Taps Coogan – April 25th, 2022

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The following chart, from Alpine Macro via ISABELNET, shows the relationship between the ISM (Institute for Supply Management) Manufacturing Index and the difference between new orders and inventories according to the same ISM surveys.

The imbalance between orders and inventories that emerged since the start of Covid has finally reversed. We are now showing excessive inventories relative to orders, which is typically correlated to a slowdown in manufacturing activity – and a drop in inflation.

While inventories finally appear to have been replenished on an absolute basis, relative to sales they are still historically low, which means that new orders are likely weakening as well.

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