Implications: Manufacturing continues to boom, with the ISM index coming in at 60.4 in April. The index has now been over 60 for four straight months and the four-month average of 60.9 is the strongest since 1984, when the economy was in the huge 1980s recovery. The sub-indices all remain at very high levels. The only bad news in today's report was on inflation, where the prices paid index rose to 85.5 from an already elevated 85.0 in March. The index is quickly approaching levels seen during the summer of 2008, when oil prices were spiking. The Fed's loose monetary policy continues to become more and more inappropriate as the recovery continues. In other news this morning, construction increased 1.4% in March (1.1% including downward revisions for February). The increase in March was led by home improvements and commercial construction (power plants, manufacturing facilities, and hospitals). We project that, in general, both home building and commercial construction will be moving upward from current levels, although certainly not every month.
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