Manufacturing is at the foundation of our economy. It runs through the entire economy from mining to raw materials, manufacturing, transportation, wholesale, retail, construction, home furnishing, you name it and it most includes manufacturing. It is one of the first sectors hit by economic recession and one of the most fundamental elements of a recovery. It is the indicators reflecting the general health of the economy. So when it is in a 9-month run, it is likely signaling an improving economy from the bottom up, as it is feed from the consumer down. This is good news.

The current ISM (NAPA) Manufacturing Index rose by 0.8 points in April to 60.4%, a bit above market expectations. This is the highest level since June 2004 and indicates that manufacturing activity grew for the ninth consecutive month. This indicates that the demand for factory goods continues to accelerate. This is reflected in increases export orders. Production accelerated and is now growing stronger. Inventories fell back slightly, which will accommodate further increased production.

About the NAPA Index

The NAPM Index provides a comprehensive view of the manufacturing sector. The composite index is derived from a survey of 300 purchasing managers in 20 different industries nationwide. The survey asks questions regarding production orders, commodity prices, inventories, vendor performance, and employment. The purchasing managers are asked to rate the categories as up, down, or unchanged.

The National Association of Purchasing Managers compiles the data and publishes it on the first business day of each month, covering the prior month.

What it means (why should we care)

Analysts and investors like the fact that the data is timely, within hours of the end of each month. The index is watched closely for unexpected changes or turning points as an indication of the overall economy's ups and downs. An index reading over 50 indicates the sector is expanding. A reading below 50 indicates the sector is contracting and a reading below 44.5 indicates the sector and the overall economy are contracting (portends of a possible recession).

On a scale of 1-4*, we place ** on the importance this indicator has on the flow of monies in and out of real estate. In addition to NAPA, our Economic Focus and Week In Review track about 40 of the key economic indicators as they pass through the week.

Keep an eye on the ISM (NAPA) Manufacturing Index.