United States: ISM manufacturing index hits highest level since September 2018 in October
November 2, 2020
The Institute for Supply Management (ISM) manufacturing index increased to 59.3 in October from 55.4 in September, beating market expectations of 55.8 and marking the highest reading in just over two years. Consequently, the index moved further above the 50-threshold that separates expansion from contraction in the manufacturing sector.
October’s result was driven by a surge in new orders and production, while employment levels expanded for the first time in 14 months. New orders expanded for the fifth straight month in October and at the strongest pace since January 2004 as nearly all manufacturing subsectors recorded growth. Moreover, new export orders, inventories and backlogs of work also expanded in October relative to September as supply chain disruptions eased and demand strengthened. Despite the strong improvement, uncertainty remains as a surge in new Covid-19 cases and stalled stimulus talks cloud the outlook.
Commenting on the state of the manufacturing sector with regard to October’s print, analysts at Goldman Sachs noted:
“The composition of the report was firm, with increases in the production, new orders, and employment components. Construction spending increased in September by less than expected, with August revised down and July revised up. We lowered our past-quarter GDP tracking estimate for Q3 by one tenth +33.0% (SAAR), compared to +33.1% as originally reported. We left our Q4 GDP tracking estimate unchanged at +4.5%. Our preliminary October Current Activity Indicator now stands at +6.0% (vs. +8.2% in September).”
Author: Steven Burke, Economist