ISM: U.S. Manufacturing sector growing again

The August 2009 Manufacturing ISM Report On Business was released and the widely followed PMI Index came in ahead of expectations at 52.9. Expectations were for 50.5. As 50 marks the divide between contraction and expansion, this survey indicates that U.S. manufacturing is expanding for the first time in years.

This is the strongest reading since June 2007 and the first reading above 50 in 19 months. The report was strong across the board. But, employment continues to lag and it came in at a disappointing 46.4. The increase in production has much to do with the inventory cycle, something I have been anticipating since April (see my section on other positive economic factors in this post).  So, the question now is whether this uptick is sustainable.

For now, the recovery in manufacturing seems to have arrived. Below is the chart supplied by the ISM outlining the manufacturing situation.


Both the new orders and the production numbers were off the charts strong, meaning that the third quarter is almost certainly going to show a positive contribution from manufacturing.  Prices paid (due to the rise in commodity prices) are a negative factor, as is employment. The report indicates that inventories are still being wound down, albeit it at a slower pace.  This sets Q4 up for some very favorable comparisons.

On the whole, this is a very bullish report and should provide some support equity markets, which have been faltering of late (Addendum: the Dow Jones Industrial Average was off 100 points just two hours into trading despite this report).

Update 1200ET: The Dow is now off 155 points.  This tells you the equity markets are running out of momentum, one reason I have turned bearish.  I would have thought a bullish report would at least stem losses. Wrong!


Manufacturing ISM Report On Business – ISM website

Comments are closed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More