US ISM Manufacturing
On Tuesday morning, May 1, the Institute for Supply Management reported its Manufacturing Index for April at 54.8 (Figure 1.1) – well ahead of last month’s 53.4 and surprisingly higher than the estimates for a 53. Recent regional manufacturing reports released at the end of April suggested a softer April U.S. ISM. This report should be viewed as a significant positive surprise that will favorably impact the capital markets in the near term.
Here are some highlights from the report:
• This is the highest ISM reading since the June 2011 reading of 55.8 (Figure 1.2)
• New Orders surged to 58.2 from 54.5 last month (Figure 1.3)
• Production rose to 61 from 58.3 last month, the highest reading since April 2011 (Figure 1.4)
o 15 of the 18 reporting industries posted gains in both production and orders
o None of the 18 industries reported declines in both production and orders
• Employment Index rose to 57.3 from 56.1, a 10-month high (Figure 1.5)
• Inventory Index declined to 48.5 from 50
• Orders waiting to be filled fell to 49.5 from 52.5
• Prices paid was unchanged at 61.0
During April, capital markets navigated through an intense “tug of war” between corporate earnings and weaker global economic data, with earnings being the sole anchor on the higher market side. This morning’s stronger than expected ISM suggests that earnings may not be alone in pulling against uncertain FOMC monetary policy, a deepening European recession, and slowing Chinese growth.
Next up is Friday’s U.S. jobs report, which I suspect will be the catalyst for some of the busier trading days we will see in the near term this year.
Figure 1.1 U.S. ISM Manufacturing, December 2007 to Present
Figure 1.2 U.S. ISM Manufacturing, May 2011 to Present
Figure 1.3 U.S. ISM New Orders, December 2010 to Present
Figure 1.4 U.S. ISM Production Index, December 2010 to Present
Figure 1.5 U.S. ISM Employment Index, December 2010 to Present