KEY DATA: ISM (Manufacturing): +1.9 points; Orders: +1.3 points; Hiring: +1.2 points/ Construction: -0.8%; Private: -0.3%

IN A NUTSHELL: “With manufacturing coming back, it looks like the early year economic swoon is over.”

WHAT IT MEANS: Manufacturing has been battered by the collapse of the energy sector and the strength of the dollar, but those factors may be moderating. The Institute for Supply Management reported that manufacturing activity improved solidly in June. New orders and production increased strongly and that led to hiring to finally kick in again. The employment index had been negative for most of the past year, so this may be a sign that firms are seeing strong enough demand to add to their payrolls. Indeed, with new orders running at a very high level, we payroll gains could accelerate, especially since order books are filling again.

Construction spending fell in May, led by a drop in government spending. Distressingly , construction of key infrastructure items such as transportation, highways and streets, waste and sewer, power and water were all down not just in May but also over the year. It is hard to grow the economy strongly if the government doesn’t invest in future-growth generating infrastructure, and that seems to be happening.

MARKETS AND FED POLICY IMPLICATIONS: The Fed was cautious in June, in part because of the softening job gains, led by contracting manufacturing payrolls. But it looks like manufacturing is coming back and that should stabilize if not lead to rising industrial employment. We will get an idea about that next Friday when the June employment report is released and I do expect a solid increase in manufacturing. Regardless, if manufacturing production really is accelerating, that would indicate the U.S. economy is on the rise and the Fed has to keep its eye on the target, which is U.S. economic growth. Of course, if government doesn’t want to spend money on what just about everyone agrees are necessary infrastructure projects, not only will near-term activity be slowed but long-term growth will be limited as well. Investors should be buoyed by the manufacturing improvement and maybe they will recognize that the U.S. economy can withstand the impacts of Brexit.