US ISM: Despite modest retreat in headline, production remains strong - Wells Fargo
Overall, the ISM purchasing managers index came in at 58.2 with solid gains once again in production, employment and orders, explained analysts from Wells Fargo. They added that input prices continue to show upward pressure and restraint on profits.
Key Quotes:
“The ISM manufacturing index slowed ever so slightly in November to 58.2 from 58.7. The composite index is coming off a cycle high of 60.8 in September and with a six-month average of 58.4, the index continues to signal firmness in the manufacturing sector.”
“For the year ahead, we expect quarterly GDP gains of 2 percent or greater. Subcomponent details are encouraging. The production index, for example, has been above 60 since June and came in at 63.9 in today’s report for November; that’s the highest reading since March 2011.”
“As for employment, that index came in at 59.7, above its six-month average of 58.7 with 11 of 18 industries reporting employment growth. This is a plus for the employment numbers to be reported next Friday.”
“New orders came in at 64.0 in November, above the 63.4 for October and the 62.7 six-month average. This is a good signal of continued growth ahead. Fourteen of 18 industries showed growth in orders, including electrical equipment, appliances, paper, furniture, plastics and machinery. The gains in new orders are solid and broadly based.”
“Rising commodity prices have led to some cost pressures in the nation’s factory sector and this is reflected in the 65.5 reading on prices paid. Fifteen of the 18 industries surveyed indicated paying higher prices for their inputs including plastics, textile mills, machinery, food & beverage and paper, curbing profit growth in these industries. Commodities up in price included aluminum (13 straight months), corrugated boxes (14 straight months), caustic soda (5 months) and hot rolled steel (12 months). The rise in the ISM prices index does intimate upward pressure on core finished goods in the producer price index.”