ISM Recap

November 2nd, 2015 11:23 am | by John Jansen |

Via Millan Mulraine at TDSecurities:

US: Manufacturing Sector Shows Signs of Stabilization

·         The ISM manufacturing sector index declined for the 4th consecutive month in October, falling to 50.1 from 50.2.

·         Despite the drop, the index remained above the crucial 50-threshold suggesting some stabilization in this sector.

·         The details of the report were somewhat mixed, with some improvements in new orders and production activity, though export orders and order backlog remain firmly in contractionary territory.   


The ISM manufacturing sector index drifted modestly lower in October, dipping to 50.1 from 50.2 the month before. This is a slightly better showing than the market consensus for a drop to 50.0. Despite the drop, the fact that the headline number held above the 50-threshold suggests that the manufacturing sector is beginning to show signs of stabilization after months of weakness. This would be an encouraging sign for the Fed.

The details of the report were somewhat mixed. There were some improvements in the new orders sub-index, which rose to 52.9 from 50.1, pushing the new orders to inventory sub-index up to 6.4 from 1.6. Production momentum also rebounded as the headline index edged to 52.9 from 51.8, though employment slipped to 47.6 from 50.5, marking the first sub-50 print since April. The order backlog sub-index also remained firmly in contractionary territory, though this ticked modestly higher to 42.5 from 41.5.  

This report offers some encouraging that the prolonged slump in the US manufacturing sector may be nearing an end, as the headwinds from the strong dollar and weak global demand abate. For the Fed, this report will provide some encouragement that the US economic recovery may be finding its footing again after the summer swoon. Nevertheless, with the various regional manufacturing PMIs still firmly in contractionary territory, it will be some time before momentum begins to shift back in a positive direction.

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