign in general.”
That said, if there was in fact little movement in most CMI categories, what accounts for this? Kuehl again cited the unusually long and bitter winter, like so many others: “The CMI isn’t far from readings registered in other segments of the economy. The latest durable goods numbers, industrial production numbers and other measures have been flat as well. Ample evidence suggests that weather caused a great deal of disruption in almost every category. The transportation system was paralyzed several times, affecting everything from manufacturing to retail.”
In short, March feels like a holding pattern month, as the effects of an unpredictable winter fade. Kuehl said overall, even if the CMI flattened out at a fairly unimpressive level, there are reasons within the index's categories to believe the business community remains encouraged and optimistic about growth potential, but with a "bias toward caution."
For a full breakdown of the manufacturing and service sector data and visuals, view the latest complete report at http://web.nacm.org/CMI/PDF/CMIcurrent.pdf on Monday afternoon. CMI archives may also be viewed on NACM’s website at www.nacm.org/cmi/cmi.asp.