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US ISM Manufacturing Remains Too High

ByDanske Markets
Published 12/02/2014, 02:52 AM
Updated 05/14/2017, 06:45 AM

  • The US ISM manufacturing index surprised once again in November. We had expected the ISM to move more in line with real economic data. Instead, the index held almost unchanged at 58.7 only marginally lower than in October (59.0).
  • Details were in general positive. Especially the new orders index which managed to increase to 66.0 from 65.8. Production held up at a lofty 64.4, employment declined only slightly 54.9 from 55.5 and inventories declined to 51.5 from 52.5. Customer inventories on the other hand increased two points to 50 and pushed our leading “new order less customer inventories” index lower. This measure now suggest a drop in the ISM to around 54.
  • Outside the components which makes up the headline index, prices paid declined to 44.5 from 53.5 reflecting the latest decline in raw materials prices.
  • The ISM has become increasingly detached from real manufacturing production growth and we continue to expect a moderation in the ISM over coming months. The Markit PMI has done a much better job in predicting the real level of activity in the manufacturing sector (see chart below).

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