This is giving credibility to Ben Bernanke’s (and our) theory that at least some of the recent weakness in activity data in many countries would prove to be earthquake related and therefore transitory. Indeed the US ISM manufacturing survey showed a modest improvement in June against average expectation of a further weakening.
That June recovery was centred largely in inventories, just as the weakness was centred in May. Inventories were clearly run-down in the immediate aftermath of the quake, but have since been restored.
There was a modest improvement in the New Orders index. That soft recovery in the key forward-looking index tells us, as we suspected earlier, that there is perhaps more to the recent softness in US activity indicators than just the quake-related supply disruptions.
On a brighter note the employment index moved higher (from 58.2 in May to 59.9 in June), and the prices paid index fell again (from 76.5 to 68.0). The decline in the prices paid index indicates some cost-relief to manufacturers on the back of softer commodity prices.