The ISM manufacturing survey showed a near stabilization in conditions in September, whereas consensus was looking for an improvement, which also occurred in the previous eight months. However, earlier released regional survey already pointed to a weaker result. The headline ISM index fell by 0.3-points to 52.6, still pointing to rising activity in the sector and in the overall economy. The details were still relatively bullish. Indeed, new orders fell 4 points but at 60.8 they remain strong and point to further recovery of activity in the next months. Also backlog of orders (53.5 versus 52.5), supplier deliveries (58 versus 57.1) and new export orders (55 versus 55.5) contain good news. The decline in production (55.7 versus 61.9) was slightly disappointing, but given an increase in orders the decline in production shouldn’t go much further. Inventories jumped to 42.5 from 34.4, suggesting the inventory contraction continued to slow. The employment index more or less stabilized at 46.2, showing that firms are still shedding jobs. The prices paid index slipped to 63.5 from 65, but is clearly above the 50 barrier, suggesting a positive price trend.
Households went on a spending spree in September. Indeed, Personal spending increased by a stronger-than-expected 1.3% M/M in August following an upwardly revised 0.3% M/M increase. This means that PCE will make a substantial +3% contribution to Q3 GDP. The outcome is well above expectations. Nevertheless, the sharp increase in spending was led by car sales, a result of the cash for clunkers program. As the program finished, car sales will fall sharply, as the surge in spending on cars borrowed from sales in the next months. Also higher gasoline prices played a role, but the 0.4% M/M increase in services is promising in a longer term perspective. So, there is no place for euphoria, but also no reason for pessimism. In the next months, we will see how the consumer will behave. The tepid 0.2% M/M rise in income in August following an identical rise in July highlights the constraints households face in their spending, but was nevertheless somewhat above consensus. .
Pending Home sales rose for the seventh consecutive month in August up by 6.4% M/M and 12.4% Y/Y, following a 3.2% M/M in July, reaching their highest level since March 2007. The figures suggest that the unexpected decline in Existing home sales that occurred in August probably won’t be repeated in September. Pending Home sales precede Existing Home sales, even if the correlation is not always respected in the month-to-month approach. Construction spending rose a biggerthan- expected 0.8% M/M in August, following a steep, downward revision to -1.1% M/M in July.
Initial claims unexpectedly jumped 17 000 to 551 000 from an upwardly revised 534 000 (earlier 530 000). The 4-week average fell 6 250 to 548 000. The market was positioned for a near unchanged outcome. The trend is still downwardly oriented, but the pace of slowing is a bit disappointing. Continuing claims on the contrary fell 70 000 to 6 090 000, the lowest level since the peak
EMU: PMI survey revised higher
EMU PMI manufacturing index for September was revised 0.3 points higher to 49.3, which compares to the August value of 48.2, according to the final report. It was the highest reading since May 2008. However the result still suggests a declining activity in the sector, even if the decline is slowing. The details didn’t change the message coming from the preliminary report.
EMU unemployment rate climbed 0.1%-point to 9.6% as unemployment rose 165 000. The deterioration is broadly in line with the pace of deterioration in previous months.
