ISM Manufacturing Index Rises, But Can Momentum Be Sustained?

The modest rise in the ISM Manufacturing Index in yesterday’s September update surprised most economists, based on consensus forecasts that anticipated a decline. But the advance to 56.2 last month--the fourth consecutive gain for this benchmark--matched Monday's average econometric projection via The Capital Spectator. More importantly, this early look at September’s macro profile suggests that economic growth remains the prevailing wind for evaluating the business cycle. Assuming, of course, the fiscal follies in Washington don’t roll on for too long and bite too deeply.

As of Tuesday afternoon New York time, the United States federal government remains closed for business, save for what’s deemed essential and necessary. It remains to be seen how long this goes on, which is why it’s so hard at the moment to estimate what the economic blowback will be. But at least there’s still a sign of forward momentum in the September economic trend, or so today’s ISM data suggest. Both the headline number and the employment component in the numbers du jour increased last month. The critical new-orders slice of the data dropped, but for the moment that doesn’t look troubling since this part of the survey is still running at a relatively high level.

In fact, ISM’s new orders level for September is near its highest elevation in over two years—second only to the August 2013 number. That’s a signal for thinking that the near-term outlook for manufacturing activity remains upbeat. Then again, it’s unclear if the encouraging trend will go the way of the dodo in October, courtesy of the US Congress.

Yes, the country has fallen back into what’s becoming a disturbing habit in fiscal matters in Washington: turning the government into a potentially lethal threat for the business cycle. But at least one politician in Washington has the ability to see things clearly. "What we're doing here is shooting ourselves in the head," says California Rep. Dana Rohrabacher via The Wall Street Journal.