To disentangle the signal from the noise, I have first extreme-adjusted the individual time series (the ISM and the PMI survey data time series) and then I have averaged them. Extreme-adjustment is an algorithm which removes or reduces the impact of extreme events. In particular, over this period, it reduces the impact of the Covid Crash in early 2020. In addition, averaging two statistically independent series reduces the random fluctuation (error term) in the resulting index. Both these techniques reduce the "spikiness" of the time series, making the chart easier to read.
Right now, the PMI is giving a more robust picture of the US economy, and the ISM survey a slightly weaker view. This pattern has been the other way around in the past, for example in 2017/18. But the line to watch remains the thick green one. It points to a renewed upturn, as the economy shakes off the impact of the Fed's policy tightening, as government spending and private investment on the back of IRA tax incentives push the economy forward.
Good news for Biden's re-election. But it also means that the Fed will be reluctant to cut rates, until it gets evidence that inflation is continuing to decline.
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