Implications: Good news on manufacturing today. The ISM manufacturing index came in at 51.7 for October, easily beating consensus expectations and exceeding 50 for the second consecutive month after lagging 50 for the prior three. According to the Institute for Supply Management, a level of 51.7 is consistent with real GDP growth of 3.1%. However, these data only cover the manufacturing sector. As a result, we see today's data consistent with plow horse like 2% growth in the overall economy. The best news in today's report was that the new orders index rose for the second straight month. Although the employment index fell to 52.1, it remains in positive territory. On the inflation front, the prices paid index declined to 55.0 in October from 58.0 in September. We expect prices to continue to gradually move higher. In other news this morning, construction rose 0.6% in September, but was up 1.7% including revisions to prior months. The gain in September was led by single-family home construction which was up 3.9%. The construction of new homes – 1-family and multi-family, combined – is up 6 months in a row and up 25.7% from a year ago. In other recent news, the Case-Shiller index, which measures home prices in the 20 largest metro areas, increased 0.5% in August (seasonally-adjusted) and is up 2% from a year ago. In the past six months, prices are up at an 8.7% annual rate. Prices increased in almost every metro area in August, led by Atlanta and Phoenix; Seattle was the lone exception. All metro areas have had price increases in the past three months.
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