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It's Not All Bad News for the Economy

Some recent problems for businesses have shown signs of improvement, the Action Alerts Plus team notes.
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There's always a lot of drama on Wall Street around what the economy is doing.

And much of it centers on the latest results of any number of surveys and indexes. 

While it's important not to rely on any single one to make investment decisions, a review of each release can keep you in touch with broader trends that can affect your portfolio. Plus, it helps keep economists employed. 

To get a sense of the economy's health the Action Alerts Plus team looks at a number of indicators including the ISM Manufacturing Index. The index measures economic activity through a survey of manufacturing firms. It uses data points such as business activity (orders placed and products shipped), employment trends (hires and quits), internal orders (how many parts and products a company buys) and more.

"ISM's [latest] report pretty much confirmed what many of us suspect about March - that existing inflationary pressures accelerated considerably during the month," the AAP team wrote recently.  "That though was confirmed with the jump in ISM's Prices Paid figure to 87.1 for March, the highest level in some months, even stronger than the 82.4 reading in November.”

According to Action Alerts Plus, much of the slowdown in manufacturing can traced back to the same two issues which have plagued the durable goods sector for well over a year. Inflation has increased the price of raw materials and mid-stage components, while supply chain issues still make it harder for companies to both receive necessary parts and ship out finished goods.

However there is some good news:

“The renamed S&P Global US Manufacturing PMI report for March painted a somewhat different picture. While the headline figure pointed to output growth accelerating at its fastest pace in seven months, new order growth also ticked higher leading backlogs to rise considerably month over month," the AAP team wrote. 

"What stood out in this report even more was the finding that even though lead times still lengthened markedly amid labor and material shortages, some firms stated that bottlenecks started to ease."

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