The ISM manufacturing index increased to 52.7 in November

Implications: Very good reports today on manufacturing and construction.  The manufacturing sector has now grown for 28 straight months and came in stronger than the consensus expected in November.  Boding well for future months, new orders came in at a very strong 56.7, increasing for the second consecutive month after falling for three straight months before.  The one sub-index that remains weak is inventories.  The reluctance of manufacturers to accumulate inventories may stifle growth in the short term, but should add to growth in the future.  On the inflation front, the prices paid index rose to 45.0 in November. A reading below 50 is a welcome sight, but we don't expect it to last.  Monetary policy is very loose.  In other news this morning, construction increased 0.8% in October and was up 1.4% including revisions to prior months.  October growth in construction activity was led by home improvements, power plants, and office buildings.  Upward revisions to past months show stronger home building and commercial construction.  In other news this morning, new claims for unemployment insurance increased 6,000 last week to 402,000.  The four-week moving average is 396,000 versus 440,000 in April/May.  Continuing claims for regular state benefits rose 35,000 to 3.74 million.  We anticipate that tomorrow's official Labor Department report will show private payrolls up 125,000 in November.

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Posted on Thursday, December 1, 2011 @ 10:33 AM

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