US ISM: Despite retreat in headline, production remains strong - Wells Fargo

According to analysts from Wells Fargo,  today’s ISM Manufacturing report shows encouraging underlying details and signals continued strength in the factory sector.

Key Quotes: 

“The ISM manufacturing index retreated ever so slightly in October, losing 2.1 points to post a still solid figure of 58.7. The composite index is coming off a cycle high of 60.8 and continues to signal firmness in the manufacturing sector. As effects from the recent hurricanes fade from the data, we can get a more accurate read of how the manufacturing sector is performing.”

“While the majority of the index’s subcomponents experienced a negative monthly change, the details are still encouraging. The production subcomponent lost 1.2 points but remains above 60.0, and has done so for 5 consecutive months. Likewise, the new orders component lost 1.2 points but posted a 63.4 reading, suggesting that future orders will remain strong in the coming months. This marks the 14th consecutive month of new orders growth.”

“Of the 18 manufacturing industries, 15 reported employment growth in October. Friday’s employment report will provide us with more detailed figures of the actual number of hires. We look for the factory sector to add to payroll growth in Friday’s employment report.”

“Another area where hurricane effects were still lingering was in prices. Although the prices paid index fell to 68.5 in October, the index is still at elevated levels. Prices for raw materials have now increased for 20 consecutive months.”