Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  The ISM Manufacturing Index Declined to 48.2 in December
Posted Under: Data Watch • ISM
Supporting Image for Blog Post

 
Implications: Today's ISM report starts 2016 with a fizzle, not a bang, with the Manufacturing index hitting the lowest level since the end of the recession in 2009. While we would prefer the manufacturing sector show the same solid pace of recovery as the much larger services sector, we don't see the recent slowdown in manufacturing as a sign of looming doom. Today's data continues to highlight a stark contrast in two broad sectors of the economy: services, where the economy is expanding briskly and prices are rising, versus goods, where both growth and inflation are soft to non-existent. ISM survey respondents cited low energy prices as a leading culprit in December, as it continues to hurt companies in the energy sector and looks to be causing some companies to delay new purchases as they get improved margins from their existing machinery. Adding to the trouble, stores say they are still working through excess inventories that resulted from overaggressive purchasing in early 2015. There are two important things to remember with today's report. First, the manufacturing sector represents a much smaller portion of the economy than the service sector, which grew much more rapidly in 2015. Paired with solid gains in employment and wages, as well as positive trends in housing and consumer spending, the economic fundamentals suggest a recession is nowhere in sight. Second, the inventory buildup is a temporary factor. In other words, ignore headlines that suggest the sky is falling and that the Fed should hold off on further rate hikes (or, from the super doves, calls for rates to be cut back to zero.) The modest readings from the ISM manufacturing report in 2015, after peaking at 58.1 in August 2014, have given some pessimists reason to cheer, but we see no broad-based evidence of a significant slowdown. And remember, the ISM is a survey which can reflect sentiment as much as actual economic activity. Overall activity isn't booming, but it does continue to plow forward at a modest pace. In other news this morning, construction declined 0.4% in November, led by a drop in government projects and chemical manufacturing facilities. Single-family home building rose 0.6% and we expect a large gain in December given unusually warm December weather. In spite of the drop in overall construction in November, it's still up 10.5% from a year ago and likely headed higher in 2016.

Click here for PDF version
Posted on Monday, January 4, 2016 @ 10:32 AM • Post Link 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.
Search Posts
 PREVIOUS POSTS
M2 and C&I Loan Growth
Let’s Try Again: S&P 2,375
M2 and C&I Loan Growth
New Single-Family Home Sales Increased 4.3% in November
Personal Income Increased 0.3% in November
New Orders for Durable Goods Were Unchanged in November
Existing Home Sales Dropped 10.5% in November
Real GDP Growth in Q3 was Revised to a 2.0% Annual Rate
Greedy Innkeeper or Generous Capitalist?
M2 and C&I Loan Growth
Archive
Skip Navigation Links.
Expand 20242024
Expand 20232023
Expand 20222022
Expand 20212021
Expand 20202020
Expand 20192019
Expand 20182018
Expand 20172017
Expand 20162016
Expand 20152015
Expand 20142014
Expand 20132013
Expand 20122012
Expand 20112011
Expand 20102010

Search by Topic
Skip Navigation Links.

 
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.
Follow First Trust:  
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 © 2024 All rights reserved.