Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  The ISM Manufacturing Index Declined to 55.4 in September
Posted Under: Data Watch • ISM

 

Implications:  The pace of growth in the manufacturing sector slowed in September, but it continues to expand at a healthy clip.  Remember, readings above 50 signal expansion, so the September reading of 55.4 is comfortably within growth territory, even if it is a modest decline from the August print of 56.0 (which, it's worth noting, was the highest reading for the index since late 2018).   Growth in September remained broad-based, with fourteen of eighteen industries reporting expansion, while four reported contraction.  And comments from survey respondents showed more than two positive comments for every cautious comment.  Looking at the major indices, the two most forward looking – new orders and production – led the headline number lower in September, showing declines from August's multi-year highs, but remain above 60.0.  Given that the customers' inventories index (where a reading below 50 signals inventory levels are too low), hit the lowest reading in more than a decade at 37.9 in September, while at the same time the backlog of orders index (which show orders rising faster than production can fill them) hit a multi-year high at 55.2, the data suggest activity should remain robust for the foreseeable future.  Employment, meanwhile, remains on the "bad, but not as bad" path, rising to 49.6 in September from 46.4 in August.  We are projecting that tomorrow's report on nonfarm payrolls will show a gain of 1.073 million jobs in September, which would move the unemployment rate down to around 8.0% from 8.4% in August.  The index for supplier deliveries, which rises when companies have difficulty meeting demand on a timely basis, and moves lower as delays ease, moved higher in September to 59.0.  The coronavirus and related shutdowns have wreaked havoc on supply chains, in particular, transportation challenges, labor shortages, and limitations on the number of workers who can be present at any given time due to safety concerns.  These challenges have generated a sustained headwind to the process of getting back to business and are expected to remain for the foreseeable future, representing one of the biggest headwinds to even faster production and inventory growth.  On the inflation front, the prices paid index rose to 62.8 from 59.5 in August, as rising costs for aluminum, copper, and freight led the index.  This, too, is in part a reflection of the supplier delivery difficulties, as rising costs to acquire and produce input materials are being passed along to manufacturing companies.  Recovery is clearly under way, and now the focus shifts towards the ability of companies to return to business and meet demand.  It's not smooth sailing yet, but the path ahead continues to improve.  In other news this morning, construction spending rose 1.4% in August (+3.5% including upward revisions to prior months).  Strong growth in homebuilding, paired with increased public spending on highways & streets, was partially offset by a decline in private sector power projects.   

Click here  for PDF version

Posted on Thursday, October 1, 2020 @ 1:10 PM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2021 All rights reserved.