In October, the US manufacturing sector expanded for the third consecutive month. The manufacturing ISM headline index surged from 52.6 to 55.7, while an outcome of 53.0 was expected. Looking at the details, the improvement was led by production (63.3 from 55.7) and very encouraging by employment (53.1 from 46.2), but also inventories rose steeply for the second month in a row. New orders (58.5 from 60.8) and imports (51.0 from 52.0) on the contrary dropped, but new orders remain at very lofty levels. New export orders rose marginally. The better than expected outcome is a very positive sign and raises hopes that the US manufacturing sector might recover sharply in the current quarter. The jump in the employment index might be an additional sign that gradually stronger growth is affecting the payrolls.
In September, US pending home sales rose for the eighth consecutive month. On a monthly basis, pending home sales rose by 6.1% M/M, while the consensus was looking for a flat outcome. Regional data showed increases in sales in the West (10.2% M/M), Midwest (8.1% M/M) and South (4.9% M/M), while sales fell in the Northeast (-2.0% M/M). Again, the upward surprise might be due to Americans rushing to meet the deadline for the home-buyer tax credit. In this respect a pullback in the next months wouldn’t be a surprise. The administration is pondering an extension of the tax credit.
Construction spending rose by a much stronger than expected 0.8% M/M in September, to compare to a consensus estimate of -0.2% M/M. However, the upward surprise was largely due to a downward revision of the August figure to -0.1% M/m from +0.8% M/M.
EMU: manufacturing sector shows first expansion in 17 months
In October, the manufacturing PMI jumped back into expansionary territory. The final figure confirmed the first estimate which showed an increase from 49.3 to 50.7. This is the first month that the euro zone manufacturing sector is expanding since May 2008 and raises expectations that the manufacturing sector might grow again in the fourth quarter. The missing country details show an improvement in manufacturing sentiment in Italy, but very weak, declining optimism in Spain.
Other: UK manufacturing PMI at highest level in 2 years
In the UK, the manufacturing PMI surprised on the upside of expectations rising to 53.7, while the consensus was looking for an outcome of 50.0. Also the previous figure was upwardly revised from 49.5 to 49.9. Most of the improvement was due to a significant increase in new orders. The outcome provides further evidence that the UK economy is recovering from the severe recession and the scrappage scheme might have had a positive impact on business confidence in October.
