The ISM Rings The Bell?

Just a quick comment on the yesterday's release of the Purchasing Managers Index from the Institute of Supply Management. Although the PMI print of 59 was one of the strongest in recent memory, mainly on the back of production and new orders, the markets apparently were looking for more. This is as the equity markets traded relatively flat on the day. More so, look at the inventory survey results in the table below, as presented by the ISM.

MANUFACTURING AT A GLANCE AUGUST 2014
Index	Series Index Aug	Series Index Jul	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI®	59.0	57.1	+1.9	Growing	Faster	15
New Orders	66.7	63.4	+3.3	Growing	Faster	15
Production	64.5	61.2	+3.3	Growing	Faster	6
Employment	58.1	58.2	-0.1	Growing	Slower	14
Supplier Deliveries	53.9	54.1	-0.2	Slowing	Slower	15
Inventories	52.0	48.5	+3.5	Growing	From Contracting	1
Customers' Inventories	49.0	43.5	+5.5	Too Low	Slower	33
Prices	58.0	59.5	-1.5	Increasing	Slower	13
Backlog of Orders	52.5	49.5	+3.0	Growing	From Contracting	1
Exports	55.0	53.0	+2.0	Growing	Faster	21
Imports	56.0	52.0	+4.0	Growing	Faster	19
OVERALL ECONOMY				Growing	Faster	63
Manufacturing Sector				Growing	Faster	15

Manufacturing ISM^® Report On Business^® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries indexes.

Both inventory and customers' inventory levels increased by more than 3 points and 5 points, respectively. Generally, inventory survey results remain below the 50 demarcation, as manufacturers typically run lean production lines and a build up in inventory levels can indicate a problem. Of course, that depends on production and new order levels. I would not be so bold to predict an outright decline in either at this point, but the customers' inventory survey results are flashing a warning of a slow down in new orders. Throughout the survey's history, customer inventory survey results have averaged around 45 and lower(higher) than averaged have typically presaged a pickup(slowing) in new orders. We will have to see if the ISM results have rang the bell.