There's nothing like conflicting indicators to befuddle analysts and executives. The fact that our selected recovery indicators are contradictory is the best sign that we are at or very close to the bottom of the recession. Back in January we explained why we selected the specific indicators from the Institute of Supply Management, as well as the NASDAQ index, and proprietor's income from the Bureau of Economic Analysis. This is our latest summary table:
Three of the indicators are up, and three are down. The three that are up are on the “change since prior reading” line and are in bold italics.
One of the indicators, new manufacturing orders, is higher than at the start of the recession, and finally broke above 50, indicating that business is growing. Before we get too excited, we must mention that we're growing off a low base. The last time this was positive was November 2007. It almost makes it look like the National Bureau of Economic Research selected December 2007 as the start of the recession because of this very indicator.
The other ISM manufacturing and non-manufacturing indicators that are still below 50 indicate that the economy is still contracting. Manufacturing imports are just declining at a slower rate.
The disappointing part of this month's report is that the non-manufacturing indicators are showing deeper contraction. I'll delve into the dirty details in Monday's column.
Of worry to me is that proprietor's income has worsened since the fourth quarter of 2008. This indicator of small business health is critically important to having a recovery. Small business is taking a really big hit this recession, and higher tax rates for subchapter S income tax filers are unfortunately aimed directly at them. Small businesses often have more flexibility. The Wall Street Journal had an article the other day about businesses leaving storefronts and heading home. In my opinion, many of these businesses will not head back to those storefronts when their fortunes change. The tools available to run many businesses out of homes are better than ever. This has even led some stock analysts to favor Vistaprint as a stock investment, one of which has written on Seeking Alpha. The main point is that small businesses, especially home microbusinesses, are difficult to find, and very difficult to make sales calls to. Printers are not used to that kind of business, and sales cycles can be long. Yet these businesses have the most to gain from cross-media programs that rely on the expertise of “the new print business” as an advisor, creator, manager, and deployer of communications. This will be a key factor in the post-recession printing business, and I wonder how many print businesses have this as a serious item on their agendas.
Overall, this month's recovery indicators are less encouraging than last month's, except for that one item of manufacturing new orders that broke through to levels higher than the recession's start. Let's hope that we don't hear locomotive sounds coming from the far end of the tunnel and that we're getting that peek of daylight we're so anxious to see.