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November 2, 2015 | Manufacturing ISM Flirts With Contraction Third Month, Employment Shifts to Contraction

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Economists who looked at last month’s barely above contraction report and predicted the same results this month were nearly spot on.

Last month the Manufacturing ISM was 50.2, this month the Bloomberg Consensus was 50.0, and the report came in at 50.1.

For a third straight month, the ISM is skirting near contraction, at 50.1 in October vs 50.2 and 51.1 in the prior two months.

New orders are showing some life, up nearly 2 points to a 52.9 reading that is safely above breakeven 50. Production is also at 52.9. But other readings are not as a favorable. Backlog orders remain in deep contraction at 42.5 while employment, for the first time in six months, is also in contraction, down nearly 3 points to 47.6. Exports have been the difference this year for the factory sector and new export orders in this report, at 47.5, remain below 50 for the fifth straight month. Prices, at 39.0, extended their long run of contraction.

ISM October 2012-Present

 

That was the lowest reading since May of 2013. Let’s investigate all the details of today’s report straight from the Institute for Supply Management Manufacturing ISM® Report On Business® released this morning.

IndexOctSepPP ChangeDirectionRate of ChangeTrend in Months
PMI®50.150.2-0.1GrowingSlower34
New Orders52.950.1+2.8GrowingFaster35
Production52.951.8+1.1GrowingFaster38
Employment47.650.5-2.9ContractingFrom Growing1
Supplier Deliveries50.450.2+0.2SlowingFaster3
Inventories46.548.5-2.0ContractingFaster4
Customers’ Inventories51.054.5-3.5Too HighSlower3
Prices39.038.0+1.0DecreasingSlower12
Backlog of Orders42.541.5+1.0ContractingSlower5
Exports47.546.5+1.0ContractingSlower5
Imports47.050.5-3.5ContractingFrom Growing1

Key Points

  • Backlog of orders are in contraction
  • Growth in new orders barely positive
  • Exports contracting for the fifth month
  • Prices have plunged

There’s nothing in the ISM report to make the Fed want to hike, but the Fed will do what they want.

For an interesting alternative to today’s ISM numbers please see Gardner Business Index Shows Small to Medium Sized Businesses Struggling Most.

Mike “Mish” Shedlock

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November 2nd, 2015

Posted In: Mish Talk

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